When medical billers submit insurance claims for reimbursement, they can be approved, they can be denied, or they can be adjusted to pay out less. If a claim is denied, there will be a denial code attached that explains the reason for the denial. Each denial code usually has a prefix which adds more information about why the claim was denied or adjusted, and who is responsible for fixing the claim so it can be processed and approved. Here are what those prefixes mean.
CO (Contractual Obligation)
This means the claim was denied due to a contractual agreement between the healthcare provider and the insurance company. The healthcare provider is responsible for fixing the claim. Coverage and reimbursement are pre-negotiated, and there are many examples where this prefix can be used.
The denial code can have a CO prefix if there is a cap on reimbursement, if the fee schedule for a procedure limits the amount of reimbursement, if the procedure is considered bundled with another service, or if the charges are disallowed under the plan.
How to Avoid / Fix: Communicate with the payer to make sure the billed amount matches the fee schedule for the procedure. Verify the contractual terms of the patient’s coverage. Pre-authorize the procedure if it is appropriate.
PR (Patient Responsibility)
The payer has determined the patient is responsible for covering the cost of the claim. There are a myriad of reasons this code prefix can be used.
The deductible or co-pay may not be met, there may be excluded procedures in the insurance policy, there may be services not covered. The patient may have had a lapse in insurance coverage and be responsible for the full amount. A patient’s insurance may only cover a certain percentage of the claim, and they are responsible for the remaining amount.
How to Fix: Double check the payer’s reimbursement to make sure it matches the patient’s benefits. Check patient coverage and communicate with the payer. If the patient needs help paying their bill; offer them a payment plan or refer them to a credit partner.
OA (Other Adjustments)
This is a category for denials and adjustments that don’t fit any other categories. Some reasons this prefix can be used include internal policies from the payer and coordination of benefits issues.
This can occur if the payer has policy provisions of which the medical billing team is not aware.
How to Avoid / Fix: Contact the payer for clarification. Find out if the claim can be fixed and re-submitted. Make a note about the payer’s internal policies to avoid repeating this problem.
PI (Payer Initiated Reductions)
This means the insurance payer adjusted the claim reimbursement amount due to internal policies. This can be caused by fee schedule adjustments, limitations on the policy, or a procedure the payer decides is not medically necessary.
These reductions can be triggered by a payer’s adjustment policies, as a way to avoid paying the full claim amount. For this reason, it is important to always include adequate amounts of documentation that substantiate the procedures before submitting a claim.
How to Avoid / Fix: Analyze the patient’s policy. If the claim adjustment is unwarranted, file an appeal including the necessary documentation.
There are also explainer codes that can be used as prefixes or add more information about the denial.
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CARC (Claims Adjustment Reason Codes)
Explains why a claim or service line was paid differently than billed. This means the payer adjusted the amount of reimbursement.
RARC (Remittance Advice Remark Code)
Provides more information for CARC or information about remittance processing.
Become a Medical Biller and Coder With Our Online Training Program
If you’ve been thinking about a career in medical billing and coding, Campus Sacramento has an online program made just for you! Our Online Medical Billing and Coding program will help you become a certified biller and coder in less than ten months. You’ll learn procedural coding, ICD-10 codes, CPT codes, and how to prepare, scrub, and file reimbursement claims to avoid denials. If you’re ready to begin a new career and earn money in healthcare, we have new classes enrolling now. If you have any questions, contact our friendly Admissions team or call 888-675-2460 for more information.
