According to the American Hospital Association (AHA), 78% of healthcare organizations report worsening experiences with commercial payers. Additionally, 84% noted rising costs of complying with insurer policies, and 95% said staff were spending more time on prior authorization processes. That’s why it is important to understand the root cause of these denials to not only quickly resolve them, but also avoid them altogether.

What are CARC Codes?

Insurance companies use claim adjustment reason codes (CARC) to identify issues and provide a clear explanation of why a claim was denied or adjusted. According to the American Medical Association (AMA), approximately 8-10% of claims are denied across healthcare organizations, and many of these denials are explained using CARC. While the following codes may be among the most common, that does not mean these errors are unavoidable.

1. Missing/Incorrect Modifier (Denial Code 4)

The absence of a required modifier or the use of an inappropriate one causes the claim to be denied. Modifier-related errors can lead to costly rework, delayed payments, and lower clean claim rates. 

Strategy:

• Stay updated on payer-specific modifier requirements and reference updated resources frequently.
• Use coding software equipped with validation checks and alerts for modifier issues.
• Train coding teams to understand correct modifier usage through regular workshops and payer updates.

2. Missing or Incomplete Information (Denial Code 15)

Claims are submitted with missing or incomplete information. This oversight can lead to claims being rejected, delaying reimbursements and potentially disrupting your revenue cycle. Addressing these gaps efficiently minimizes processing delays and repeated denials.

Strategy:

• Train your team to thoroughly review payer-specific requirements to ensure all required information is included in claims.
• Utilize advanced RCM systems to flag incomplete or missing data prior to claim submission.
• Implement regular quality checks and audits of your claims process to ensure accurate and complete documentation.

3. Age Conflict (Denial Code 6)

This claim adjustment reason code indicates a mismatch between the procedure and the patient’s age, such as billing pediatric services for an adult patient. These errors disrupt eligibility verification and delay claims adjudication. 

Strategy:

• Verify and confirm patient demographic details during scheduling and at the point of care.
• Use coding systems that flag age-restricted procedures as potential discrepancies before claim submission.
• Establish demographic audits to identify recurring errors and correct them at the source.

4. Expenses Incurred After Coverage Termination (Denial Code 27)

CARC 27 is assigned when claims are submitted for expenses incurred after a patient’s coverage has ended. This results in outright denials, leading to increased administrative workloads and missed revenue opportunities. Timely identification and prevention of such errors streamlines claims processing and ensures cash flow

Strategy:

• Train your team to verify active coverage before rendering services and submitting claims to avoid unnecessary denials.
• Use integrated insurance eligibility verification tools within your RCM systems to check policy status in real time.
• Establish a routine process to review and update patient coverage information during scheduling and prior to service delivery.

5. Diagnosis/Procedure Mismatch (Denial Code 11)

There’s a disconnect between the submitted diagnosis codes and the procedure performed, often caused by coding errors. This common denial type increases manual corrections and administrative costs. 

Strategy:

• Use coding software with built-in diagnosis-to-procedure crosswalks to validate submissions.
• Train billing teams to ensure proper CPT and ICD-10 matches.
• Conduct post-claim audits to identify problematic workflows or recurring errors.

6. Claim/Service Lacks Information (Denial Code 16)

A critical detail, such as patient demographics or procedure codes, is missing or incorrect, causing the claim to be rejected. These denials lead to delays, require rework, and increase administrative costs to address errors. 

Strategy:

• Conduct pre-submission audits using RCM software to detect missing or inaccurate details.
• Train staff on thorough documentation practices, ensuring all necessary claim details are captured.
• Leverage technology to automate claims validation and minimize entry errors.

7. Coordination of Benefits Issue (Denial Code 22)

The claim was denied because payer responsibilities were not coordinated correctly, often due to confusion over primary and secondary insurance coverage. Coordination of Benefits (COB) issues extend payment cycles, causing unnecessary delays. 

Strategy:

• Verify and document the order of insurance for each patient during pre-registration.
• Use payer portals to confirm coordination of benefits rules before claim submission.
• Automate verification workflows to detect discrepancies in COB data.

8. Charge Exceeds Fee Schedule/Maximum Allowable (Denial Code 45)

This code indicates that the billed amount exceeds the payer’s allowed amount for the specific service, meaning the payer will not cover the full billed charge. Delays in collecting the patient’s portion could negatively impact cash flow and increase accounts receivable.

Strategy: 

• During pre-authorization, confirm the payer’s fee schedule or maximum allowable rates for the service to avoid surprises for both the patient and the practice.
• Ensure that the patient is fully informed about potential out-of-pocket costs before the service is provided, especially if charges may exceed insurance allowances.
• Encourage upfront collections or set clear expectations about patient responsibility to minimize financial strain and avoid delays in payment.

9. Payment Adjusted Because the Patient Has Not Met the Deductible (Denial Code 97)

This code indicates that the patient has not yet met their deductible for the year, so the payer has made a reduced or no payment. Failure to collect deductible amounts upfront can lead to delayed payments, increasing accounts receivable and complicating revenue forecasting.  

Strategy:

• Prior to the visit, verify the patient’s deductible status to provide an accurate estimate of out-of-pocket costs.  
• Communicate to the patient the responsibility for paying their deductible before or at the time of service, and ensure they understand their financial obligations.  
• Use point-of-service collections to collect deductible amounts directly during check-in or immediately following care.

10. Payment Adjusted for Prior Overpayment (Denial Code 197)

This code indicates that the payer is adjusting the current payment to account for a previous overpayment. Delayed or reduced payments due to overpayment adjustments can create cash flow issues and disrupt billing cycles.

Strategy:

• Regularly review payer statements and claims to quickly identify any overpayments or discrepancies.  
• Communicate promptly with the payer to resolve overpayment issues and ensure that adjustments are made accurately.  
• Inform the patient if an overpayment affects their balance, particularly if any adjustments will result in a patient responsibility.

Claim Adjustment Reason Codes: Minimizing Denials

Effectively managing revenue cycle processes means more than just reacting to claim denials; it requires a proactive approach designed to prevent them in the first place. In fact, the Journal of Health Information Management asserts that healthcare organizations with effective denial management programs and automation can reduce denial rates by 10-20%. The following best practices address the root causes of denials:

• Implement robust technology: Use automated, AI-powered RCM platforms equipped with validation checks for demographic data, coding, modifiers and eligibility verification.
• Prioritize staff training: Ensure continual training for billing, coding and front-desk teams on payer-specific rules, CARC codes and denial management protocols.
• Leverage denial analytics: Regularly review denial trends and use this data to identify patterns. Address recurring issues with targeted training or system enhancements.
• Streamline pre-authorization processes: Invest in streamlined patient intake and pre-verification workflows to avoid issues related to deductible, coinsurance and COB errors.
• Strengthen relationships with payers: Build collaborative communication channels with payers. Timely resolution of denials often depends on clear payer-provider interactions.

Adopting these strategies can streamline claims management and improve overall revenue outcomes. For many healthcare organizations, outsourcing RCM to experienced billing providers provides a positive return on investment through increased revenue and time savings.

Transform Your Revenue Cycle with Automated Solutions

Conifer Health’s technology is designed to minimize denials, accelerate claims processing, and optimize financial performance – driving efficiency and improving your bottom line. With our data-driven approach, we empower healthcare organizations to streamline operations, reduce administrative burdens, and ensure faster, more accurate reimbursements.

Learn how Conifer Health can help your organization achieve greater financial viability through more successful denial appeals. Let’s Talk.