CO 256 Denial Code | Everything You Need To Know

One of the leading causes of claim denials are unpayable services. Insurance companies usually associate such denials with the CO 256 denial code. This blog explores the reasons why insurers use this code to deny claims. We will also uncover various strategies that you can implement to avoid it.

Apart from that, experience seamless revenue cycles with our denial management solutions. We help prevent and resolve claim denials efficiently.

CO 256 Denial Code Descriptions

The CO 256 denial code indicates that a specific service is not payable. This decision is made according to certain terms and conditions. They are primarily outlined in a managed care contract between insurers and hospitals.

This agreement outlines the terms of service coverage agreed upon by both parties. The full form of CO is contractual obligations. These obligations comprise the legally binding responsibilities set between patients, insurance companies, and healthcare providers.

With the CO 256 code, insurance companies determine that your billed services are not covered under those terms. A denied claim with this code means that insurers will not reimburse healthcare providers for their medical services. The service is explicitly excluded from their coverage.

This coverage is set under the provider’s contract with the insurer. The reasons for a CO 256 denial are not the focus of this code. Its common causes often involve discrepancies between billed services and insurance coverages. There can be specific issues as well with the patient’s eligibility or authorization.

Common Reasons for the CO 256 Denial Code

CO 256 denials can arise due to various reasons in medical billing. Each of those reasons is explained in more detail below:

• Contractual Limitations and Place of Service Mismatch

A service may be explicitly excluded from the managed care plan. In such cases, it will not be covered by insurance companies. These exclusions are typically outlined in the contract. This is why it is crucial for providers to be familiar with these terms. Some mismatches can also occur with the place of service.

This occurs when the location where you provided the service does not align with the contractual stipulations. For example, consider a procedure that should be performed in an outpatient setting. It may not be covered if you conduct it in an inpatient setting.

• Out-of-Network Providers and Incorrect Procedure Codes

The services of those providers who are not part of the insurer’s network may also not be covered. It is also possible that they may be reimbursed at a lower rate. Such cases can lead to partial or full denials.

Some healthcare providers use procedure codes that do not accurately reflect their services. They use a code that is not included under their contract with an insurer. Such reimbursement claims also end up with denials.

• Benefit Limits Reached and Lack of Pre-authorizations

It is also possible that your patients have already exhausted their allocated benefits for a particular service. This exhaustion can either be annually or over a lifetime. As a result, the subsequent services will not be covered. Many services like the expensive or uncommon ones require prior authorization. Failure to obtain this authorization can lead to a denial.

• Invalid Documentation and Patient Information

An accurate claim processing hinges on adequate documentation provided by healthcare providers. These documents usually include medical records, test results, and diagnostic reports. They support the necessity and execution of the service.

Errors in key details can also lead to denials due to mismatches or inconsistencies. These details comprise patient demographics, insurance details, or other claim-related information.

• Medical Necessity

An insurance company may also determine that a service is not essential for the relevant diagnosis or treatment. In this case, they may deny the claim based on a lack of medical necessity. Claims might also be denied if the level of service billed is not supported by the patient’s medical records. It may also not be supported by their condition at the time of the service.

How to Avoid CO 256 Denial Code?

You can prevent the occurrence of CO 256 denials by implementing several effective strategies. These strategies span across pre-service verification, following contractual terms, and much more. Here’s a detailed look at each of those strategies:

• Pre-Service Verification

Verifying patient eligibility involves confirming that the patient is currently covered by the insurance plan. This includes checking the start and end dates of the coverage. You should also check the coverage limits and exclusions specific to that policy.

Healthcare providers have to verify the specific benefits covered under the insurance plan as well. By doing this, you can ensure that your services are adequately reimbursed. Also identify the services that need prior approval and submit necessary documentation.

• Accurate Coding and Documentation

Using the correct procedure codes is crucial. It involves the selection of the most specific and appropriate CPT and HCPCS codes. You also have to regularly update your coding practices according to the latest updates from coding authorities.

Maintain detailed and clear healthcare documentation. Make detailed notes on patient consultations and diagnostic information. Stay updated with coding regulations and guidelines to ensure compliance. Conduct regular internal audits to identify and rectify coding errors.

• Following Contractual Terms

Thoroughly understanding the managed care contract is essential for any healthcare provider. It helps you stay informed about coverage limitations and places of service restrictions. You can also learn a lot about the set reimbursement rules. Through this learning, you can avoid billing non-payable services under the contract.

Ensure that you are in-network with the patient’s insurance plan. By doing this, you can avoid denials related to out-of-network services. Such denials often carry higher out-of-pocket costs for patients. It is also possible that they may not be covered.

• Claim Submission and Follow-up

Ensure that all claim forms are filled out accurately and completely. Submit claims within the payer’s specified deadlines as well. In the event of CO 256 denials, you must always review the explanation of benefits.

You should also resubmit corrected claims or initiate an appeal at least. Appeals often work for healthcare providers if their denials are disputed.

How Health Quest Billing Helps Prevent Claim Denials?

Health Quest Billing focuses on the latest billing practices and regulatory compliance. This keeps our staff at the forefront of industry standards. We also establish direct communication lines with insurance companies. Our billing team specializes in comprehensive claim scrubbing as well.

It helps them catch errors before submission. This ability reduces the chances of denials for reasons like CO 29. We ensure that there are no coding mistakes or incomplete information in your claims. Health Quest Billing plays a crucial role in preventing claim denials.

We use state-of-the-art technology and expert insights to save our hospital clients from them. Our real-time data analytics help us identify patterns that lead to those denials. This is how we enable preemptive action for healthcare providers.

By doing this, we can swiftly resolve disputes and clarify coverage ambiguities. As a result, we significantly speed up the appeal process. The claim acceptance rates of healthcare providers also improve. By doing all this, we ensure that our hospital clients receive maximum reimbursements for their services.

The Bottom Line

Insurance companies deny claims with the CO 256 code whenever specific services are not payable. This can happen due to a variety of reasons like contractual limitations, out-of-network providers, and much more.

You can avoid CO 256 denials by implementing strategies like pre-service certification, accurate coding, and follow-ups. Contact Health Quest Billing and get a chance to work with the best medical billers in the market.