7.5 Denials Management & Appeals
Key Takeaways
- Denials are categorized by root cause — registration, eligibility, authorization, coding, medical necessity, timely filing, and coordination of benefits.
- Common CARCs include CO-22 (COB), CO-29 (timely filing), CO-50 (not medically necessary), CO-97 (bundled/inclusive), PR-1 (deductible), and PR-3 (copay).
- Root-cause analysis groups denials so the underlying process — not just the individual claim — gets fixed.
- The Medicare fee-for-service appeal ladder has five levels: Redetermination, Reconsideration, ALJ Hearing, Council Review, and Federal Court.
- Commercial payers typically allow two internal appeal levels plus one external review by an Independent Review Organization (IRO).
Denial vs Rejection
A rejection never entered the payer's adjudication system — it failed front-end edits and can simply be corrected and resubmitted. A denial was adjudicated and the payer decided not to pay. Denials must be analyzed, and either corrected, appealed, or written off.
Categorizing Denials
Grouping denials by category reveals the process to fix:
| Category | Typical cause |
|---|---|
| Registration | Wrong demographics, member ID, or payer |
| Eligibility | Coverage inactive on the date of service |
| Authorization | Missing or expired prior authorization |
| Coding | Invalid code, missing modifier, diagnosis mismatch |
| Medical necessity | Service not supported by the diagnosis or policy |
| Timely filing | Claim submitted after the payer's deadline |
| Coordination of benefits | Wrong payer billed first |
Common CARC Codes
| CARC | Meaning |
|---|---|
| CO-22 | Care may be covered by another payer per coordination of benefits |
| CO-29 | The time limit for filing has expired (timely filing) |
| CO-50 | Non-covered — not deemed a medical necessity by the payer |
| CO-97 | Service is bundled/inclusive in another paid service |
| PR-1 | Deductible amount — patient responsibility |
| PR-3 | Copayment amount — patient responsibility |
Note the group code: CO denials are provider/contract issues to correct or appeal, while PR amounts simply move to the patient.
Root-Cause Analysis
Root-cause analysis asks why a denial happened so the same denial stops recurring. If many CO-29 timely-filing denials trace to one slow clearinghouse queue, the fix is the workflow, not the individual claims. Billers track denial reasons, quantify the dollars, and report trends to management.
Medicare Fee-for-Service Appeal Levels
Medicare fee-for-service has a five-level appeal ladder, each with its own deadline and decision-maker:
| Level | Name | Decided by |
|---|---|---|
| 1 | Redetermination | Medicare Administrative Contractor (MAC) |
| 2 | Reconsideration | Qualified Independent Contractor (QIC) |
| 3 | ALJ Hearing | Administrative Law Judge (OMHA) |
| 4 | Council Review | Medicare Appeals Council |
| 5 | Federal Court | U.S. District Court (judicial review) |
Levels 3 and 5 carry a minimum amount-in-controversy threshold. The provider must move up one level at a time, meeting each deadline.
Commercial Appeals
Commercial payers generally provide two internal appeal levels followed by one external review by an Independent Review Organization (IRO) — an outside, unbiased reviewer. The external review is especially relevant for medical-necessity denials.
Supporting Documentation
A strong appeal includes a cover letter stating the issue, the denial details (claim number, CARC), and clinical documentation — operative notes, the history and physical, lab results, or the authorization number — that proves the service was covered and necessary. Submitting an appeal without supporting evidence usually fails.
A Medicare fee-for-service claim is denied. The provider already received an unfavorable Redetermination decision from the MAC. What is the next appeal level?
A claim is denied with CARC CO-29. What is the denial reason and the appropriate biller response?