A study by AARP suggests that around 15% of all claims get denied, leading to over 200 million rejections every day. So, ensuring an uninterrupted flow of revenue can be difficult while focusing on providing compassionate care to patients.

Being a healthcare provider, dealing with insurance claims is not easy. You may have to face claim denials, and coping with these secretive denial codes is a tough pill to swallow. One of the most commonly used denial codes that we’re going to discuss today is CO-45.

If you’re also one of those struggling with denial code CO-45, we’ve compiled this blog post to provide you essential information like what is CO-45 – Claim Adjustment Reason Code (CARC), how to handle it and how to collect affected reimbursements.

What is Denial Code CO-45?

When a claim is rejected using CO-45, it signifies that the charges claimed by the healthcare provider are higher than the maximum allowable established by the insurance. Simply saying, the payor refuses to cover the costs of the service rendered as the charges mentioned in the bill are higher than what the insurance company allows under a specific policy.

Frequent claim denials for a practice due to CO-45 result in loss of revenue, increased administrative burden and patient responsibility. Recurring denials using CO-45 may point towards a faulty billing process, i.e., wrong coding, misaligned billing procedures with the insurance or that the fee schedules may need reforms or non-participation in network agreements.

A Practical Example to Understand CO-45 on Your EOB

For instance, after diagnosing and treating a patient, a healthcare provider submits a claim showing a charge of $350 against the service rendered. However, the insurance provider’s fee schedule shows a maximum of $275 for this service; the claim will be automatically denied using CO-45 denial code in the Explanation Of Benefit (EOB).

If a doctor or physician charges a higher fee than the stipulated amount in the contract with the insurance, the claim will either be rejected or they will receive a reduced amount based on the fees agreed upon. The claim will be returned with a denial marked with CO-45 on the EOB, or the practice may receive a lower amount against healthcare services.

What Is ‘CO’ And How Does It Relate to 45?

The prefix ‘CO’ stands for Contractual Obligations and has been used in the industry since 1995. It stands for denials based on contractual agreements between insurance providers and healthcare providers. Whenever providers breach this agreement or contractual terms like payment, they face CO denials.

To get full reimbursement rates against services delivered, providers should carefully review their contractual agreements. To comply with this rule, providers must update their charges, coding practices and network agreements. This helps to streamline the billing process and helps them extract timely and complete revenue for the care provided to patients.

Common Contractual Obligations in Medical Billing

When it comes to medical claims, healthcare providers and practices often deal with multiple contractual obligations. These are denoted with a short form of contractual obligations, i.e., CO, which is affixed with a two-digit numerical for reference. These codes or obligations are essential for a seamless billing process and appropriate reimbursement. 

Some common examples of contractual obligations are:

CO-29

It is filed when the time for filing a claim has expired.

CO-96

This code stands for non-covered charges, with detailed information in an additional code. 

CO-97

This code is used when a provider does two services on the same day; one may be included in the other and not billed separately. 

CO-18

This code signifies a duplicate service or claim already submitted.

CO-50

Insurers use this code when the procedure code mentioned on the bill doesn’t relate to the diagnosis code according to the coverage rules. 

CO-11

Used to refer to inconsistencies between the diagnosis and procedure performed. 

CO-16

This code indicates a claim that doesn’t have complete information or comes with submission/billing errors. 

Reasons or Factors Leading to CO-45 Denials

To help you understand the intricacies, here are some common reasons or contractual obligations healthcare providers may encounter in the CO-45 denial code.

Overcharging

One of the most common reasons for receiving a CO-45 denial is when a healthcare provider tries to bill with charges exceeding the insurance’s maximum allowable amount. This is a clear breach of the agreement between the two stakeholders and means that the healthcare provider has billed more than allowed.

Not Updating Fee Schedules

When a practice or healthcare provider doesn’t update the fee schedule according to the recent changes in their contact. Not updating fee schedules based on the insurance’s guidelines may lead to a gap between the amount billed by the provider and the payor’s allowable reimbursement.

Errors in Coding

Another common reason for claim rejection may be due to discrepancies or errors. It could be due to not following coding guidelines, trying to bill for separate services under one procedure, using an incorrect modifier or anything else.

Contractual Non-Compliance

Another reason leading to denied claims is not fulfilling the terms set out in the agreement with the insurance company. For instance, if the charges mentioned in the claim exceed the amount agreed upon earlier, it results in non-adherence, and the claim will be returned with a CO-45.

Duplicate Adjustments

Another reason for bill rejection is when the healthcare provider tries to claim for reimbursements already received or lowered by the payor for the same service. Simply saying, submitting a duplicate for an identical service means reduced, incomplete payment, or straightaway rejection.

No Participation in Network Agreements

Not participating in network agreements may be another factor leading to claim denial based on CO-45. It may result in healthcare providers’ billable amount to exceed the allowable limit set by the payor leading to a common form of claim denial. 

How to Prevent CO-45 Denials?

If you’re a healthcare provider or someone working for a third-party medical billing company, you know CO-45 can be a hard nut to crack. However, a cautious approach is one way to deal with it. Other ways to manage and rectify them are below.

Verify Contractual Agreements

As a healthcare provider, carefully review the contractual obligations with payors and ensure that your practice’s billing processes align with the agreed-upon terms and conditions.

Pre-Emptive Measures

Partner with reliable third-party medical billing services providers that take a proactive approach to check your claims for mistakes and error-proof them to revert the chances of denial codes like CO-45. It helps you big time to adjust claims before submission.

Complete Documentation

Ensure complete, detailed, and correct documentation for medical services provided. This documentation will help you justify the charges and reimbursement within the allowable payment limits.

Clear Communication

Maintain a clear line of communication with payors in case of any errors or discrepancies. Moreover, try to understand the causes of denials, which will help you resolve the error and claim the appropriate reimbursement.

Regular Training

To cope with these types of denials and reduced revenue, make sure to arrange regular training for yourself and your staff. This will help you and your staff stay updated with the recent coding and billing changes like Contractual Obligations, denial codes, their implications, and how to counter them.

Submit Appeal

After all rectifications and transparent communication, if the payor denies the claim for any reason, you, as a healthcare provider, have the right to file a strong appeal or a dispute resolution request.

How to Appeal A CO-45 Code for Denial from The Payor?

After taking all precautionary measures, the healthcare providers may still end up with a denied claim based on CO-45. If, for any reason, you end up receiving a denial with CO-45, don’t hit the panic button yet. A well-planned appeal is the way forward if you think the denial is unfair and wrong and must be overturned.

It all starts with a careful examination of the claim status to ensure that the insurance company hasn’t applied the payment to the patient’s deductible or coinsurance. If this isn’t the case, you can appeal against the decision with relevant supporting materials.

Collect The Relevant Documentation

Start by gathering all the relevant documentation, like a copy of the claim, the agreement, and a detailed explanation as to why you think the denial wasn’t justified. Moreover, if you have any relevant documentation that you think could back up your claim should also be included.

The process initiation and appeal submission process must be according to the insurance company’s guidelines and within the set timeline. Most insurers have a defined timeline of 120 days to submit an appeal. And it can be done via their official email or by submitting online application through official portal with all the necessary documents.

Here’s to submit the appeal for denial code CO-45.

Verify the Claim Status

Before moving forward with the appeal, make sure that the payment of the claim or services provided aren’t diverted towards patient deductibles or coinsurance. If you’re sure this isn’t the case, you can proceed with the appeal.

Collecting Required Documents

Following are some necessary documents without which you cannot proceed with the appeal process.

Original Claim

The first and foremost document upon which your appeal process relies is the original claim rejected with CO-45 denial code. Make sure to have a copy of it.

Agreement with the Payor

In case you delivered the healthcare service according to the guidelines of an agreement signed with the insurance, present a copy of that.

Justify your appeal

Create a strong and concise explanation as to why the claim should not have been rejected. And why the denial wasn’t appropriate.

Supporting Documentation

Make sure to support your appeal with the required documentation. These include complete medical records, referral letters, lab test results, or any other vital record. All this record strengthens your claim against the claim denial. 

Adhere to The Procedure Guidelines Set Out by The Payor

Before initiating the appeal process, ensure that you’re well aware of the insurer’s appeal process. Every insurance company has its own appeal process. Ensure you’re familiar with it and submit your case based on their guidelines.

Consider the timeline, as most insurers give healthcare providers around 120 days to submit their appeal documents. However, it is better to be aware of the specific timeline of the payor you’re dealing with. Not all insurance companies have the same appeal deadline.

Ways to Submit the Appeal

Online

Most insurance providers have official web portals for easy submission and processing of appeals. In case you’re taking the online route, ensure you have clear soft copies of the claim and the supporting documents to submit.

Email

Before sending the appeal via email, ensure that the insurance company entertains appeals via email. If yes, ensure that you’ve attached all the required documentation and sent all copies via one push to their official email address.

Wait for A Response

Once you’ve submitted the documents, the insurer will take a few weeks to review your appeal. The time period required for the review process takes between a few weeks to a couple of months. It depends on the nature of the appeal – whether it was complex or not – and the process followed by the payor.

Follow Up

Once you’ve completed the submission and have not heard from them even after a few weeks, you can follow up with the insurer within the specified timeframe. Ensure that your follow-up email is professional, as it helps resolve issues swiftly.

In the end, it is important to understand the reasons for denials. It helps you choose the right path to appeal based on correct documentation and professional communication. Appealing rightfully against CO-45 denial helps healthcare providers secure appropriate reimbursement, helping them acheive a streamlined revenue process.

Final Words

Denial code CO-45 is quite prevalent in medical billing and is responsible for the deteriorating financial health of your practice. Apart from revenue challenges, it also poses credibility issues. However, if you’re knowledgeable of how to tackle it, understand the contractual obligations and can implement a proactive strategy while submitting claims, you can steer clear of denials leading to a loss in revenue.

If you think dealing with obstacles faced in medical billing, e.g., the CO-45 denial code, is challenging and hard to handle on your own, partner with a leading medical billing services provider like I-Med Claims

We have a highly professional and experienced team of medical billing audit and denial management experts who’ll ensure that all your bills are approved on the first attempt, resulting in financial stability for your practice.