The healthcare industry is constantly evolving, and nowhere is this more apparent than in revenue cycle management (RCM). For healthcare leaders and revenue cycle teams, staying on top of the latest RCM trends isn't just about being "trendy"—it's about maintaining financial stability, accelerating revenue, reducing denials, and ensuring quality patient care. Denials, in particular, can significantly impact a healthcare practice's financial health. While some denial codes are straightforward, others, often disguised as adjustments, can be far more complex and lead to substantial revenue loss if misunderstood.
In the intricate world of healthcare revenue, not all codes that cause revenue loss are explicitly labeled "denials". Some are adjustment codes that function very similarly to denials, subtly eroding your practice’s financial stability. Understanding and tracking these seemingly innocuous occurrences is vital to prevent what can become significant revenue loss. Let's demystify some of these tricky codes and explore how you can effectively manage and prevent the revenue drains they represent.
The cost of appeals for denied claims is roughly $118 per claim. If a practice submits 50 claims a day with an average reimbursement rate of $200 per claim, they could bring in $100,000 in daily revenue. However, if 10% of those claims are denied and only one can be appealed, the practice could lose $800 per day, amounting to over $200,000 a year. As Vanessa Moldovan, an expert with over 20 years in physician revenue cycle, emphasizes:
"I tell you this so that you will seriously consider processes for preventing denials, as opposed to processes, resources, committed to attempting to recover the revenue after the claim has been denied."
This highlights the critical importance of a proactive approach to revenue cycle management, shifting focus from recovery to prevention.
While we'll focus on specific codes, it's worth noting that claim rejections and denials, though distinct in when they are received (rejections before the claim is on file with the payer, denials after), are often resolved and prevented in similar ways. Understanding the underlying reasons for both is key to effective RCM.
C-A-R-C-45: The "Adjustment" That Acts Like a Denial
Understanding the Definition: C-A-R-C-45 stands for "Charge exceeds fee schedule, maximum allowable, or contracted, legislative fee arrangement". The official ANSI code description notes that this adjustment amount should not equal the total service or claim charge amount and should not duplicate prior contractual reductions from previous payer adjudications. It is typically used with group codes PR (patient responsibility) or CO (contractual obligation) depending on liability.
Why It's Often a De Facto Denial: Despite its technical definition as an adjustment, payers sometimes apply C-A-R-C-45 with a "100% adjustment" when they simply don't want to pay a line item. This means that while it's technically an adjustment, it functions as a complete non-payment for that specific service, making it a de facto denial. This practice contradicts the ANSI description, which states it shouldn't equal the total charge. If the non-payment is due to an exclusion in the payer's contract, they should ideally be using a more precise denial code like C-A-R-C-256 or C-A-R-C-96.
"For those of you who are familiar with Reason Code 45, you're probably wondering, 'This is not a denial. Why are we talking about it?' Well, I will get to that. CO45 is charge exceeds fee schedule, maximum allowable, or contracted, legislative fee arrangement."
This perfectly captures the common confusion and the need to treat this code seriously despite its "adjustment" label.
Resolution Strategies: When you encounter a C-A-R-C-45 with a 100% adjustment, your first step should be to contact the payer to determine the accurate reason for the non-payment. If necessary, request a new Explanation of Benefits (EOB) or Electronic Remittance Advice (ERA) that includes a more precise reason code. Having the correct denial code is crucial for accurate tracking in your system and for billing the patient if it is ultimately deemed their responsibility.
Prevention: Unfortunately, C-A-R-C-45 often signifies a payer error, making direct prevention challenging from the provider's side. However, if you consistently receive this code because a service is contractually excluded, you should adjust those services at the time of payment posting. More importantly, it's critical to create processes to specifically identify 100% adjustments with C-A-R-C-45. Failing to address these can lead to significant revenue loss. Remark codes on the EOB/ERA can also provide additional, helpful information about the payer's reasoning.
C-A-R-C-59: Navigating Multiple Procedure Payment Reductions (MPPR)
Understanding MPPR Edits: C-A-R-C-59 indicates that a claim was processed based on "multiple or concurrent procedure rules," such as those for multiple surgeries or diagnostic imaging. Payers apply MPPR, which means they pay the first procedure at 100% and subsequent procedures at reduced rates (e.g., 50%, or even 0%). This reduction is typically based on the Relative Value Units (RVUs) of the procedures, processed from highest to lowest. However, some payers may process the hierarchy based on the order you submitted them on the claim, regardless of RVUs. The use of modifier 59 can also affect this hierarchy.
Resolution: When a C-A-R-C-59 adjustment is applied, review the claim to ensure that the reductions were based on RVUs from highest to lowest. If they were not, you might be able to reorder the procedures and resubmit the claim as a corrected claim or a reconsideration. This could potentially "bring in more revenue". Additionally, review for the proper placement of modifier 59, as its correct application is crucial. Many billing software systems are configured to flag C-A-R-C-59 adjustments for manual review, especially for high-dollar procedures, to ensure accuracy.
Prevention: A key prevention strategy is to educate your coders and charge entry staff to enter multiple procedures in RVU order (highest to lowest). Some billing software can automatically reorder procedures, or coding software may recommend the correct order. Utilizing coding software to identify the correct order and the appropriate use of modifier 59 is highly recommended.
C-A-R-C-54: Addressing Multiple Physician/Assistant Limitations
Causes: C-A-R-C-54 indicates that "Multiple physicians/assistants are not covered in this case". The cause is often a payer's limitation on the number of physicians or assistants allowed for a particular procedure.
Resolution: To resolve this, first utilize a coding software or the CMS physician fee lookup tool to identify the payment indicator for assistant surgeons or co-surgeons. These indicators (0, 1, 2, 9) provide specific guidance on payment restrictions and requirements for supporting documentation. Based on the payment indicator, you would take action:
Add the appropriate modifier and resubmit if allowed (e.g., for indicators 1 or 2 where payment is possible with documentation or if two specialty requirements are met).
Adjust the charges if the indicator signifies it's absolutely not allowed.
Submit supporting documentation to establish medical necessity if required for consideration.
If the payer does not follow Medicare guidelines, contact them directly to identify their specific policies.
Prevention: To prevent this denial, utilize coding software to identify these restrictions proactively for Medicare and payers that follow Medicare policies. While some providers bill assistant surgeon services to non-Medicare payers that might cover them, exercise caution against "negligent or unethical billing". If you know a payer follows Medicare guidelines, it's generally recommended not to bill services that are restricted, as intentional billing of non-covered services can lead to audits.
C-A-R-C-151: Managing Medically Unlikely Edits (MUE) and Bilateral Procedures
Causes: C-A-R-C-151 indicates that "Payment adjusted because the payer deems the information submitted does not support this many frequency of services". This often occurs when the billed frequency or units exceed the Medically Unlikely Edits (MUE) maximums established by CMS. Another common cause is when "bilateral procedure billing guidelines for the payer have not been followed". Each payer has its own specific guidelines for billing bilateral procedures.
Resolution:
For MUE issues: Refer to the MUE information in coding software or the Medicare physician lookup tool to determine the maximum number of units or days allowed. If you billed two units but only one is allowed, you can sometimes split the services into multiple line items and resubmit, though this doesn't always guarantee payment if the absolute limit is one unit per day. Regardless, if you billed more units than allowed, reduce the units to the allowed maximum and resubmit a corrected claim. If you believe the denial was incorrect, contact the payer for reprocessing.
For bilateral procedure issues: Identify the payer's specific guidelines for bilateral procedures and then correct the claim accordingly before resubmitting. There are "several different ways you can bill right and left" (e.g., one line item with modifier 50 and two units, or two units with double charges), and payers have approved methods.
Prevention:
For MUE: Utilize coding software to determine MUEs before claim submission to identify unit limits proactively. The Medicare physician lookup tool is a valuable resource if coding software isn't available, providing detailed information including RVUs, multiple physicians, and global surgical packages.
For bilateral procedures: Create a team resource detailing the bilateral procedure billing guidelines for each payer and ensure all relevant staff are aware of these rules. This consistent reference can significantly reduce denials related to incorrect bilateral billing.
The Role of AI and Automation in Identifying and Resolving Complex Denials
The challenges posed by these complex adjustment and denial codes underscore the growing need for advanced solutions in revenue cycle management. This is where embracing AI and automation becomes not just a trend, but a necessity. Healthcare organizations grapple with vast amounts of data, and AI technologies offer crucial relief. About 80% of healthcare executives are increasing spending on IT and software, driven by the rise of AI tools, including generative AI. These powerful tools are helping healthcare providers enhance efficiency, streamline workflows, and minimize errors.
Magical, for instance, offers Agentic AI that can transform repetitive workflows into scalable automations that require zero human involvement. Unlike traditional Robotic Process Automation (RPA) tools, which can be rigid, expensive to maintain, and break easily when encountering unexpected variations, Agentic AI excels in dynamic environments. Magical's tools make setting up RPA workflows much faster, reducing setup time from months to minutes.
Here’s how Agentic AI can revolutionize the management of complex denials:
Automated EOB/ERA Analysis: Agentic AI can autonomously perceive, decide, and act to achieve its stated goals. This means it can automatically analyze incoming EOBs and ERAs, accurately identifying and flagging complex adjustment codes like C-A-R-C-45 that carry a 100% adjustment. This allows for immediate manual review by human staff, preventing these "de facto denials" from being overlooked and causing significant revenue loss.
Proactive MPPR Compliance: For C-A-R-C-59 related to Multiple Procedure Payment Reductions, Agentic AI can be trained to ensure correct billing order based on RVUs (highest to lowest) before claims are submitted. If a payer's specific hierarchy differs, the AI can adapt, ensuring claims are consistently submitted in the optimal order to maximize reimbursement and minimize reductions. It handles "smart data transformation" and "real-time data cleanup" to correctly format and map data between systems automatically.
MUE and Bilateral Rule Enforcement: Agentic AI can cross-reference MUE and bilateral billing rules against submitted claims before submission, flagging potential issues where units exceed maximums or bilateral guidelines haven't been followed. This proactive identification significantly reduces denials stemming from these causes, as it helps ensure claims are accurate "the first time you submit them". Its "AI-powered resilience" means it can adapt to changes and handle edge cases automatically, ensuring automations run reliably.
Seamless Data Integration: RCM workflows often involve numerous interconnected steps and data from various systems like Electronic Health Records (EHRs), billing systems, and payment gateways. Agentic AI can interact with multiple systems, ensuring seamless data flow and process automation across departments and platforms. This capability is critical for tasks like patient registration and eligibility verification, claims processing, denials management, and payment posting.
Increased Efficiency and Accuracy: By automating tasks that require decision-making and problem-solving, Agentic AI can reduce manual effort, minimize errors, and accelerate the revenue cycle. This frees human staff to focus on more strategic and complex tasks, leading to increased productivity and enhanced patient experiences. For example, WebPT increased revenue by decreasing billing errors and speeding up patient charting by 25% using agentic AI.
Overcoming Staffing Shortages: With persistent staffing shortages and rising labor costs plaguing the healthcare industry, Agentic AI offers a powerful solution by essentially providing "AI employees" that can automate time-consuming workflows faster and more flawlessly. This helps reduce in-house workload and manage patient collections efficiently.
Magical’s Agentic AI is designed to automate complex processes effortlessly, making decisions just like a human by using reasoning models, real-time data retrieval, and goal-based execution. It can run entirely on virtual machines, allowing for infinite scalability and batch processing. Furthermore, Magical offers a "new standard for AI reliability & security," with daily automated testing, detailed automation logs, adaptation to app changes, in-product error handling, and SOC2 & HIPAA compliance. Notably, Magical doesn't store keystrokes or patient data, minimizing data breach risks.
Ready to transform your revenue cycle management and make denials disappear? Book a demo with the Magical team today to see how Agentic AI can automate your most challenging RCM workflows.
Conclusion: Empowering Your Team with Deeper Denial Code Understanding
Effectively managing complex denial codes like C-A-R-C 45, 59, 54, and 151 is critical for maintaining financial health in healthcare. These "non-denials" and intricate adjustments can silently chip away at your revenue if not proactively identified and addressed. The healthcare industry handles "mountains of sensitive patient data," making data security a top priority as well, which AI solutions like Magical prioritize.
By empowering your team with a deeper understanding of these denial codes—their nuances, causes, resolution strategies, and prevention tactics—you build a more resilient revenue cycle. This includes robust staff training on ever-changing requirements for claim submissions and continuous monitoring.
Furthermore, by embracing innovative advancements in AI and automation, you can transform your approach to RCM. Technologies like Agentic AI offer powerful capabilities to streamline operations, reduce errors, and ensure compliance, allowing your organization to steer through challenging times and focus more on what truly matters: delivering quality patient care.
Don't let complex denial codes undermine your practice's financial well-being. Learn more about how Magical can automate your revenue cycle workflows and put these RCM trends into action today. With over 60,000 companies already using Magical to automate workflows across systems without integrations, you can simplify your revenue cycle, increase revenue flow, and gain a competitive advantage.
