Are CO 256 denial codes slowing down your practice’s revenue cycle and impacting the financial health of your healthcare facility? This is a usual hurdle, especially when dealing with insurance providers, and hinders your payment from being collected on time, thereby affecting your practice financially. Identifying the major reasons why CO 256 denials occurred and how to avoid them is fundamental to avoiding operation delays and ensuring that your claims are paid as required.
In this blog, we’ll discuss the common reasons and tips on how to prevent CO 256 denials and let you focus on delivering comprehensive patient care.
What is the CO 256 Denial Code?
The CO 256 denial code defines “service not payable per managed care contract agreement.” This denial code is applied when a payer denies a claim for service not provided by the terms of a managed care contract between the provider and a payer. It states that the billed service is non-reimbursable because it falls outside the managed care plan.
This denial does not stem from billing errors or patient eligibility considerations but rather comes down to contractual limitations between provider and payer.
Do You Know?
According to industry reports, denial rates (including CO 256 denials) have been steadily rising across healthcare industry practices, with estimates showing 10-15% of claims denied upon first submission in healthcare environments dealing heavily with insurance providers. CO 256 claims alone account for 20-30% of denials in such environments.
Common Reasons for CO 256 Denial Code
Here are common reasons for CO 256 denial codes:
Out-of-Network Provider
For most managed care plans to keep costs under control, they require patients to use only providers from within their network of providers; any services from providers outside this group could result in denials from CO 256 forms, and reimbursement will often only occur with prior preauthorization or special arrangements being put in place beforehand.
Non-Covered Services
Every insurance plan covers certain services. If a provider submits a claim that does not fall within this list, their payer will deny it with a CO 256 code denial notice. Non-covered services could include elective procedures, experimental treatments or treatments not considered medically necessary by their plan – therefore no reimbursement will be given regardless of medical necessity.
Contract Exclusions
Even when providers are in-network, services may still be excluded by contract between provider and payer. For instance, managed care agreements often cover general office visits but exclude certain diagnostics or treatments. Providers must carefully review these contracts to make sure all services they offer fall under their agreement with the payer. Failing to do so could result in CO 256 denials due to contractually excluded services.
Policy Changes or Plan Modifications
Managed care contracts and insurance policies can often change unexpectedly, including the addition or deletion of services that were once covered but are no longer eligible for reimbursement under CO 256 regulations. Without knowing the latest updates in contracts and policies, providers could submit claims that had previously been eligible but now no longer are, leading them into CO 256 denials and claim rejections. Keeping abreast of contract updates to prevent denials is of utmost importance, so providers stay aware.
Failing to Achieve Pre-Authorization
Certain managed care plans require providers to secure pre-authorization before providing certain services, and failure to do so could result in claims being denied due to CO 256 regulations—medically necessary procedures might not receive coverage without approval from their payer.
Explanation of Patient Plans
A patient’s specific insurance plan may contain restrictions or limitations on services that can reduce benefits. For example, their plan might only cover limited visits for certain care (like physical therapy) or exclude certain treatments altogether; even if a provider is in-network and services are otherwise covered, exceeding limits or restrictions can trigger a CO 256 denial notice.
Billing for Bundled Services
Under managed care plans, certain services are often combined for reimbursement purposes under one “bundle.” If providers attempt to bill separately for something that already falls into such an agreement under CO 256 and payees deny or delay payments accordingly, being aware of which services fall within your managed care agreement’s parameters can ensure accurate billing practices and prevent unnecessary denials of payment claims.
Do You Know?
Providers who outsource denial management have reported a 50% reduction in CO 256 denials, improving their cash flow and claim approval rates.
How to Address CO 256 Denial Code?
To effectively address a CO 256 denial code (Service Not Payable Per Managed Care Contract Agreement), first identify its source before taking corrective actions to address it. Here are steps you can follow to effectively handle this form of denial:
Review the Explanation of Benefits (EOB)
Initiate by reviewing the Explanation of Benefits (EOB) or Remittance Advice (RA) document provided by your payer. This document will give specific details as to why the claim was denied, such as contract exclusions or out-of-network services that prevented payment being approved. Understanding their reasoning will enable you to formulate the next steps more efficiently.
Check the Managed Care Contract
In case a denied claim relates to an excluded or non-covered service, review its terms carefully in order to assess whether that denial was legitimate; if listed as non-payable, it may have been denied properly, but if instead covered under agreement, there could be grounds to challenge that denial.
Verify Patient’s Insurance Plan
This step involves verifying whether the service provided aligns with a patient’s specific insurance plan and coverage details, taking note of tiers or exclusions for certain services that might apply; in cases where their plan doesn’t cover such costs, consider discussing them with them before proceeding as they may be responsible for payment themselves.
Check for Pre-Authorization
If the service required pre-authorization, make sure this was obtained prior to providing it. If this wasn’t the case, denial could still apply, though you could try appealing it by explaining why pre-authorization wasn’t obtained and asking for a retroactive review of medical necessity, if appropriate.
Contact the Payer for Clarification
If the denial was unclear or issued incorrectly, get in contact with the payer directly to receive further explanation about why service was denied and whether any exclusions may apply; furthermore, establishing direct communication can often expedite resolution processes more quickly.
Submit an Appeal if Necessary
If the denial was incorrect, appeal it by providing all required documentation, like medical records of the patient(s), proof of preauthorization if applicable, and relevant sections from the managed care contract(s). Your appeal should clearly outline why service(s) should be covered, along with evidence supporting it.
Correct and Resubmit the Claim
If there was an error with how your claim was originally submitted (such as incorrect coding or missing details), revise and resubmit for processing to ensure all details match up with contract terms and patient coverage plans. A corrected claim could possibly solve the denial without going through the formal appeal process.
Update Credentialing or Contract Information
If the reason for denial was provider being out-of-network or lacking proper credentials with payer, take steps to update or negotiate managed care contract to bring more patients in-network and reduce CO 256 denials in future years.
Educate Patients on Out-of-Network Costs
When services are denied due to out-of-network status, it’s crucial that patients understand any out-of-pocket expenses before providing services. By informing patients up front about potential out-of-pocket costs they could be expected to bear and helping manage expectations to prevent unexpected bills from appearing on their bills.
Document All Communication
In all communications between payers and patients or members of your internal team during this process, keep all documentation regarding appeal submissions, conversations with payers, contract revisions, or contract amendments, as this can assist with tracking claims’ progression as well as supporting them if further appeals become necessary.
Do You Know?
The average resolution time for CO 256 denial claims is 45-60 days, leading to delays in revenue collection.
How CO 256 denial Affects Healthcare Providers?
Such denials as CO 256 can cause considerate monetary losses among the health care providers. It leads to long durations of revenue cycles and raises administrative costs since billing professionals must spend more time analyzing the claims. Failure to properly address denials can result in stacking and an overall reduction of revenue.
Further, denial management is time-consuming and may lead to increased staff training to manage such cases. Extra time is spent on handling denials instead of pursuing other crucial obligations, which hampers the efficiency of the billing department.
How to Prevent CO 256 Denial Code?
Healthcare providers should take proactive steps to prevent CO 256 denial codes before they occur, by making sure claims meet managed care contracts and payer requirements. Here are key strategies for avoiding denial:
Thorough Review of Managed Care Contracts
It is vital that you review and fully comprehend the terms of your managed care contracts on an ongoing basis to ensure they cover the services you are offering and are aware of any limitations or exclusions in them. By keeping contracts up-to-date and verifying coverage details, denials due to billing for excluded services or out-of-network care can be prevented from arising.
Verify Patient’s Coverage Before Services
Before providing services to managed care patients, always verify their specific insurance coverage. Make sure that any service planned to be provided falls under their plan’s coverage, as well as determining any restrictions or exclusions that could hinder claims from being rejected due to non-covered services or out-of-network restrictions. Taking this step helps avoid claim rejection due to non-covered services or out-of-network restrictions that would require them to be paid for separately.
Obtain Pre-Authorization for Services
Many managed care plans require pre-authorization before providing high-cost or elective procedures, so always secure pre-authorization before providing these services so that payers will cover your claim; failing to do so may result in CO 256 denial, even when medically necessary services have been rendered.
Stay Informed About Policy Changes
Managed care contracts and insurance policies often undergo revision, adding or subtracting services from coverage. Make sure that both you and your billing staff remain aware of any updates or modifications to existing contracts with payers; any claims submitted for new services excluded could lead to denials.
Proper Staff Training
Make sure your billing and coding staff is well trained on contract requirements, payer guidelines, managed care plans, and managed care plans. They must know which services each payer covers as well as ways to avoid billing for services excluded by payer contracts—staff training can help prevent errors that lead to denials such as CO 256.
Communicate with Patients About Coverage
Be clear in explaining to patients exactly what their insurance covers and any potential out-of-pocket costs associated with services provided, and any limitations or exclusions so as to reduce surprise denials after services have been rendered. This step can help manage patient expectations and decrease denials related to non-covered services.
Use Real-Time Eligibility Tools
Providers should utilize real-time eligibility verification tools to quickly confirm whether planned services are covered under their managed care plans and that any pre-authorization may be needed, and to quickly inform if services fall within coverage. Using such tools allows providers to instantly inform patients whether or not their coverage applies based on real-time eligibility verification tools’ instantaneous updates.
Audit Claims Before Submission
Implement pre-claim audits to ensure all services being billed meet payer guidelines and contract terms, helping identify any potential issues such as billing for non-covered services or submitting claims for out-of-network providers prior to being submitted—potentially preventing CO 256 denials and further costs associated with them.
Work Closely with Payers
Establish strong communication with managed care payers in order to clarify contract terms, policy updates, and pre-authorization requirements. A good working relationship between payers can also help resolve any misunderstandings about coverage and reduce the risks of claim denials.
Conclusion
Resolving CO 256 denial codes is often complex and time-consuming, often necessitating contract reviews, communication with payers, and thorough appeals processes. Preventive measures like verifying patient coverage, obtaining pre-authorizations, and staying abreast of managed care contracts may help healthcare providers lower the risk of this denial. However, efficiently responding to such denials takes expertise and patience.
MedHeave Medical Billing Services makes outsourcing your billing process easier than ever, with their dedicated team staying informed on payer contracts, pre-authorization requirements, denial management procedures, claim processing speed improvements, faster reimbursement rates, and smoother claim processing, allowing you to focus more on patient care than the administration of bills.
Contact us for further details.
