A high denial rate can bring down your healthcare practice’s revenue cycle within months, making it a headache to keep your facility’s doors open for services. Because without a steady cash flow, the overhead costs will pile up!
Thus, our medical billing experts started a library of denial guides explaining each denial, its resolution strategy, and preventive measures.
This guide will explore denial code 256 in detail.
CO 256 Denial Code – Description
The CO 256 denial code specifies that a certain service is not payable based on the terms and conditions defined in the managed care contract between the healthcare provider and the insurance payer.
For the unversed, ‘CO’ stands for contractual obligations, and the managed care contract outlines all the terms and conditions of covered services agreed upon by the payer and the provider. Besides, denial code 256 lets the payer determine whether the services included in the claim are covered in the contract or not.
Reasons for CO 256 Denial Code
If you are unsure why the payer triggered denial code 256, we advise you to review this section thoroughly, as it explains the reason behind the denial. Yes, this denial code signals the service to be non-payable by the payer, but what could be the cause is another story. Thus, we penned down each denial reason in detail:
Lack of Prior Authorization
You may receive denial code 256 because the performed care service required pre-authorization as per the managed care contract. However, this was not conducted correctly or skipped altogether.
Consider a patient diagnosed with a chronic illness. In such situations, many payers mandate prior authorization to ensure the cost-effectiveness and medical necessity of the prescribed treatment. If you skip this step, a denial may occur.
Uncovered Services
Another reason for this denial is that the services highlighted in the claim are not included in the managed care contract. For instance, insurance companies do not cover experimental treatments and cosmetic procedures, such as hair transplants or plastic surgeries.
Incomplete Documentation
Inadequate documents can be another reason for denial code 256. These may include missing patient history, such as previous diseases, allergies, surgeries, etc.
Out-of-network Practitioner
If the healthcare provider is not a part of the managed care contract, a CO 256 denial code is received. Here, consider a scenario! A patient has been seeing a physician who is an in-network provider with the primary insurance company, but the physician referred the patient to a nephrologist who is not registered with the payer (out-of-network provider). In such a situation, the services provided by the nephrologist will be non-payable.
Coding and Billing Errors
Errors in provider information, patient details, or coding are another culprit leading to this denial. For instance, the services rendered were typically performed in an inpatient setting, but the place of service (POS) code used in the claim is for the office or outpatient setting. Such minor errors will flag denial code 256.
Contract Non-compliance
The next major reason that may trigger this denial is non-compliance with the terms and conditions of the contract, such as violation of billing guidelines, claim submission deadline, and format specified in the managed care contract.
Lack of Medical Necessity
Failure to submit adequate and accurate documentation supporting the medical necessity of the performed procedure may trigger denial code 256.
Benefits Limit Exceeded
If the healthcare provider exceeds the benefits limit specified in the managed care contract, the claim will be denied with the CO 256 denial code.
How to Prevent Denial Code CO 256?
What could be better than bypassing the CO 256 denial code altogether? So, why not discuss some mitigation strategies that can help your practice skip the occasional financial bumps and strive for success in the face of the ever-growing competition in the healthcare space?
Insurance Eligibility Verification
The first strategy you should implement is to verify the patient’s insurance eligibility before providing any care services. This involves confirming the patient’s enrollment in the insurance plan, the coverage limitations, and the expiry date.
Besides, we recommend you review the specific benefits covered under the patient’s plan. This will ensure you receive reimbursements rightfully for the rendered services.
Ensure Accurate Coding and Documentation
The next strategy to avoid denial code 256 is to select accurate procedural codes while ensuring specificity. It also involves training your coding and billing staff on the ever-evolving coding guidelines and standards.
Maintaining comprehensive documentation is equally important to ensure compliance with managed care contracts and justify the medical necessity of rendered services. These documents may include physician notes, diagnostic information, test results, etc.
Review Managed Care Contracts
Reviewing the agreement and its clauses is one way to avoid denials related to the managed care contract. It will enable you to stay informed about POS restrictions, reimbursement rules, and coverage limitations.
Obtain Prior Authorization
Some care services require prior authorization from the insurance company as determined in the managed care contract. Thus, acquiring permission before rendering procedures is one way to minimize the risk of the CO 256 denial code.
Educate Patients
Maintain open lines of communication with your patients to help them understand what services are not covered under the managed care contracts. When patients are informed about potential out-of-pocket expenses, they make better healthcare decisions, ultimately reducing the likelihood of denial code 256 for your facility.
How to Resolve Denial Code CO 256?
We recommend implementing preventive strategies discussed in the previous section to avoid the occurrence of the CO 256 denial code for a healthier revenue cycle. However, if you receive this denial, you should follow the steps mentioned below for its successful resolution and payment recovery:
- Your first step should be to review the managed care contract between your healthcare practice and the payer.
- Search for specific provisions and clauses explaining exclusions, limitations, and restrictions that may provide details about why the submitted claim is not payable.
- Double-check all the details in the submitted claim to ensure the provided care services are accurately aligned with the covered services in the managed care contract.
- If you fail to identify any issue in step 3, it is time to dig deeper. Review the claim for missing or inadequate documentation, coding errors, or lack of medical necessity.
- If you believe the denial code 256 occurred due to missing or incomplete documentation. Start gathering all the relevant information, such as physician notes, lab results, etc., demonstrating the medical necessity of the rendered care services.
- Once all the required data is collected, appeal the denied claim with a detailed explanation of why you believe it should be payable based on the managed care contract terms.
- Document all the communication with the payer to use as evidence in case of any issues.
Bottom Line
This guide discussed the CO 256 denial code related to the managed care contract, possible reasons for triggering it, and some preventive strategies. These include accurate coding, comprehensive documentation, prior authorization, eligibility verification, patient communication, and managed care contracts review.
We believe this guide will help you overcome the issues related to this denial code. However, if you have trouble dealing with it, outsource denial management services to professionals like us. At MediBill MD, we take a tailored approach to addressing each denial and apply rigorous mitigating strategies to keep denials at bay.
