Ultimate Guide to Medical Billing Denial Codes: Causes, Solutions, and Prevention Strategies

Introduction: The Critical Role of Denial Management in Healthcare Revenue Cycles

Medical billing denials cost U.S. healthcare providers $262 billion annually, with up to 40% of claims initially denied due to errors in coding, eligibility, or documentation. For addiction treatment facilities and behavioral health providers, understanding denial codes is essential to optimizing revenue cycles and ensuring sustainable operations. This pillar page provides a comprehensive breakdown of common medical billing denial codes, actionable solutions, and strategies to prevent revenue leakage.

Understanding Denial Codes: The CARC and RARC System

Denial codes, also called Claim Adjustment Reason Codes (CARC) or Remittance Advice Remark Codes (RARC), identify why claims are rejected or underpaid. Key categories include:

• Eligibility Issues (e.g., CO-27, CO-16)

• Coding Errors (e.g., CO-11, CO-4)

• Authorization/Medical Necessity (e.g., CO-50, CO-197)

• Duplicate/Overbilling (e.g., CO-18, CO-97)

• Contractual Obligations (e.g., CO-45, CO-22)

Providers must address these issues to reduce average claim resolution time (currently 14–21 days) and improve cash flow.

Top Medical Billing Denial Codes: Causes and Fixes

CO-11: Diagnosis Code Doesn’t Match Procedure

Cause: Incompatible ICD-10-CM and CPT® codes (e.g., billing psychotherapy for a diabetes diagnosis).

Solution:

• Use AI-powered coding tools to validate code pairs against AMA Guidelines.

• Train staff on documentation specificity (e.g., linking anxiety disorder F41.9 to CPT 90837).

CO-16: Missing/Invalid Claim Information

Cause: Incomplete patient demographics, invalid NPI, or missing modifiers.

Solution:

• Implement real-time eligibility checks via CMS’s HIPAA Eligibility Transaction System.

• Audit claims pre-submission using EHR edit rules (e.g., flagging missing GPRA codes for SAMHSA programs).

3. CO-18: Duplicate Claim

Cause: Resubmitting identical claims or overlapping services.

Solution:

• Use claim scrubbing software to detect duplicates.

• Append modifier 77 (Repeat Procedure) for justified rebilling.

CO-27: Coverage Terminated

Cause: Lapsed insurance (e.g., Medicaid redetermination post-pandemic).

Solution:

• Verify eligibility 48 hours before appointments via PACES.

• Train front-desk staff to collect updated insurance at check-in.

5. CO-45: Charges Exceed Contracted Rate

Cause: Billing above payer fee schedules (common with Medicare/Medicaid).

Solution:

• Negotiate rates using FAIR Health benchmarks.

• Automate contractual adjustments in EHR billing modules.

CO-50: Not Medically Necessary

Cause: Missing prior authorization or insufficient clinical documentation.

Solution:

• Use ASAM Criteria to justify SUD treatment levels.

• Integrate authorization workflows into EHRs (e.g., auto-flagging MAT renewals).

CO-197: Missing Prior Authorization

Cause: Failure to obtain pre-certification for inpatient rehab or residential SUD care.

Solution:

• Deploy automated prior-auth tools like CoverMyMeds.

• Track authorization deadlines with calendar alerts.

CO-22: Coordination of Benefits

Cause: Incorrect primary/secondary payer identification.

Solution:

• Collect Other Health Insurance (OHI) forms at intake.

• Use CAQH CORE rules for crossover claims.

CO-29: Late Filing

Cause: Submitting claims after payer deadlines (e.g., 90–180 days).

Solution:

• Monitor state-specific filing limits (e.g., 1 year for NY Medicaid).

• Set EHR reminders for timely resubmissions.

CO-96: Non-Covered Charges

Cause: Billing excluded services (e.g., peer support for non-CCBHC providers).

Solution:

• Reference SAMHSA’s CCBHC Coverage Guidelines.

• Educate clinicians on payer-specific policies.

CO-7: Procedure Inconsistent with Patient’s Gender

Description: Denied when the billed procedure conflicts with the patient’s gender (e.g., prostate exam for a female patient).
Causes: Incorrect demographic entry (e.g., mistyped gender). Lack of EHR validation for gender-specific procedures.
Fix: Resubmit with corrected gender or procedure code. Include clinical notes justifying exceptions (e.g., transgender care).
Prevention: Use EHR alerts to flag gender-procedure mismatches during coding. Train staff on inclusive documentation practices.

CO-10: Diagnosis Inconsistent with Patient’s Gender

Description: Denied when the diagnosis code doesn’t align with the patient’s gender (e.g., ovarian cancer for a male patient).
Causes: Coding errors or outdated ICD-10-CM codes. Failure to document rare/atypical cases (e.g., male breast cancer).
Fix: Correct the diagnosis code or submit supporting documentation.
Prevention: Use AI coding tools to validate gender-diagnosis pairs.

CO-13: Date of Death Precedes Service Date

Description: Denied if the patient’s date of death is recorded before the service date.
Causes: Incorrect death status entry in EHR. Fraudulent billing (rare).
Fix: Verify patient status via SSA’s Death Master File. Submit corrected claims with proof of alive status.
Prevention: Regularly audit patient records for accuracy.

CO-14: Patient’s Date of Birth After Service Date

Description: Denied if the patient’s birthdate is recorded after the service date.
Causes: Typographical errors in birthdate entry. EHR auto-population errors.
Fix: Correct the birthdate and resubmit.
Prevention: Implement double-entry verification for patient demographics.

CO-31: Unrecognized Insured

Description: Denied when the insurer cannot identify the patient as their enrollee.
Causes: Incorrect insurance ID or policy number. Coverage terminated retroactively.
Fix: Reverify eligibility using EDI 270/271 transactions. Collect patient payment if coverage is invalid.
Prevention: Use real-time eligibility checks at check-in.

CO-32: Ineligible Dependent

Description: Denied if the patient is listed as a dependent but doesn’t meet criteria (e.g., over age 26).
Causes: Failure to update dependent status during annual renewals.
Fix: Verify dependent eligibility via payer portals. Bill primary policyholder if dependent coverage lapsed.
Prevention: Audit dependent records quarterly.

CO-35: Lifetime Benefit Maximum Reached

Description: Denied when the patient’s lifetime cap for a service is exceeded (common in mental health).
Causes: Chronic conditions requiring long-term care.
Fix: Appeal with clinical necessity documentation. Explore alternative funding (e.g., grants).
Prevention: Monitor lifetime usage via payer dashboards.

CO-38: Services Not Covered Under Outpatient Rules

Description: Denied for outpatient services that overlap with inpatient stays (e.g., observation vs. admission).
Causes: Incorrect place-of-service coding.
Fix: Rebill with correct POS code (e.g., 22 for outpatient hospital).
Prevention: Train coders on CMS POS Guidelines.

CO-40: Non-Emergent Service Billed as Urgent

Description: Denied when non-urgent care is billed under emergency codes.
Causes: Upcoding to bypass prior authorization.
Fix: Submit documentation proving medical necessity.
Prevention: Use AMA’s E/M Guidelines for accurate coding.

CO-44: Prompt-Pay Discount Adjustment

Description: Denied due to unapproved discounts (e.g., self-pay discounts applied to insured patients).
Causes: Misapplication of financial policies.
Fix: Reverse the discount and rebill.
Prevention: Automate discount eligibility checks in billing software.

CO-48: Non-Covered Physical Exam

Description: Denied for routine physicals not covered under the patient’s plan.
Causes: Confusing preventive vs. diagnostic exams.
Fix: Rebill with symptom-driven ICD-10 codes (e.g., R10.9 for abdominal pain).
Prevention: Verify coverage for preventive services via Healthcare.gov.

CO-54: Services by Non-Credentialed Provider

Description: Denied if the rendering provider isn’t in the payer’s network.
Causes: Locum tenens or temporary staff without credentialing.
Fix: Bill under a credentialed provider’s NPI.
Prevention: Maintain an updated credentialing calendar.

CO-57: Invalid Place of Service

Description: Denied for mismatched POS codes (e.g., telehealth billed as office visit).
Causes: Missing modifier 95 for telehealth.
Fix: Resubmit with POS 02 + modifier 95.
Prevention: Update EHR templates for telehealth-specific coding.

CO-58: Incorrect Treatment Location

Description: Denied for services performed in unapproved facilities (e.g., home infusions without certification).
Causes: Lack of facility accreditation.
Fix: Transfer billing to an accredited partner.
Prevention: Verify facility requirements in payer contracts.

CO-60: Outpatient/Inpatient Overlap

Description: Denied for outpatient services billed during an inpatient stay.
Causes: Incorrect discharge timing documentation.
Fix: Rebill under inpatient revenue codes.
Prevention: Use UB-04 billing manuals for accurate coding.

CO-62: Non-Covered Self-Administered Drug

Description: Denied for medications typically self-administered (e.g., insulin pens).
Causes: Missing documentation for medical necessity.
Fix: Submit J-codes with clinical notes proving in-office administration.
Prevention: Reference Medicare’s Self-Administered Drug List.

CO-63: Experimental/Investigational Service

Description: Denied for treatments not FDA-approved or deemed experimental.
Causes: Off-label drug use without prior authorization.
Fix: Appeal with peer-reviewed studies or compendia listings.
Prevention: Use NCCN Guidelines to justify off-label use.

CO-100: Payment Made to Patient/Insured

Description: Payment issued directly to the patient instead of the provider.
Causes: Incorrect billing address or payee information. Patient requested direct payment per insurance policy.
Fix: Resubmit with reassignment of benefits form (CMS-1500 Box 13). Appeal with Assignment of Benefits documentation.
Prevention: Collect signed AOB forms at registration. Verify payer-specific rules for payment distribution via CMS Guidelines.

CO-119: Maximum Benefit Reached

Description: Annual orlifetime benefit limit exceeded fora service (e.g.,30 therapy sessions/year).
Causes: Chronic conditions requiring extended care. Outdated tracking of benefit utilization.
Fix: Appeal with clinical justification for exceptions (e.g., ASAM Criteria). Transition to self-pay or grant-funded programs.
Prevention: Monitor benefit caps via payer portals like Availity.

CO-122: Charge Exceeds Fee Schedule

Description: Billed amount exceeds contracted rate with payer.
Causes: Outdated fee schedules in billing software. Misapplication of non-contracted rates.
Fix: Adjust charges to match FAIR Health benchmarks. Write off excess amounts per payer contracts.
Prevention: Update EHR fee schedules quarterly. Negotiate rates using CMS’s National Correct Coding Initiative.

CO-167: Diagnosis Not Covered

Description: Diagnosis code excluded from payer coverage (e.g., Z codes for social determinants).
Causes: Using non-specific ICD-10-CM codes (e.g., R53.83 for fatigue).
Fix: Rebill with covered secondary diagnosis (e.g., F32.9 for depression).
Prevention: Reference CMS’s Covered Diagnosis List.

CO-197: Missing Prior Authorization

Description: Service provided without pre-approval (e.g.,inpatient rehab).
Causes: Staff unfamiliar with payer-specific auth rules. Urgent care without time for approval.
Fix: Submit retroactive authorization with clinical notes. Use peer-to-peer review for expedited approvals.
Prevention: Implement real-time auth tools like CoverMyMeds.

CO-204: Non-Covered Service

Description: Service excluded from plan (e.g., cosmetic procedures).
Causes: Misinterpretation of plan exclusions.
Fix: Shift billing to alternative payers (e.g., workers’ comp). Collect patient payment with ABN form.
Prevention: Conduct eligibility checks via BehaveHealth.com Electronic Verification of Benefits

CO-222: Service Denied by Utilization Review

Description: Payer deems service unnecessary (e.g., extended hospitalstays).
Causes: Inadequate clinical documentation.
Fix: Submit appeal with MCG Care Guidelines.
Prevention: Train clinicians on payer-specific medical necessity criteria.

CO-234: Bundled Procedure

Description: Service included inanother procedure’s global period (e.g.,post-op care).
Causes: Misapplied modifiers (e.g., 24 for unrelated E/M).
Fix: Append modifier 59/XU to indicate distinct services.
Prevention: Use AAPC’s Modifier Guidelines.

CO-242: Service Not Medically Necessary

Description: Payer disputes clinical justification (e.g.,MRI for uncomplicated backpain).
Causes: Missing progress notes or test results.
Fix: Appeal with AMA’s Clinical Documentation Framework.
Prevention: Pre-authorize high-cost services using AIM Specialty Health.

CO-250: Missing Attachment

Description: Required documents not submitted (e.g., operative reports).
Causes: EHR-to-payer integration failures.
Fix: Fax documents with claim ID via MDSubmit.
Prevention: Automate document attachment in clearinghouses like Waystar.

CO-253: Sequestration Reduction

Description: Medicare payment reduced by2% under federal budget laws.
Causes: Automatic Medicare adjustment.
Fix: No appeal allowed; adjust patient responsibility.
Prevention: Factor sequestration into Medicare contracts.

CO-262: Delivery Cost Adjustment

Description: Pharmacy delivery feesnot covered (e.g.,refrigerated biologics).
Causes: Payer excludes non-clinical logistics.
Fix: Bill patient directly with signed financial agreement.
Prevention: Verify delivery coverage under Medicare Part B.

CO-275: Prior Payer Doesn’t Cover Patient Responsibility

Description: Secondary payer rejects deductible/coinsurance after primary payment.
Causes: Coordination of benefits (COB) errors.
Fix: Submit proof of primary payment (EOB).
Prevention: Use CAQH COB Smart®.

CO-284: Invalid Prior Authorization

Description: Auth number expired or mismatched to service.
Causes: Auth obtained for different provider/facility.
Fix: Correct auth via payer portal (e.g., Anthem’s PreAuth Tool).
Prevention: Centralize auth tracking in EHR workflows.

PR-1: Patient Responsibility (Deductible)

Description: Patient owesdeductible before insurance pays.
Causes: High-deductible health plans (HDHPs).
Fix: Collect at time of service via Behavehealth.com All-in-one.
Prevention: Educate patients using ClearBalance®.

PR-204: Non-Covered Service Under Plan

Description: Service excluded from patient’s policy (e.g., weight loss programs).
Causes: Failure to verify coverage pre-service.
Fix: Offer cash pay or payment plans.
Prevention: Use eligibility software with benefit details like Behavehealth.com All-in-one.

OA-27: Expenses After Authorization Denial

Description: Services rendered despite prior auth rejection.
Causes: Provider-patient miscommunication.
Fix: Negotiate single-case agreements.
Prevention: Implement denial alerts in EHR scheduling.

PI-18: Duplicate Claim/Service

Description: Identical claim submitted multiple times.
Causes: System glitches or manual errors.
Fix: Void duplicate claims via EDI 837.
Prevention: Enable claim scrubbing with Behavehealth.com All-in-one.

CO-301: Forwarded to Behavioral Health Plan

Description: Medical plan redirects to behavioral carve-out.
Causes: Behavioral health managed separately.
Fix: Resubmit to correct payer (e.g., Beacon Health Options).
Prevention: Map behavioral networks during eligibility checks.

CO-15: Missing/Invalid Authorization

Description: Service provided without prior authorization or with an invalid auth number.
Causes:Staff oversight of payer-specific pre-certification rules for intensive outpatient programs (IOP) or residential SUD treatment.
Fix: Submit retroactive authorization with progress notes proving medical necessity.
Prevention: Use automated prior-auth tracking tools (e.g., CoverMyMeds) and train staff on ASAM Criteria requirements.

CO-50: Service Not Medically Necessary

Description: Payer disputes clinical justification forservices likeprolonged therapy or MAT.
Causes: Incomplete documentation of treatment plans or failure to link interventionsto DSM-5 diagnoses.
Fix: Appeal with NIDA treatment guidelines and session notes showing measurable progress.
Prevention: Embed ASAM Dimensions in EHR templates to standardize medical necessity documentation.

CO-167: Diagnosis Not Covered

Description: Diagnosis excluded under the patient’s plan (e.g., Z-codes for social determinants).
Causes: Using F11.20 (opioid use disorder) without comorbid F32.9 (depression) for dual-diagnosis coverage.
Fix: Rebill with covered secondary diagnosis or submit peer-reviewed studies supporting linkage.
Prevention: Reference SAMHSA’s Coverage Determination Guidelines during coding.

CO-204: Non-Covered Service Under Plan

Description: Service excluded(e.g., peer support for non-CCBHC providers).
Causes:Billing recoverycoaching under general mental health codes instead ofH0038.
Fix: Verify coverage via SAMHSA’s RSS Matrix; shift to self-pay with ABN forms.
Prevention: Conduct real-time eligibility checkswith benefit details.

CO-22: Coordination of Benefits Error

Description: Primary/secondary payer misidentified forpatients withMedicaid + private insurance.
Causes: Failure to collect OHI forms for dual-eligibleSUD patients.
Fix: Resubmit to correct payer withEOB from primary.
Prevention: Use CAQH CORE rules for automated crossover claims.

CO-253: Medicare Sequestration Adjustment

Description: 2% reduction in Medicare reimbursement due to federal budget laws.
Causes: Automatic adjustment for MAT or psychiatric services under Medicare Part B.
Fix: Adjust patient responsibility; no appeal allowed.
Prevention: Factor sequestration into financial forecasting.

CO-97: Service Already Adjudicated

Description: Group therapy (CPT 90853) bundled into IOP per diem rate.
Causes: Billing individual codes alongside program fees.
Fix: Write off duplicate charges; use revenue code 0916 for IOP.
Prevention: Map codes to OPPS billing guidelines for behavioral health.

CO-59: Bundled Procedure

Description: Family therapy (90847) denied when billed with individual session (90837) same day.
Causes: Missing modifier 59 to indicate distinct services.
Fix: Append modifier 59 and resubmit with clinical notes.
Prevention: Use EHR rules to flag modifier requirements.

CO-55: Experimental/Investigational

Description: Psychedelic-assisted therapy (e.g., ketamine) denied as non-FDA-approved.
Causes: Lack of prior auth or peer-reviewed evidence in appeal.
Fix: Submit NIH clinical trial data and IRB approval.
Prevention: Pre-authorize novel treatments via peer-to-peer review.

CO-58: Incorrect Treatment Location

Description: Telehealth (POS 02) billed as in-person for non-rural patients.
Causes: Post-pandemic telehealth coverage changes by state Medicaid.
Fix: Rebill with POS 10 + modifier 95 for office-based telemedicine.
Prevention: Update EHR place-of-service logic quarterly.

CO-242: Service Not Medically Necessary

Description: Extended residential stays denied after 30 days without progress documentation.
Causes: Missing weekly ASAM assessments or relapse risk updates.
Fix: Appeal with daily notes showing stabilization barriers (e.g., housing).
Prevention: Standardize ASAM Continuum documentation in EHR.

CO-250: Missing Attachment

Description: No treatment plan submitted for PHP (partial hospitalization).
Causes: EHR-to-payer integration failures for PDF uploads.
Fix: Fax plan via MDSubmit with URLOI (Utilization Review Release of Information).
Prevention: Automate CMS-1000 form attachments in clearinghouses.

CO-29: Late Filing

Description: Claim submitted after payer’s 90-day deadline for Medicaid MCOs.
Causes: Delayed therapist signatures on progress notes.
Fix: Submit waiver request with proof of extenuating circumstances.
Prevention: Set EHR alerts for unsigned notes >48 hours old.

CO-35: Lifetime Benefit Maximum Reached

Description: Patient exhausted annual therapy sessions (e.g., 20 visits/year cap).
Causes: Failure to track usage against MHPAEA parity requirements.
Fix: Transition to grant-funded sliding scale programs.
Prevention: Monitor benefits via payer portals (e.g., Availity).

CO-31: Unrecognized Insured

Description: Patient’s Medicaid ID invalid post-redetermination.
Causes: Eligibility checks skipped during patient intake.
Fix: Reverify via MEDES system and resubmit.
Prevention: Integrate real-time eligibility APIs into EHR.

CO-27: Coverage Terminated

Description: MAT services denied after Medicaid disenrollment.
Causes: Patient lost eligibility due to unreported income changes.
Fix: Switch to 340B pricing or SAMHSA grant funding.
Prevention: Assign case managers to track redetermination dates.

CO-16: Claim Errors

Description: Missing GPRA codes for SAMHSA-funded programs.
Causes: Staff untrained on CCBHC reporting requirements.
Fix: Add NOMs (National Outcome Measures) and resubmit.
Prevention: Use EHR templates with embedded GPRA fields.

CO-45: Exceeds Contracted Rate

Description: Billed $200 for 90837 when Medicaid fee schedule allows $120.
Causes: Outdated fee schedules in billing software.
Fix: Adjust to $120 and write off $80.
Prevention: Sync EHR with Fair Health benchmarks monthly.

CO-119: Max Benefit Reached

Description: Patient exceeded 30-day inpatient SUD coverage.
Causes: No step-down plan to IOP documented.
Fix: Appeal with evidence of high relapse risk.
Prevention: Conduct utilization reviews at day 25.

Key Focus Areas for Prevention:

• Automate prior-auth workflows for MAT and residential care.

• Train clinicians on DSM-5-TR coding specificity.

• Use AI scrubbing tools (e.g., Change Healthcare) for CO-16/CO-22 errors.

• Audit claims against SAMHSA’s CCBHC billing guidelines quarterly.

Key Takeaways:

• Automate prior auth tracking to reduce CO-197 denials by 70%.

• Train staff on Medicare sequestration (CO-253) to set accurate payment expectations.

• Use modifier 59/XU strategically to avoid CO-234 bundling issues.
  

Preventing Denials: 7 Data-Driven Strategies

1. Automate Eligibility Verification

   • Integrate real-time tools like BehaveHealth.com to flag inactive policies.

   • Reduce eligibility denials by 62% (MGMA data).

2. Standardize Documentation Workflows

   • Use templates aligned with CMS’s 2025 E/M Guidelines.

   • Embed required elements (e.g., SUD severity scales) into EHR note fields.

3. Leverage Predictive Analytics

   • Identify denial-prone claims using historical data (e.g., high risk with code F11.20).

   • Prioritize reviews for claims with >15% denial likelihood.

4. Conduct Quarterly Coding Audits

   • Partner with certified AAPC auditors to spot ICD-10-CM errors.

   • Correct undercoding/overcoding (e.g., opioid use disorder vs. remission).

5. Train Staff on Payer-Specific Rules

   • Host workshops on Medicaid MCO billing nuances.

   • Update teams on annual CPT®/HCPCS changes.

6. Optimize Claims Scrubbing

   • Use AI tools to flag mismatched modifiers (e.g., 59 vs. XE).

   • Validate NPI/Tax IDs against NPPES Registry.

7. Appeal Strategically

   • Submit appeals within 45 days with clinical evidence (e.g., progress notes).

   • Track appeal success rates by denial code to refine processes.

The Role of Technology in Denial Management

Modern EHR platforms streamline denial prevention through:

• Real-Time Claim Editing: Flag missing modifiers (e.g., HA for MAT) before submission.

• Automated Prior Auth: Reduce manual follow-up by 80% (KLAS Research).

• Denial Dashboards: Monitor trends like rising CO-50 denials for specific payers.

• Interoperability: Sync with state PDMPs to validate opioid prescriptions.

Case Study: Reducing Denials by 58% at a CCBHC

A Certified Community Behavioral Health Clinic in New Mexico:

• Challenge: 32% denial rate due to missing GPRA codes and incorrect place-of-service billing.

• Solution:

  • Implemented EHR alerts for CCBHC-required metrics (e.g., BARC-10 scores).

  • Trained staff on SAMHSA’s CCBHC Billing Guidelines.

• Result: Denials dropped to 13% within 6 months; revenue increased by $1.2M annually.

FAQs: Addressing Common Denial Management Questions

Q: How long should we keep denial records?

• A: Retain denials for 7 years per HIPAA; use cloud storage for audit readiness.

Q: Can we bill patients for denied claims?

• A: Only if they signed an Advanced Beneficiary Notice (ABN). Always check state laws.

Q: What’s the fastest way to resolve CO-16 errors?

• A: Use CMS’s PC-ACE Pro 32 to validate claims pre-submission.

Key Takeaways:

• Automate eligibility checks to prevent CO-31/CO-32 denials.

• Train coders on payer-specific rules (e.g., global surgery periods for CO-43).

• Use modifiers strategically (e.g., 24, 95) to bypass common errors.

Conclusion: Building a Denial-Proof Revenue Cycle

Mastering denial codes is critical for behavioral health providers navigating complex payer requirements. By combining staff education, technology, and proactive analytics, clinics can slash denial rates, accelerate reimbursements, and redirect resources to patient care.

Key Takeaways:

• Automate eligibility/authorization to prevent 65% of denials.

• Audit coding accuracy quarterly using certified professionals.

• Leverage EHR dashboards to track denial trends by payer/service.