Denial Codes in Medical Billing | What You Need to Know?

Denial codes act as the crucial cipher to decode the riddles behind claim rejections, offering invaluable insights into the causes behind these refusals. In this article, we discuss different denial codes and effective strategies to steer clear of them.

What are denial codes? 

Denial codes are a crucial component in claim denial management that provides an explanation of why insurance cannot cover a patient’s treatment costs. Electronic Remittance Advice (ERA) is where you usually can find denial codes and details related to them. 

There are 3 major aspects of denial codes that you should be aware of. 

Claim Adjustment Group Code (CAGC codes)

These are the standard denial codes used in ERA transactions to show the type of change made to the healthcare claim. Here, two alpha characters are used to identify the responsible party for the unpaid claim balance in conjunction with Claim Adjustment Reason Codes. Below are the CAGC codes. 

  • Contractual Obligation (CO) – Describes the difference between the medical charges and the patient’s payments. 
  • Corrections and Reversals (CR) – Describes previously rectified or reversed claims by health plan companies. 
  • Other adjustments (OA) – Used in events where no other group code meets the adjustment criteria. 
  • Payer-initiated Reductions (PI) – Describes scenarios where the payer thinks that the adjustments are not the patient’s responsibility. 
  • Patient responsibility (PR) – Used to assign responsibility for the payment to the patients or backup insurance company. 

Claim Adjustment Reason Code (CARC)

These codes explain the financially responsible party for a claim balance with the applied financial adjustments. However, if the healthcare provider doesn’t make any adjustments to the healthcare claim, the CARC is not available in the ERA. 

Remittance Advice Remark Code (RARC)

These types of codes are helpful in providing additional information for an adjustment given by CARC or about the remittance processing. Also, there are 2 main types of RARCs.

They are, 

  • Supplemental – referred to as RARC and offer more information regarding the CARC without making any distinctions. 
  • Informational – referred to as alerts and provide information about remittance processing. 

Tips to Avoid Medical Claim Denials 

Trying to avoid claim denials is something that every medical practitioner should do. So, to help you in the process of medical claim denial reduction, here are some tips. 

  • Stay updated about all the latest developments in the medical and medical billing field. 
  • Educate and train your staff about claim denials. 
  • Perform audits to investigate unpaid claims to uncover insurance carrier trends. 

Final thoughts 

Properly understanding denial codes is one of the easiest ways to speed up the claim process from the get-go and make sure your practice doesn’t lose any money. They are your chance to turn the tides with any error, miscommunication, or mistake that has happened in the medical billing process and ensure you are compensated fairly.

However, avoiding mistakes in the billing process from the start is even more effective, which you can easily achieve by hiring an experienced medical biller like Invoisync.

To learn more about our medical billing and claim management services, contact us.

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