To follow up on my last post about the complexities of a standard definition of denial rate, let's go a bit into the weeds about the challenge of even defining a denial.
When a provider submits a claim (837) they get a response from the payer (835) and the claim is either paid or denied, right? Well, not really. The 835 and Electronic Remittance Advice has a few sets of "standard" codes that, in combination, try to communicate what is going on with the claim. This information can be at the claim, line level, or even the provider level. Super important to note...the CODES are standard, but the use and application of said codes is NOT.
The main categories to understand:
Group Codes: they communicate WHO the payer says has financial responsibility. The most common are CO (contractual obligation = I ain't paying this per contract), PR (Patient Responsibility = the patient should pay this) and OA (Other Adjustment = can mean a lot of things, but usually "I ain't paying this but for a different reason"). There can be multiple Group Codes on an individual line (e.g. CO to reduce the charge to my contracted rate AND PR because the patient owes the balance per their deductible or co-pay).
Claim Adjustment Reason Codes (CARCs): Explain WHY a claim was paid differently than billed. There are about 300 reason codes, although 50 reason codes make up 90%+ of remits. Common examples include 45 - Contractual Adjustment, 97 - The payment for this service is included in another service/procedure (aka Unbundling), 197 - Missing Prior Authorization, 16 - the dreaded “Claim Lacks Information”, etc. There can be multiple reason codes on claims and individual service lines. Understanding which reason code is really driving the outcome can be challenging, and many payers inappropriately assign reason codes (e.g. Denied for “Invalid procedure, but was actually a “Non-covered Service”)
Remittance Advice Remark Codes (RARCs): These codes are similar to CARCs, but typically offer more detail. For example, "Reason Code 16 - Claim Lacks Information” is returned with over 100 unique remark codes…unfortunately the highest volume is “NULL” (awesome), but it is commonly accompanied by a RARC that gives more detail (RARC M51 - Missing/Incomplete/Invalid procedure code, N26 - Missing/Incomplete/Invalid Type of Bill, etc) . RARCs are extremely important for understanding the real cause of a denial, but are sparingly and/or inconsistently used by some payers.
Why all this matters? Find out on the next post.
