Don’t let the complexities of medical billing affect the quality of your services. Healthcare is a demanding industry. As a healthcare provider, you don’t want the additional stress of claim denials while dealing with long working hours and burnout.
However, getting the insurance companies to reimburse your medical claims on the first try is quite challenging. In fact, it is the biggest revenue cycle challenge, according to the Medical Group Management Association (MGMA).
You can only reverse these claim denials by understanding the various denial codes, including CO 45. This denial code is quite common, but you can easily avoid it by taking the appropriate preventive steps. Let’s solve the mystery behind Denial Code 45!
What is the CO 45 Denial Code?
CO 45 denial code occurs due to the difference between the physical bill and the actual agreed-upon payment. Here, CO stands for Contractual Obligations between the healthcare and insurance providers. Healthcare providers usually enter into a contract with a reliable insurance company to get timely reimbursements. These contracts include all the terms, service rates, and accepted procedures.
Healthcare providers face a CO 45 error when their billed amount exceeds the agreed-upon charges. The CO 45 is one of the most common medical claim denial codes and is a component of the Claim Adjustment Reason Code (CARC). It simply highlights the reasons for claim denial or reduced payment.
Denial Code 45: Real-World Examples
A contract with an insurance company is not simple. As a healthcare provider, you have to deal with multiple contractual obligations to increase the acceptability rates of your claims. Each of these obligations has a unique code followed by CO.
Unlike most codes, the CO 45 denial code comes with some amount of payment. It means your insurance company pays a certain portion of your bill according to the agreement. Let’s look at some common examples of the denial code 45 to gain a better understanding.
Example 1: Exceeding the Contractual Rate
If a healthcare service provider charges $300 for a service while the agreement with the payer specifies a maximum $150 reimbursement for that procedure, the insurance company will apply the CO 45 code. In simple terms, it will only cover $150. If the provider hasn’t communicated with the patient beforehand about the remaining amount, they will have to write it off.
- Billed Amount: $300
- Allowable Amount by the Payer: $150
- CO 45 Denial Amount: $150
Example 2: Overbilling for Surgery
Let’s consider another scenario. A healthcare provider bills $1,000 for surgery. However, the insurance company’s maximum allowable fee for that service is $750. According to the contract, the insurance provider reimburses $700, with $50 being the patient’s responsibility. The healthcare provider will have to write off the remaining amount as per the CO 45 denial code.
- Billed Amount: $1,000
- Maximum Allowable Amount by the Payer: $750
- Reimbursement: $700
- Patient’s Responsibility: $50
- CO 45 Denial Amount: $300 (Billed amount – Reimbursement)
Example 3: Non-Covered Cosmetic Service
A healthcare provider submits a $950 claim for reconstructive surgery. But, since the insurance policy does not cover cosmetic procedures, the payer will deny the claim with a CO 45 denial code.
- Billed Amount: $950
- Allowable Amount: $0
- CO 45 Denial Amount: $950
Example 4: Incorrect Coding
A healthcare provider bills $1,200 for cardiac surgery. However, he sends the medical claim with incorrect coding. Instead of indicating the complex procedure with a maximum allowable amount of $1,000, the wrong code pointed to a simple process with a $600 allowable amount. As a result, the insurance company only reimburses $600 and denies half the payment as per the CO 45 denial code.
- Billed Amount: $1,200
- Allowable Amount for cardiac surgery: $1,000
- Reimbursement (due to incorrect coding): $600
- CO 45 Denial Amount: $600
Common Reasons for CO 45 Denial Code
Statistically, one in seven medical claims are denied, resulting in over 200 million daily rejections. More often than not, the main reason for this is miscommunication between the payer and the healthcare service provider before signing a contract. CO 45 is perhaps the most common denial code. To avoid it, you should understand the leading causes.
Billed Amount Exceeds the Maximum Allowable Fee
Many insurance companies specify maximum reimbursement limits for all services. They also set contracted rates with healthcare providers for their services. If the providers bill a higher amount than the agreed prices, they face a CO 45 code.
Outdated Fee Schedules
An outdated fee schedule is another reason for receiving a denial code 45. Your charges should match your insurance company’s service fee list. Therefore, healthcare providers who don’t update their billing systems frequently with the latest list of charges face adjusted reimbursements by their payers.
Billing for Non-Covered Services
Insurance companies specify the services they cover in their policies. If a healthcare provider sends a medical claim for a non-covered service – for example, cosmetic surgery or an experimental procedure, the payer will adjust the billing amount to zero with a CO 45 code.
In simple terms, your insurance company will not offer reimbursements for exclusions, and the patient may have to bear the full responsibility.
Duplicate Claims
You may also get tagged with a CO 45 denial code if you submit a claim multiple times for the same service. The insurance providers reject these claims with a CO 45 code.
How to Prevent CO 45 Denial Code?
Why wait for your insurance company to reject your claim when you can take preventive measures?
One CO 45 adjustment may seem insignificant, but a higher volume can result in a substantial loss in revenue and high customer dissatisfaction.
A difference between the billed and the contractual amount may lead to patients being responsible for the remaining payment. If you are a healthcare provider, take the following steps to prevent denial code 45.
Verify Contractual Rates and Covered Services
Miscommunication can be a disaster! Before signing an agreement with your payer, verify and double-check the terms and conditions, covered services, and contractual rates for billing. You can avoid the CO 45 denial code by complying with the contractual obligations.
Update Your Fee Schedules
Another common way to prevent CO 45 denial is by regularly reviewing your fee schedule. Make sure to update your billing system according to the latest charge list of your payer. This step will align your fee schedule with your insurance company, helping you receive the entire amount for your service.
File Accurate Medical Claims
Avoid the CO 45 denial code by submitting clean medical claims with accurate information and coding. You can easily get your insurance company to pay for your services by staying transparent.
Train Your Staff
You can reduce billing errors marginally by educating your staff. Provide comprehensive training to your employees on insurance policies, contracts, CO 45 denial reasons, and mitigations. This step will help you fulfill contractual obligations and increase the claim acceptance rate.
CO 45 Denial Code Management & Resolution
A single misstep can result in a claim denial. So, if your claim was rejected, you can take the following steps to resolve the CO 45 denial code.
Step 1: Identify the Denial Reason
The first step is to understand the root cause of the problem – why you have received a CO 45 denial code on your claim. You can start by reviewing your medical claim and contract with the payer. Identify whether your insurance company has issued this denial code due to incorrect information or exceeding the contractual rates.
Step 2: Appeal
If you don’t find any discrepancy between the billed and the allowable amount, and your medical claim follows all the contractual obligations, file an appeal with your payer.
Review your insurance company’s appeal guidelines and provide all the supporting documentation to strengthen your case.
These might include a copy of the claim and contract and a formal appeal letter explaining why they should reconsider the billed amount. If you find this process complicated and time-consuming, then look at our next step.
Step 3: Hire A Professional Service Provider
You can seek professional help to resolve denial code 45. You can find several denial management services online. Consult with your team, read reviews, and choose a reliable revenue cycle management (RCM) company to recover your lost revenue. Their experienced workforce uses smart solutions to optimize the claim management process, allowing you to focus more on providing quality care to your patients.
Bottom Line
Insurance companies use the CO 45 denial code with the adjusted reimbursements. This denial code explains the reason for adjustment, usually specifying the difference between the billing and the allowable rates.
Keep in mind that receiving a denial code does not mean that healthcare providers don’t receive any payment. It means that they only receive the contractual rates for their services. We have highlighted several prevention and management techniques for the denial code 45 so you can improve the financial health of your practice.
