Denial code 253, also referred to as CO 253, is a mandatory payment reduction enforced by the federal government on reimbursements for healthcare services or procedures.
If you are a Medicare-approved provider, then this sequestration will be applied to all your claims. Hence, it is important to understand the common reasons behind these sequestration-related denials, the best practices to prevent them, and the steps to resolve them.
What is Medicare Sequestration?
Sequestration is the term for the 2% cut imposed on Medicaid providers by the Medicare Budget Control Act of 2011 to achieve specific financial targets. Due to this sequester payment cut, remittance advice (RA) for Medicare providers has decreased.
When filing claims for sequester reduction, providers must use the claim adjustment reason code (CARC 253). Upon applying this code, the claim will appear as CO 253 as sequestration, i.e., reduction in the name of government payments.
Besides, the claims filed for the Medicare FFS (Fee-for-Service) program must include the dates of services along with discharge details. Unless there are any changes to the fiscal objectives, Medicare is subject to a sequestration decrease on all claims submitted after April 1, 2013.
What is CO 253 Denial Code?
CO 253 denial code is Medicare sequestration-related, which reflects a reduction in federal payment. Simply put, if you receive this denial code, it means that your claim has been denied or partially paid because of a reduction in federal payments for a specific procedure or service.
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Common Causes of CO 253 Denial Code
The following are the common reasons that lead to sequestration-related denials:
Sequestration
One of the reasons for the denial code 253 is a reduction in the federal payment (sequestration). It reflects the automatic spending cuts applied by the government to minimize the federal budget deficit. The payment cuts directly impact providers’ reimbursements from government initiatives like Medicare.
Inaccurate Billing
Another reason that can result in denial code CO 253 is incorrect billing information, such as wrong diagnosis or procedural codes, missing or incomplete documentation, or inaccurate patient demographics.
Lack of Medical Necessity
The payer may reject the claim and assign code 253 if they decide the services were not medically required. Insurance payers require all claims submitted to support the medical necessity, i.e., the rendered service or procedure must be required for a patient’s treatment.
Non-covered Services
The payer can also assign a CO 253 denial code if the patient’s insurance coverage plan does not cover the rendered services or procedures. This can happen if the provided care services are cosmetic, experimental, or fall outside the patient’s coverage.
Late Claim Submission
You are required to submit a claim as per the ‘timely filing limit’. However, if you miss the deadline and submit it late, the insurance payer may assign denial code 253.
How to Prevent CO 253 Denial Code?
Following are some best practices you can implement to mitigate future denial code 253 instances:
Stay Current on Federal Payment Policies
Your billing should be regularly revised and updated based on evolving federal payment policies and how they impact provider reimbursements. Some ways to do it are by engaging with professional associations, attending conferences or webinars, and subscribing to industry newsletters.
Ensure Timely and Accurate Documentation
Another best practice to avoid denial code 253 is providing accurate and timely documentation. You must ensure proper patient information/ documentation and provide service/procedure codes in compliance with the current coding guidelines.
Patient Insurance Eligibility Verification
Remember, we discussed that one of the reasons the payer assigns the CO 253 denial code is rendering healthcare services that are out of the scope of a patient’s insurance plan. Thus, you should make ‘checking insurance coverage before the encounter’ standard practice in your billing workflow. It will help you prevent denials related to Medicare sequestration.
Track Remittance Advice and Claims
Proactively monitor claims and remittance advice to spot any sequestration-related denials. Besides, you should promptly resubmit rejected claims with the additional details and supporting documentation.
Leverage Revenue Cycle Management
You can prevent sequestration-related denials by implementing robust revenue cycle management (RCM ) processes. These may include conducting regular audits, enhancing coding accuracy, implementing denial strategies, and streamlining billing workflow.
Train Your Billing and Coding Staff
You should invest in educating and training your billing and coding staff on sequestration-related guidelines to ensure they know the latest requirements and accurately charge claims for the rendered care services.
Establish Strong Payer Relationships
A strong provider-payer relationship also helps in the effective resolution of sequestration-related denials. Thus, we recommend you regularly communicate with insurance payers, address their concerns, and take a collaborative approach to reduce the denial rate.
Harness the Power of Automation
Your healthcare facility should leverage automation tools to streamline the medical billing and coding workflow to minimize errors, boost efficiency, and reduce the denial rate.
How to Resolve a Denial Code 253?
Now that we have discussed how to prevent denial code 253, it is time to understand how to resolve it if it occurs:
Step # 1 – Conduct a Denial Review
Review the denied claim thoroughly, including policy coverage, documentation, and coding, to identify any inconsistencies and errors in your billing process.
Step # 2 – Appeal the Denial
If, in the review phase, you determine the denial was issued in error or due to missing documentation or wrong coding, you should promptly appeal it. This process may include submitting a written appeal coupled with additional documentation to the payer. Besides, there are deadlines and guidelines for appealing a claim, and you should adhere to them to increase your chances of a successful resolution.
Bottom Line
Sequestration reduction in medical billing is indicated as denial code CO 253. Some of the common reasons behind it are federal budget cuts, incorrect patient information, and the provision of non-covered services. By following the prevention and resolution techniques stated above, you can steer clear of denial code 253 and optimize your payment collections.
Whether you are an individual provider, a multispecialty practice, or a hospital, if you find it difficult to manage and resolve denials, you can outsource your medical billing operations to professionals, like MediBill MD.
