Denials are the speedbreakers in your revenue cycle. They disrupt the pace of cash inflow and can cause revenue leaks if you do not manage or resolve them. PR 204 denial code is no different. It has the same impact on the financial health of your practice as other CARC denial codes. If you want to stay clear of it or reverse it, first, you must understand what it is and what causes it. So, let’s get right into it.
PR 204 Denial Code – Description
Claim Adjustment Reason Code (CARC) 204 is flagged when the patient’s insurance plan does not cover a service, equipment, or drug. Denial code 204 is part of the code set represented by the alpha characters ‘PR’ to indicate patient responsibility. It means that the insurance payer is not liable for the product or service rendered to the patient and will not reimburse the provider. Hence, the provider must approach the patient for payment collection, also known as the patient’s financial responsibility.
The payer may also append Remittance Advice Remark Codes (RARC) N130, N428, or more to reason code 204 to offer more explanation for the denial.
Reasons for Denial Code 204
The insurance payer can trigger the PR 204 denial code for a number of reasons, varying from negligent eligibility and benefits verification to incorrect coding and miscommunication with the patient to being an out-of-network provider. Let’s explore the top 8 reasons in detail.
Hasty Insurance Coverage Verification
Healthcare providers and their administrative staff are required to obtain the medical insurance details from the patients, including their plan numbers, at the time of visits or admissions. This is known as patient eligibility and benefits verification. It allows the healthcare provider to understand what procedures, services, equipment, and drugs are covered under the patient’s specific plan and will be reimbursed by the insurance payer.
This coverage check is a vital part of the medical process, and if done improperly, it can lead to denials, as in the case of the PR 204 denial code. Healthcare facilities often experience a high patient inflow, and due to staff shortages, patient verification is rushed, leading to errors and misunderstandings. Noting down the wrong policy number, patient name, or payer details can show inaccurate results for covered products and services. The provider thinks he is rendering a covered procedure and administering an approved drug, but the reality is quite the opposite. So, the provider realizes the mistake only after the claims are filed and processed and the reason code 204 is issued.
Patient Miscommunication
Miscommunication can occur at the time of patient eligibility and benefits verification or intra and post-procedure. Denial code 204 is triggered if there was a misunderstanding while recording the patient’s insurance details or when the provider knew that certain procedures or products were not covered but failed to communicate the financial responsibility to the patient during and after the service. Misunderstanding of insurance coverage leads to erroneous claim filing and surprise billing once the PR 204 denial code is passed on to the patient.
Lack of Prior Authorization
Healthcare providers must obtain prior authorization for specialized services, medication, and equipment. Approaching the insurance payer for pre-authorizations resolves confusion regarding covered products and services. They can know in advance whether or not the procedures and treatment techniques are payer-approved and will be reimbursed. However, when providers skip prior authorization and render healthcare without it, they bill non-covered services, drugs, and equipment, triggering denial code 204.
Inaccurate Coding
Inaccurate CPT, HCPCS, or IDC-10 coding can also result in a PR 204 denial code. Adding, deleting, or switching a single digit in the procedural, product, or diagnostic code can change a covered service into an uncovered one, causing the reason code 204. For example, the patient’s benefit plan may cover L2310 (addition to lower extremity, abduction bar-straight), but not L3215 (orthopedic footwear, ladies’ shoes, Oxford, each).
Out-of-Network Provider
Insurance payers impose stricter rules and tighter limitations on out-of-network providers. Fewer services, equipment, and drugs are covered if the patient gets treated by an uncontracted physician or other qualified healthcare professional. So, the chances of denial code 204 increase when an out-of-network provider treats the patient and submits an insurance claim.
Plan Exclusions or Limitations
Even the most comprehensive health insurance plans can have exclusions and limitations when it comes to specialized services, medicines, and devices. A payer can also trigger the PR 204 denial code if the particular item or procedure is excluded from the plan but other related services are not.
Moreover, some services have a monthly or yearly cap. In this case, the patient’s plan would clearly state how many times he/she can receive the service, drug, or device from the provider without paying for it. Once the patient reaches this maximum benefit limit, the payer rejects the claim with a 204 denial code.
Medically Unnecessary Products/Services
Clean claim filing involves proving the medical necessity of the service rendered to the patient. Payers do not compensate for equipment, drugs, or procedures the patient can easily do without. Hence, a PR 204 denial code is issued if the provider cannot explain why the billed service, medicine, or equipment was needed for patient care.
Missing, Incorrect, or Outdated Information
Old, incomplete, or inaccurate patient information can also lead to reason code 204. For example, the insurance payer’s system will deny the claim because of incorrect information if the billing staff uses previously saved data to copy and paste the patient’s old insurance number with narrower coverage while billing the service under the new and extensive plan. Similarly, typing errors and blank spaces on the claim form can also flag a denial code 204.
PR 204 Denial Code – Management & Resolution
Now that a denial has occurred, is there any way to overturn it? If that is the debilitating question on your mind, then we have good news for you. Yes, the PR 204 denial code can be reversed if you adopt the following denial management and resolution techniques.
Review the Denial Letter
The first and most important step is to thoroughly study the denial letter. Understand why your claim was rejected and pay special attention to the accompanying Remark Codes, as they will help you comprehend the underlying reasons for the denial.
For example, Remark Code N130 denotes that the provider should “consult plan benefit documents/guidelines for information about restrictions for this service”. So, after reading the denial letter, you should get a copy of your patient’s insurance plan and carefully study all the benefits and exclusions, as explained below.
Re-read the Patient’s Benefit Plan
You may have read your patient’s benefit plan before, but the denial code 204 and its accompanying Remark Code indicate that you misread it the first time. Re-read it to see if you really did bill the payer for an uncovered service, equipment, or drug or if something else triggered the denial.
Check the Claim for Inaccuracies/ Missing Information
Next, check the claim form for coding mistakes and missing or incorrect patient information. Verify the patient’s insurance details to confirm that you entered the correct policy number, and double-check all the codes to ensure that they correspond to covered services and supplies.
Evaluate the Medical Necessity
Re-evaluate the medical necessity of the service or product. If the procedure, device, or drug is mandatory for the patient’s well-being, then collect all the available information and documentation to prove its medical necessity and send them to the payer. Their decision may be overturned on medical grounds.
Explore Alternative Coverage Options
Ask the patient if they have any secondary insurance plans that cover the rendered services and prescribed products. You can also check if the services, drugs, or equipment under scrutiny are covered under other financial assistance programs like state-sponsored screenings, home health supplies, etc.
Communicate With the Patient
As the PR 204 denial code specifies that the service, equipment, or drug is the patient’s responsibility and they must bear its cost, it makes perfect sense to talk to the patient, send them the bill, and collect the payment from them.
Appeal (If Necessary)
However, if you feel that you did everything right and an error was made on the payer’s part when they denied your claim with reason code 204, appeal the decision. Follow the payer’s specific guidelines for initiating an appeal process, submit all the necessary paperwork, and wait for the board to review your claim and notify you of their verdict.
Monitor and Report the Denial
You must diligently report and track all the denials to understand their frequency and underlying reasons. Chances are that you are making repeated mistakes. Recording and analyzing all the denials will help you identify key areas of improvement, making your medical billing process efficient and error-free.
How to Prevent Denial Code 204?
Did you know that it costs medical practices $25 per claim, and hospitals spend around $181 on each claim to rework or appeal denials? Also, money is not the only thing you are losing because of denials.
Staff must put in extra time and effort to study each denial code, understand its root cause, and rework it to reverse it. The process becomes more time-consuming if you have to appeal them because sufficient documentation is required to prove that the payer’s decision was unjust.
However, all this hassle can be prevented if you employ coding and billing best practices to file clean claims and mitigate denials. Let’s learn some pro tips on preventing the PR 204 denial code.
Always Verify Insurance Coverage
You must check the patient’s insurance coverage, such as the plan benefits and details, before providing services. It will help you understand which procedures and supplies (drugs and devices) are covered and will be reimbursed by the insurer and which will become the patient’s responsibility. You can use an electronic eligibility verification system to enter the patient’s policy number and check for the details.
Vigilantly Collect Patient Information
Another best practice to avoid denial code 204 is to record all patient information precisely in your system. While this is mandatory at the time of new patient intake, vigilance must be maintained when encountering an established patient and asking them if their personal or insurance information needs to be updated. Many patients are billed with their old insurance numbers even though they changed their plans months or years ago.
Obtain Prior Authorization
As an extra layer of caution, you must request pre-authorization for specialized procedures, drugs, and equipment. Prior authorization can delay timely patient care, but it can save you from getting the PR 204 denial code. Contact the insurance payer and follow their pre-authorization steps to get a written go-ahead for the procedure, medication, or equipment. You can attach this document with the claim form during submission.
Thoroughly Review Payer Policies
Payers update their policies from time to time. So, while you and the patient may think that a specific service, equipment, or drug is covered under the current plan, the payer might have updated their policy and removed the service or item from the “Covered” list. Hence, it is a good practice to carefully study the payer’s latest policy and plan details and contact them for more clarity before submitting claims.
Maintain Efficient Communication
Timely and effective communication with the payer and patient can help you prevent reason code 204. The patients can give you accurate information about their current plan or plans, including the payers’ names and contact information. Similarly, the insurance payers can tell you in detail which services are excluded from the plan benefits and what limitations are applicable (if any, e.g., the maximum benefit limit). Always ask when in confusion to avoid costly mistakes, such as denial code 204.
Submit Proof of Medical Necessity
As we have stated before, insurance payers demand to know why a service, equipment, or drug was medically necessary for the patient before processing reimbursements. Therefore, you must submit sufficient proof of medical necessity with the completed claim form to avoid denial code 204. For example, you can gather and attach documents like referral letters, lab test reports, and clinical notes to help the payer understand the patient’s medical condition and the necessity of billed products or services.
Use Claim Scrubbing Tools/Software
Claim scrubbing tools and software can automatically detect coding mistakes and highlight sections where information is inaccurate or incomplete. You can run your claims through claim scrubbing software to spot and rectify coding and billing mistakes. Proprietary claim scrubbing technology can be leased from industry leaders like AdvancedMD and Experian Health.
Outsource Medical Coding & Billing
The best way to keep the PR 204 denial code at bay is to let the professionals handle the financial aspects of your practice. Third-party medical billing companies take care of the process from the start to the finish, ensuring up to a 98% clean claim rate and a 96% net collection ratio. From the patient’s insurance verification to accurate coding and claim scrubbing, they effectively manage every step of the process to mitigate denials.
Bottom Line
Your practice’s operations, staff’s motivation, and revenue generation can take a hit when your meticulously filed claims are sent back with the PR 204 denial code, only to tell you this claim should not have been submitted in the first place as the patient is responsible for the cost of services, drugs, or equipment. While the denial code 204 is reversible, it is better to prevent it as the real cost of reworking the claim extends beyond the dollar amounts.
At MediBill MD, we offer complete support in the fight against denial code 204. Our comprehensive denial management services include verification, claims rework & resubmission, and appeals management to overturn denials, reclaim reimbursements, and keep revenue flowing smoothly.
