Payer denials based on diagnosis coding are a significant challenge for healthcare Providers.

Every rejected claim leads to revenue loss, additional administrative work, and overall frustration. However, understanding denial and claim rejection reasons can help prevent rejections and improve claim approval rates.

Payers use policies and automated code edit software to prevent payment for services when codes are reported improperly. Many denials are based directly on the instructions and guidelines in ICD-10-CM. Coding and billing staff should be familiar with and reference these policies to avoid denials, identify the reason for a denial, and/or appeal an inappropriately denied service.

Additionally, diagnosis codes listed on claims must be in the correct order and linked to corresponding procedure codes. This is especially important when reporting services that are considered distinct procedural services (e.g. -59 manual therapy reported with CMT).

Recently, I have seen an uptick in diagnosis coding denials from payers stating the following:

• “Missing/incomplete/invalid principal diagnosis”
• “Submitted diagnosis code is not specific enough for accurate determination of benefit eligibility”
• “Diagnosis codes cannot be billed together”
• “Procedure/Service non-covered with billed diagnosis code”
• “The procedure is deemed not reasonable and necessary with reported diagnosis as per CMS national coverage determination policy”

The reasons for these denials are often self-inflicted by Providers and typically are due to simple coding errors.

The most common errors are:

1. Using Truncating codes – A truncated code is an invalid code that is missing 1 or more additional digits. ICD-10-CM codes often require specific details in the fourth and fifth digits. Using truncated codes (missing these details) is a common error that guarantees claim denial.
2. Using Unspecified codes – Unspecified codes should only be used when the documentation does not provide enough information for a more specific code. Unspecified codes are easy to identify as the word “unspecified” is included in the description.
3. Code Missing Laterality – Using a code without proper identification of laterality will often result in automatic denial. Not all codes require that laterality is specified, however when they do, it is critical to choose wisely.
4. Excludes1 – This identifies when 2 diagnosis codes are mutually exclusive e.g. two conditions that cannot be reported together. The code combination should never be used at the same time.
5. Using Deleted codes – Using a code that is no longer valid and has been either replaced with a new code or entirely deleted.
6. Improper Primary Diagnosis Code – This type of denial can be for multiple reasons. Sometimes it’s due to one of the above reasons and other times it is due to payer policy. For example, some payers are now following Medicare diagnosis hierarchy rules e.g. requiring a subluxation code as primary.

Almost all the above denials can be easily avoided by performing a quick review of claims, prior to submission. However, many Providers and billers don’t take the time to keep on top of changes to coding rules that occur every year.

Reducing the frequency of diagnosis coding denials starts with a “zero-tolerance” mindset for preventable denials. Most of these are well within the practice’s control, caused by either action or inaction within the code assigning process. For example, deleted code denials can be easily avoided by ensuring all code choices are valid for the date of service. A list of deleted codes is published every year (for free) and can be easily cross referenced and updated in your billing software, any deleted codes for that year should be removed as a choice and will no longer be cause for denial.

Another example of preventable denials is use of unspecified and/or truncated diagnosis codes. Last week I received a question from a Provider that wanted to know why their claim was denied. The code used was M23.305 – Other meniscus derangements, unspecified medial meniscus, unspecified knee. Submitting a claim without identifying which knee has the issue is not only easy to identify, it’s an easy automatic denial from the payer. To avoid these, Providers can simply remove these code choices from their software, limiting selection to valid codes only. Not being able to assign an unspecified or truncated diagnosis code eliminates the chance for this denial reason.

One of the most confusing types of denials is “Excludes1”. Remember, Excludes1 means a code is mutually exclusive to another code for the same patient for the same DOS. If both codes are used on the same claim, then the entire claim will be denied. For example, code M51.16 Intervertebral disc disorders with radiculopathy, lumbar region and M54.16 Radiculopathy, lumbar region are considered “Excludes1”. Therefore, if they are used on the same claim the entire claim will automatically deny. Denial for Excludes1 is preventable, however it does take diligence on the part of the Provider and billing staff to check for these exclusions. The Excludes1 codes are listed in the tabular code listing or there are online tools that easily identify code combinations that are Excludes1. All Providers should have either an up-to-date ICD-10-CM code book or an on-line version, such as Find-A-Code.

Some denials are destined to occur no matter how diligently the claims are reviewed before submission. However, the goal is to stay on top of all denials to ensure they are corrected and appealed (if necessary) as they occur. Providers must be proactive and identify trends, quantify and categorize denials by tracking, evaluating, and recording them to help identify and rectify the issues causing denials in the first place.

---

ABOUT THE AUTHOR:

David Klein, CPC, CPMA, CHC, is the ANJC’s coding and compliance consultant. He is the co-founder of PayDC, a web-based Electronic Health Records Practice Management system that focuses on compliance and reimbursement. He is a certified professional coder through the American Academy of Professional Coders (AAPC) and is certified in healthcare compliance through the Health Care Compliance Board (HCCB). He is also the Founder and President of DK Coding & Compliance, Inc. a health care consulting firm that focuses on audit defense, education, compliance and reimbursement issues.