Denial Code CO-45: How to Avoid and Resolve It?

Denial Code CO-45 is a common denial that physical therapy practices encounter, and it can have significant implications for your revenue cycle. As a physical therapist, understanding this denial and knowing how to manage it effectively is crucial to maximizing reimbursements and maintaining financial stability.

What is Denial Code CO-45?

Denial Code CO-45 indicates that the amount billed exceeds the fee schedule or maximum allowable amount established by the payer. Essentially, it means the payer is refusing to cover the full cost of the service because the charge exceeds what is deemed reasonable or allowed under their policy.

Why Does CO-45 Matter?

CO-45 denials can result in lost revenue, increased patient responsibility, and additional administrative burdens. Frequent CO-45 denials may also indicate that your practice's billing procedures are misaligned with payer expectations or that fee schedules need updating. Understanding how to address CO-45 denials is essential for optimizing revenue and minimizing out-of-pocket costs for your patients.

Deconstructing a CO-45 Denial: What Went Wrong and How to Fix It?

Example:

• Initial Billing:
  • CPT 97110: Therapeutic Exercise - $150
  • CPT 97140: Manual Therapy - $100
  • CPT 97530: Therapeutic Activities - $120
  • Total Billed Amount: $370
• Outcome: Denial Code CO-45 was applied, reducing the allowed amount to $300 based on the payer's fee schedule, resulting in a $70 reduction.

Remedy:

1. Verify Payer Fee Schedules: Review the payer's fee schedule to confirm the allowed amount for each CPT code.
2. Adjust Charges if Necessary: If the charges exceed the allowed amount, consider adjusting them to align with the payer's limits.
3. Appeal if Justified: If the billed amount is reasonable and supported by documentation, consider appealing the denial with evidence that supports your charges.

• Corrected Billing:
  • Adjust charges to reflect the payer's fee schedule or appeal with supporting documentation to justify the higher charges.

Actionable Steps: How to Address a CO-45 Denial

• Review the Explanation of Benefits (EOB): Carefully examine the EOB to determine why the payer applied the CO-45 denial.
• Check for Contractual Agreements: Ensure that your practice's charges align with the contracted rates for that payer.
• Gather Supporting Documentation: Collect clinical notes, previous claims, and payer guidelines to support the appropriateness of your charges.
• Resubmit or Appeal: Make the necessary corrections or submit an appeal with the appropriate documentation if the denial is incorrect.

Correcting Charge Amounts and Appealing Denials

Correctly charging and appealing denials is crucial for minimizing CO-45 denials. Accurate charge setting aligned with payer fee schedules and understanding the circumstances under which an appeal is appropriate can help protect your revenue.

Common Causes of CO-45 Denials

1. Overcharging Beyond Allowed Amounts: When the billed amount exceeds the fee schedule or payer's maximum allowable charge.
2. Lack of Updated Fee Schedules: Failing to regularly update your practice's fee schedules according to the payer's policy.
3. Inaccurate Contractual Agreements: Not adhering to the terms of your contractual agreements with payers.

Proactive Prevention: Avoiding CO-45 Denials

Pre-Claim Submission Checklist:

• Verify Charges: Ensure all billed amounts align with payer fee schedules.
• Stay Updated: Regularly update your practice's fee schedules based on the latest payer policies.
• Accurate Contract Management: Keep accurate records of your contractual agreements with payers and adhere to them.

Training and Best Practices:

• Train billing staff on the importance of adhering to payer fee schedules and understanding contractual obligations.
• Implement best practices for accurate and compliant billing.

Technology and Tools:

• Use advanced billing software to flag discrepancies between billed amounts and payer fee schedules before claims are submitted.
• Leverage tools that automatically update fee schedules and provide alerts for potential issues.

Conclusion: Protect Your Practice’s Revenue with Effective Denial Management

Denial Code CO-45 can impact your bottom line, but by understanding its implications and taking proactive steps to prevent it, you can safeguard your revenue and ensure smoother operations. Staying informed about payer fee schedules, maintaining accurate charges, and appealing unjust denials are all essential strategies for managing CO-45 denials effectively.

Take Action with SPRY

Navigating the complexities of billing and denial management can be challenging, but SPRY's advanced physical therapy software makes it easier. Our platform helps ensure accurate billing, aligns with payer fee schedules, and minimizes the risk of denials. Schedule a demo today to see how SPRY can support your practice's financial health and enhance your revenue cycle management.

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