Insurance standardized codes can cause confusion for healthcare providers.
In 2008, Medicare updated its policy to require contractors to employ standardize codes in paper and electronic Remittance Advice (RA) forms. Derived from Health Insurance Portability and Accountability Act (HIPAA) of 1996, the Medicare instruction updated these standardized codes, thereby etching in stone their use in Explanation of Benefits (EOBs), the analogues of Medicare RAs issued by nongovernmental payers.
The standardized remark code system used in RAs and EOBs is the Claim Adjustment Reason Code, commonly known by its acronym, CARC. An additional code – the Reason Adjustment Remark Code (RARC) – gives further clarification for an adjustment already described in a CARC. Used in tandem, CARCs and RARCs are seemingly efficient tools for clarifying the reasons behind reductions and denials.
However, in practice, some CARCs are so generic that any helpful meaning to providers becomes diluted, and ultimately lost. Indeed, these “low specificity” CARCs actually cause more confusion. [1] Consider CARC 197, for instance. This CARC is troublesome in that it declares, almost nominally, “Payment denied/reduced for absence of precertification/authorization.”
Consider a situation where CARC 197 is commonly employed:
A patient successfully undergoes an elective procedure and is admitted to the facility. After spending the night, she returns home the next day without complications. The procedure was a success. In fact, during the operation, the surgeon took the additional step of repairing a hiatal hernia. While the original contemplated treatment had been precertified, the hernia repair was only noticed during the operation. Later, the claim is denied under CARC PI 197. (PI means Payer Initiated.)
For the surgeon to be paid, the staff now must submit an appeal. But it is imperative that the appeal squarely address the denial rationale. Was the inpatient not authorized because the health plan determined the patient should have been in observation status? Did the hernia repair trigger an administrative denial because that procedure was not pre-certified? PI 197 does not clarify the denial. Moreover, because the stay was for only 1 day, it is extremely unlikely that concurrent review was performed to confirm whether the denial was premised on a level-of-care.
Unfortunately, the surgeon’s staff (as well as the hospital’s appeal team), must call the health plan to ascertain clarity to the denial’s rationale. This step, as frustrating as it may be, is important, because a provider only has a limited number of appeals – typically, 1 or 2. So, rather than focus an appeal to address an inapplicable rationale, healthcare providers filing appeals in response to such generic denials should always confirm the specific basis of the denial. That extra step will reduce written-off dollars and help keep a medical practice in better financial health.
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[1] Furthermore, the fact that each payer decides how, and in what circumstances, a particular CARC is used makes matters worse for providers in understanding of the actual denial reason.
