Filing insurance claims is a painstaking task for healthcare providers. The sheer number of claims is enough to overwhelm the billing team of any small practice or even a large hospital. It becomes more difficult when insurance companies deny the claims.
Do you know that almost 20% of medical claims are initially denied? This accounts for about 850 million denied claims each year. Plus, many healthcare providers have no idea how to deal with these denials. That’s why 60% of these denied claims are never resubmitted for reimbursement.
The claims can be denied due to various reasons, and among the most common is denial code CO 45. In this blog, we will try to understand the CO 45 denial code. We will also discuss common causes, prevention strategies, and solutions. So, let’s start.
CO 45 Denial Code – Description
The CO 45 denial code is triggered when the billed amount exceeds the allowable amount per the contract between the healthcare provider and the insurance payer. Essentially, it signifies a contractual obligation (CO) adjustment, meaning the insurance company will only reimburse up to the agreed-upon amount, and any excess must be written off.
Let’s try to understand this with an example.
Suppose a hospital provides a service to a patient for which it charges $250. However, the patient’s payer fee schedule only allows $200 for this service. In this case, the insurance company will reject the claim with a denial code 45. However, the insurer will pay the $200 and adjust the extra $50 as a contractual write-off.
What Causes the CO 45 Denial Code?
Now that we understand CO 45, let’s look at some root causes that lead to this denial.
Billing Amount Exceeds Allowable Limits
We have already discussed this one. In short, healthcare providers set their charges for medical procedures. On the other hand, insurance companies adhere to maximum allowable fee schedules. When a provider’s charge exceeds this limit, the CO 45 denial is triggered.
Outdated Fee Schedules
Another reason you might get hit with a CO 45 denial code is outdated fee schedules in your database. Insurance companies change their fee schedules periodically, or they might even change them suddenly in some instances.
If, as a healthcare provider, you are unaware of these changes and do not adjust your billing practices accordingly, your claims will most probably be denied with denial code 45. You may unknowingly submit claims exceeding the allowable amounts according to the old fee schedule.
Duplicate Claims
The CO 45 denial code can also be flagged if you try to submit multiple claims for the same service within a short time frame.
It happens when the billing team tries to resubmit the claim without checking the status of the original claim.
Lack of Patient Eligibility Verification
The claim may be denied or adjusted if a patient’s insurance coverage has changed or is inactive at the time of service. That is why you must check patients’ eligibility and insurance details before providing any medical service.
Coding Errors and Incorrect Modifiers
Incorrect CPT codes, HCPCS codes, or modifiers can result in claim denials or partial payments. Accurate coding is necessary to ensure proper reimbursement.
Failure to Document Medical Necessity
Insurance companies require medical documentation to confirm the medical necessity of procedures and products. If you fail to provide the documents for justification, your claim has a chance of getting denied.
However, in this case, the denial will not always be through denial code 45. Rather, it will be denied through other codes.
How to Prevent Denial Code CO 45?
Prevention is always better than resolution. To prevent and reduce the risk of CO 45 denials, the following are a few suggestions:
Regularly Update Fee Schedules
Make sure that all billers are updated on payer fee schedules and the terms and conditions stated in the contracts.
Doing this manually is difficult and may require a much larger billing team. Implementing revenue cycle management (RCM) software makes the process efficient. The software tracks allowed charges and prevents excessive billing.
Verify Patient Insurance Eligibility
As discussed earlier, a patient’s insurance policy may sometimes be inactive or terminated.
Therefore, all healthcare providers must verify the patient’s insurance status, confirm coverage details, and determine the extent of available benefits before providing any medical services. Otherwise, you might have to face denials or payment delays.
Ensure Proper Medical Coding
You must train your billing and coding teams to use accurate CPT, HCPCS, and ICD-10 codes. Also, train your biller to use automated tools to detect and correct coding discrepancies before submission.
Leverage Denial Management Services
The easiest way to avoid CO-45 denials is to outsource denial management services to specialized medical billing companies.
Outsourcing can help reduce claim denials, improve compliance, and enhance overall revenue cycle performance. Plus, it will also reduce a ton of work for your employees, making the overall operation of your practice better.
How to Resolve Denial Code CO 45?
Even after implementing all preventive measures, your claims may sometimes be denied with denial code 45. Here’s how to resolve this situation:
Review the Explanation of Benefits (EOB) and Claim Details
The first step in resolving the CO 45 denial code is to check why the claim was denied. You can do this by thoroughly reviewing the explanation of benefits (EOB) or the electronic remittance advice (ERA). These documents contain all the necessary information about the denial.
Verify if the denial was due to contractual obligations, billing errors, or coding issues.
Compare the Claim with Contracted Rates
Now, check whether the billed amount exceeds the amount in the insurer’s contract. If a discrepancy exists, contact the payer for clarification.
Submit an Appeal if Necessary
If you think that the CO 45 adjustment is incorrect, submit an appeal to the insurance company with supporting documentation.
Appeals should include:
- Copy of the original claim
- Payer contract details
- Explanation justifying the appeal
- Supporting medical records or invoices
Use Clearinghouse and RCM Services
The best way to solve and prevent denial code 45 is to use automated tools and clearinghouse and RCM services.
These service providers act as an intermediary between healthcare practices and the insurance company. The purpose of clearinghouses is to check claims for inconsistencies, missing data, and coding errors, reducing the chances of denials.
On the other hand, RCM companies oversee the entire medical billing process. These companies use claim scrubbing tools to catch errors before submission.
Final Word
The CO 45 denial code can cause financial losses for any healthcare provider. That’s why every biller on the team needs to understand its meaning, causes, and resolution methods.
If you are unable to handle the overwhelming complexity of denials, the best way to solve this issue is to outsource the services to us. Our denial management services can help you recover lost revenue, optimize claims processing, and reduce future denials.
