The healthcare industry is constantly evolving, and nowhere is this more apparent than in revenue cycle management (RCM). As we head into 2025, healthcare leaders and RCM teams are working hard to stay on top of the latest trends. Why? Because the advancements happening in RCM are helping teams adapt their strategies to maintain financial stability, accelerate revenue, reduce denials, and deliver quality patient care. Staying competitive means understanding what's trending, because your competitors are likely already on it.
Revenue cycle management is the financial process healthcare facilities use to monitor patient care from registration to settling outstanding balances. It's a critical process, and managing it efficiently is key to financial success in healthcare. This intricate process involves various front-end tasks like patient registration and eligibility verification, and back-end tasks such as billing, collections, denials, and appeals. Streamlining and automating these tasks helps healthcare providers reduce administrative costs, accelerate cash flow, minimize claim denials, and even improve patient satisfaction.
One of the biggest headaches for healthcare providers? Denied claims. Dealing with them is a constant battle, with half of providers reporting an increase in denial rates over the past year. Denials can significantly impact a practice's financial health.
"Denials can sink a profit margin, and given the cost of appeals, which is roughly $118 per claim, not all denials can be reworked. A practice submitting 50 claims a day at an average reimbursement rate of $200 per claim should bring in $100,000 in daily revenue. But if 10% of those claims are denied, and the practice can only appeal one, they lose $800 per day, upwards of $200,000 a year."
As you can see, understanding and tackling denials isn't just about efficiency; it's about survival and growth. The financial losses from denials quickly add up, making prevention a far better strategy than recovery. In this guide, we'll dive into some of the most common and complex denials you might face, offering clear strategies for resolution and, more importantly, prevention.
Common Denials: Beyond the Coding Complexities
Before we dive into the nuances of coding-related denials, let's touch upon some other common denial types that can significantly impact your revenue cycle.
Timely Filing Denials (CARC 29)
This is a classic. CARC 29 means "The time limit for filing has expired". This isn't just about initial claim submission; it applies to corrected claims, appeals, reconsiderations, and even second-level appeals. Payers have specific timely filing guidelines, which can be based on the date of service or the date of receipt. Sometimes, your provider contract with the payer might even have a different limit than their general billing guidelines, which will override the latter.
Cause:
Failure to meet the payer’s timely filing limits for initial claims, corrected claims, or appeals.
Corrected claims billed without proper indicators, causing them to be processed as initial claims.
Appeals or reconsiderations recognized as initial claims by the payer.
Resolution:
Confirm the timely filing limit before simply accepting the denial; payers can make errors.
If the submission truly was late, the decision likely cannot be reversed.
Get the patient involved if they played a role in the delay, or if the insurance company is being unreasonable. Payers are often more likely to overturn denials when their members intervene.
Submit proof of timely filing. This could be an electronic acceptance report (showing the acceptance date, not just submission), a claim number with an embedded receipt date, a return receipt from the USPS, or an electronic date and timestamp from the payer portal.
Be aware that timely filing denials are difficult to reverse even with proof, and some payers have very specific processes for follow-up.
Prevention:
Implement processes to ensure medical records are completed, charges are entered, and claims are submitted in a timely manner. These processes need ongoing monitoring.
Create a readily accessible resource for all team members that lists timely filing limits for each payer and each filing type (initial, appeals, etc.), indicating whether it’s based on date of service or receipt. Include limits for retroauthorizations too.
Prioritize claims with shorter timely filing limits (e.g., 30, 45, or 90 days) for more frequent follow-up.
Ensure adequate staffing for AR follow-up teams to resolve denials promptly. Without sufficient human resources, even the best initial processes can fall apart.
It's crucial to monitor trends. If a payer consistently and incorrectly denies claims (e.g., timely filing denials reversed 85% of the time with proof of acceptance), it's important to report this to their provider network consultant. While not necessarily unethical, it warrants investigation.
Charge Exceeds Fee Schedule, Maximum Allowable, or Contracted, Legislative Fee Arrangement (CO45)
CARC 45 is technically an "adjustment" code, meaning the charge exceeds the allowed amount based on the payer's fee schedule or contract. However, payers sometimes use this code to deny a line item entirely, even though the description states it shouldn't equal the total service or claim charge amount.
Cause:
The billed charge is higher than the payer's allowed amount.
Incorrect use of the code by the payer, potentially to deny a service completely, when a different denial code (e.g., CARC 256 or 96 for non-payable items) would be more appropriate.
Resolution:
Contact the payer to determine the accurate reason for the line item not being paid.
If necessary, request a new EOB (Explanation of Benefits) or ERA (Electronic Remittance Advice) with the correct reason code. This is particularly helpful for tracking denials or if a PR (patient responsibility) denial is needed for patient billing.
Prevention:
This denial is often a payer error, so direct prevention is limited unless you're receiving them because you're billing services specifically excluded by your contract.
Create processes to identify CO45 with 100% adjustment immediately, as these can lead to significant revenue loss if not addressed.
Use remark codes for additional information if you're stuck on why a claim was denied, especially with CO45 adjustments.
Decoding Complex Coding Denials: The Interplay of Coding and Denials
Accurate coding and modifier application are paramount for revenue integrity. Denials related to multiple procedures, units, or assistant surgeons can be particularly challenging. Let's break down some common denial and adjustment codes in this complex realm.
CARC 54: Multiple Physicians/Assistants Not Covered
This denial indicates a payer’s limitation on the number of physicians or assistants allowed for a specific procedure.
Cause:
The payer has a restriction on paying for multiple physicians or assistant surgeons for a particular procedure.
Resolution:
Utilize coding software or the CMS Physician Fee Lookup Tool to identify the "payment indicator" for assistant or co-surgeons.
0: No payment restriction for assistant at surgery unless medical necessity established. Co-surgeon not permitted.
1: Statutory payment restriction applies. Assistant surgeon may not be paid. Co-surgeon may be paid with supporting documentation.
2: Payment restriction doesn't apply. Assistant surgeon may be paid. Co-surgeon permitted if two specialty requirements are met, no documentation needed.
9: Concept does not apply to the code (e.g., office visits).
Take action based on the indicator:
If payment is allowed (indicator 1 or 2), add the appropriate modifier and resubmit.
If medical necessity is required, submit supporting documentation.
If not allowed, adjust the charges.
If the payer does not follow Medicare guidelines, contact them to understand their specific policies.
Appeal if the denial is incorrect.
Prevention:
Proactively utilize coding software to identify these restrictions with Medicare or payers that follow Medicare policies.
While some non-Medicare payers might pay for services restricted by Medicare, be cautious of negligent or unethical billing. If you know a payer follows Medicare guidelines, it's best not to bill those services to avoid audits.
CARC 59: Processed Based on Multiple/Concurrent Procedure Rules (MPPR)
This is typically an adjustment, not a denial, indicating a "multiple procedure payment reduction" (MPPR).
Cause:
Multiple procedures billed were run through the payer’s MPPR edit.
Payers apply different payment hierarchies (e.g., first procedure at 100%, second at 50%, etc.), often based on Relative Value Units (RVUs).
Some hierarchies are based on the order submitted, regardless of RVUs.
Modifier 59 usage can affect the hierarchy.
Resolution:
Review to ensure procedures were reduced based on RVUs. If not, reorder them and resubmit as a corrected claim or reconsideration to potentially "bring in more revenue".
Review for proper placement of modifier 59.
Note: Many billing software systems are set up to flag or not automatically post CO59 adjustments so that high-dollar surgeries and procedures can be manually reviewed for accuracy.
Prevention:
Educate coders and charge entry staff to enter multiple procedures in the order of RVU highest-to-lowest.
Utilize coding software or create billing software edits to identify the correct order and ensure appropriate modifier 59 usage.
Educate coders on appropriate use of modifier 59, ideally using coding software.
CARC 151: Payment Adjusted Due to Frequency/Units (MUEs & Bilateral Procedures)
CARC 151 indicates that the payer deems the information submitted does not support the billed frequency or units of service.
Cause (MUEs):
The number of days or units billed for the same provider on the same day "exceeds MUE (medically unlikely edits) maximum established by CMS".
Resolution (MUEs):
Refer to MUE information in coding software or the Medicare Physician Lookup Tool to determine the maximum units allowed. This tool provides comprehensive information, including RVUs and MUEs, for CPT or Hickspix codes.
If two units were billed but only one is allowed, you can consider splitting services into two line items and resubmitting (though this doesn't always guarantee payment).
If only one unit is allowed, reduce to one and resubmit a corrected claim.
If incorrectly denied, contact the payer to reprocess.
Prevention (MUEs):
Utilize coding software to determine MUEs before claim submission, so you can identify unit limits proactively.
Cause (Bilateral Procedures):
Payer-specific bilateral procedure billing guidelines have not been followed.
Resolution (Bilateral Procedures):
Identify the payer's specific guideline (e.g., one line item with modifier 50, two units, double charges; or one line item, modifier 50, one unit with double charges) and correct the claim accordingly.
Prevention (Bilateral Procedures):
Create a team resource detailing the bilateral procedure billing guidelines for each payer and distribute it to all relevant staff.
Routine Service Denials (PR 204 & PR 49)
These are PR (patient responsibility) denials. PR 204 means "This service equipment drug is not covered under the patient's current benefit plan". PR 49 states "These are non-covered services because this is a routine exam or screening procedure done in conjunction with a routine exam". These are especially relevant for Medicare or payers following Medicare guidelines.
Cause:
Routine physical exams are generally not covered by Medicare, except for specific "Welcome to Medicare" or "Initial Preventive Physical Exam (IPPE)" guidelines.
Incorrect ICD-10 or procedure codes triggering payer edits for routine services.
Resolution:
Confirm correct CPT and ICD-10 codes were billed. A simple coding or charge entry error can trigger these denials. Correct and resubmit the claim.
If coding is correct, review for appropriate use of ABN (Advance Beneficiary Notice of Non-coverage) modifiers (GA, GZ, or GU).
Prevention:
Educate all team members about ABNs, Medicare routine services, and proper usage of ABN modifiers.
There are extensive resources on the CMS.gov website and Medicare portals regarding ABNs and their use for services considered medically unnecessary.
Crucially, you cannot bill Medicare patients if the denial has a CO (contractually obligated) prefix. You can only bill them if the denial code has a PR (patient responsibility) prefix. ABNs and ABN modifiers will trigger either a PR or CO denial.
"What's really important to understand here especially when dealing with ABNs and not just with routine services but with other services that might be mutually excluded is that you cannot build Medicare patients when your denial has the CO prefix. CO, like we mentioned before, is contractually obligated. You cannot build a Medicare patient when CO is before the denial. You can only build them when PR is before the denial code which is patient responsibility."
Understanding this distinction is vital for treating Medicare beneficiaries fairly and ethically.
Integrating AI for Proactive Coding Compliance and Beyond
So, how can healthcare organizations tackle these complex denials and streamline their revenue cycle? The answer increasingly lies in embracing advanced technology, particularly Artificial Intelligence (AI) and automation. The healthcare industry is contending with vast amounts of data, and AI provides much-needed relief by improving efficiency, optimizing workflows, and minimizing errors. In fact, approximately 80% of healthcare executives are increasing spending on IT and software due to the rise of AI technologies.
AI-powered solutions, especially Agentic AI, are rapidly transforming RCM. Agentic automation is an AI-powered solution that autonomously perceives, decides, and acts to achieve its stated goals while adapting to new situations based on predefined instructions. Unlike traditional rule-based automation (RPA), which can be rigid and break easily when encountering something it wasn't predefined to handle, Agentic AI operates more like a human worker. It can understand context, adapt to changing situations, and make judgments based on available data, making it ideal for complex, unstructured tasks.
Agentic AI combines large language models (LLMs) with traditional AI methods, allowing agents to process human language, learn from data, and integrate with enterprise systems like EHRs and billing systems. This capability makes it exceptionally well-suited for RCM workflows:
Understands and adapts to complex processes: RCM often involves interconnected steps, unstructured data analysis, and decision-making based on various factors.
Interacts with multiple systems: Seamless data flow and automation across different platforms.
Improves efficiency and accuracy: Automates tasks like claims processing, payment posting, and follow-up, reducing manual effort and errors.
Leading RCM companies are investing heavily in these cutting-edge solutions. For example, Magical is transforming healthcare revenue cycle management by putting workflows on autopilot with AI employees. Magical's Agentic AI automates entire processes end-to-end, with zero human involvement required, and it can even run while your team sleeps. It’s designed to solve problems so automations don't break or fail.
Magical helps address critical RCM areas such as patient registration, eligibility verification, claims processing, denials management, and payment posting. It excels at tasks like smart data transformation, intelligent PDF processing (extracting data from medical records and insurance forms to populate online forms instantly), and is built with AI-powered resilience, meaning its agents adapt to changes and handle edge cases automatically, ensuring reliable operations. Magical offers a new standard for AI reliability and security, being both SOC2 and HIPAA Compliant, and it doesn't store keystrokes or patient data, virtually eliminating the risk of data breaches.
With Magical, you can automate repetitive tasks across various systems without needing complex integrations, boosting efficiency by over 50%. It can even automatically identify new repetitive workflows that are prime for automation opportunities. One client noted that they "increased revenue by decreasing billing errors and by speeding up patient charting by 25%," thanks to Agentic AI. This is the kind of impact that transforms a challenging revenue cycle into a smooth, efficient operation.
Put These RCM Trends Into Action
Navigating the complexities of denials, especially coding-related ones, requires a proactive approach and a willingness to embrace innovation. From the persistent challenge of timely filing to the nuances of multiple procedure rules and routine service coverage, each denial type presents unique hurdles that can drain your organization's financial health.
The best defense against denials is a strong offense: clear processes, diligent staff training, vigilant monitoring, and leveraging advanced technology. Instead of chasing lost revenue, focus on preventing denials from happening in the first place.
If you're looking for a way to streamline your revenue cycle, boost efficiency, and proactively prevent denials, consider the power of Agentic AI. Discover how Magical's AI employees can automate your most complex RCM workflows effortlessly. Book a demo today to see the magic in action and free your team from mundane, soul-crushing tasks.
Remember, if you ever get stuck on a denial, make Google your friend to find resources for resolution and prevention. Also, pay close attention to remark codes on EOBs—they often provide crucial additional information. By staying informed, embracing technology, and fostering clear communication within your team, you can steer your organization through challenging times and help patients better understand their financial responsibility.
The healthcare landscape is constantly evolving, but with the right strategies and tools, your revenue cycle can not only survive but truly thrive.
