Why are medical claims denied? The top causes and how to prevent them
Medical claims are denied when the payer finds a reason not to pay under the patient's coverage, the provider's contract or its billing rules. The most common reasons are coverage problems (the plan was inactive or another payer is primary), missing prior authorization, missing or invalid claim information, coding and modifier errors, bundling under NCCI edits, services the payer does not consider medically necessary, duplicate submissions and claims filed after the deadline. Each reason appears on the remittance as a Claim Adjustment Reason Code (CARC), for example CO-27 for coverage terminated or CO-197 for missing authorization. Most of these denials trace back to a step before the claim was sent, which is why prevention works better than appeals.
This guide groups denials by where they start in the revenue cycle, shows the CARC codes you are likely to see, and lists what prevents each one. For a code-by-code reference with correction steps, see our article on common claim denial reasons.
How to read a denial code
Each adjustment on an 835 remittance or EOB has three parts. The group code shows who is responsible: CO (contractual obligation, generally not billable to the patient), PR (patient responsibility), OA (other adjustment) or PI (payer initiated reduction). The CARC gives the reason. The Remittance Advice Remark Code (RARC) often adds the detail you need to fix it. CARC and RARC code lists are maintained by X12 and updated several times a year, so check the current list when you see an unfamiliar code.
Top denial causes with CARC examples
| Cause | Example CARC | What the code means | Where to prevent it |
|---|---|---|---|
| Coverage ended | CO-27 | Expenses incurred after coverage terminated | Eligibility check before each visit |
| Patient not found | CO-31 | Patient cannot be identified as our insured | Registration: name, date of birth, member ID |
| Wrong payer or order | CO-22, CO-109 | Care may be covered by another payer per coordination of benefits; claim not covered by this payer | Confirm primary and secondary at check-in |
| Missing authorization | CO-197 | Precertification, notification, authorization or pre-treatment absent | Authorization check at scheduling |
| Missing or invalid information | CO-16 | Claim lacks information or has submission or billing errors | Claim scrubbing before submission |
| Modifier problem | CO-4 | Procedure code inconsistent with the modifier used, or a required modifier is missing | Charge review |
| Diagnosis does not fit | CO-11 | Diagnosis is inconsistent with the procedure | Coding review |
| Medical necessity | CO-50 | Non-covered because the payer does not consider it medically necessary | Check LCD/NCD or payer policy before the service |
| Bundling | CO-97 | Benefit included in payment for another service already adjudicated | NCCI edit checks and correct modifier use |
| Duplicate | CO-18 | Exact duplicate claim or service | Check claim status before resubmitting |
| Late filing | CO-29 | The time limit for filing has expired | Timely filing tracking on open claims |
Denials that start at the front desk
Eligibility and coverage (CO-27, CO-31, CO-22, CO-109)
Coverage problems are among the most frequent denials, and among the easiest to prevent. Patients change jobs, move between Medicaid managed care plans, or age into Medicare, and the card on file goes stale. A CO-27 means the plan ended before the date of service. A CO-31 usually means the name, date of birth or member ID on the claim does not match the payer's records. CO-22 and CO-109 point to the wrong payer or the wrong order of payers.
Prevention: verify eligibility electronically (270/271) before every visit, not only at the first appointment, and ask patients at check-in whether their insurance has changed. Copy the name exactly as it appears on the card. Our eligibility verification service covers this step.
Missing prior authorization (CO-197)
Authorization rules vary by payer, plan and service, and they change. A CO-197 means the payer expected an approval that it does not have on file, or the approval number on the claim did not match. Common triggers include advanced imaging, some surgical procedures, specialty drugs and ongoing therapy visits that exceed the authorized count.
Prevention: check authorization requirements at scheduling, record the authorization number, dates and visit count where the billing team can see them, and track remaining visits. Some payers allow a retroactive request in limited situations, but you cannot count on it.
Denials that start in coding and charge entry
Missing or invalid information (CO-16)
CO-16 is a catch-all for claims that are missing information or have billing errors. The remark code tells you what is missing. For example, N290 points to a missing or invalid rendering provider identifier, and M51 to a missing or invalid procedure code. Resubmitting without reading the RARC usually produces the same denial.
Prevention: scrub claims before submission for required fields, valid NPIs and taxonomy codes, and correct place of service.
Modifier and diagnosis errors (CO-4, CO-11)
CO-4 appears when a required modifier is missing or the modifier does not fit the code, such as a missing modifier 25 on an E/M billed with a minor procedure, or laterality modifiers (RT, LT) left off. CO-11 appears when the diagnosis linked to a line does not support the procedure. Both often come from diagnosis pointers attached to the wrong line.
Prevention: charge review that checks modifiers and diagnosis linkage against the documentation. Our guide to modifier 25 covers one of the most common cases.
Bundling (CO-97)
CO-97 means the payer considers the service included in another service already paid. Under NCCI procedure-to-procedure edits, some code pairs cannot be paid together unless a modifier such as 59 or XS applies and the documentation supports a distinct service. Adding modifiers only to get past an edit is a compliance risk.
Prevention: check code pairs against current NCCI edits, which CMS updates quarterly, and use bypass modifiers only when the note supports them. Our medical coding services include this review.
Medical necessity (CO-50)
CO-50 means the payer does not consider the service medically necessary for the diagnosis billed. For Medicare, coverage often depends on a National Coverage Determination (NCD) or the MAC's Local Coverage Determination (LCD), which list covered diagnoses for certain tests and procedures. When a Medicare service is likely to be denied as not medically necessary, an Advance Beneficiary Notice of Noncoverage (ABN) given before the service lets the practice bill the patient if Medicare denies.
Prevention: check coverage policies for tests and procedures with known limits, code the diagnosis to the highest specificity the documentation supports, and use ABNs correctly for Medicare patients.
Denials that start in follow-up
Duplicates (CO-18)
Duplicate denials usually happen when a claim is resent while the original is still in process. They add noise and delay without adding payment. Check claim status (276/277 or the payer portal) before resubmitting, and use the correct frequency code when sending a corrected claim.
Late filing (CO-29)
Every payer sets a timely filing limit. Medicare's is generally 12 months from the date of service, and commercial and Medicaid limits are often shorter. A CO-29 is usually a write-off, since the group code CO means you generally cannot bill the patient. Track open claims against each payer's deadline. Our guide to timely filing limits by payer lists common limits.
What to do when a claim is denied
- Read the group code, CARC and RARC together
- Decide whether it is an error to correct or a decision to appeal
- For errors, fix the claim and resubmit as a corrected claim where required
- For appeals, gather the note, the payer policy and any authorization, and file within the payer's appeal deadline (for a Medicare redetermination, 120 days from receipt of the initial determination)
- Log the root cause and fix the step that caused it
Building a prevention routine
Track denials each month by CARC, payer and provider. When one reason keeps showing up, fix it at the source: a registration script, an authorization checklist, a scrubber rule or provider education. A practice that reviews its top five denial reasons each month usually finds most of its preventable revenue loss there.
How SFA can help
SFA's denial management team uses AI-assisted tools to categorize denials by CARC and RARC and to flag claims against NCCI and payer edits before submission, with experienced billers reviewing each correction and appeal. To see which denials are costing your practice the most, start with a free practice audit.
Frequently asked questions
What is the most common reason medical claims are denied?
It varies by practice and payer mix, but eligibility and registration problems (such as CO-27 and CO-31) and missing or invalid claim information (CO-16) are among the most frequent. Both are largely preventable with eligibility checks before the visit and claim scrubbing before submission.
What does CO mean on a denial?
CO stands for contractual obligation. It means the adjustment is the provider's responsibility under the payer contract or rules, so the amount generally cannot be billed to the patient.
Should I resubmit or appeal a denied claim?
Resubmit or send a corrected claim when the denial came from an error on the claim, such as a missing modifier or wrong member ID. Appeal when the claim was correct and you disagree with the payer's decision, such as a medical necessity denial supported by the documentation.
Member of the SFA Solutions revenue cycle team.