CO-56 Denials Explained: How to Identify, Appeal, and Prevent Them

Denial codes are a persistent challenge in healthcare revenue cycle management (RCM), and CO-56 is one of the more complex codes to manage. This denial occurs when a payer determines that a procedure or treatment is not "proven to be effective." For healthcare organizations, these denials can result in delayed payments, operational inefficiencies, and potential revenue losses.

In this article, we’ll break down what CO-56 means, common causes, its impact on RCM teams, and most importantly, how to appeal and prevent these denials effectively. By understanding the nuances of this denial code, you can protect revenue streams and streamline your RCM processes.

What Is a CO-56 Denial?

A CO-56 denial indicates that the service or treatment billed has not been deemed "proven to be effective" by the payer. The prefix CO stands for Contractual Obligation, meaning the financial responsibility lies with the provider rather than the patient.

Payers typically deny claims under CO-56 due to a lack of clinical evidence supporting the efficacy of the procedure or treatment. These decisions are often based on the payer’s medical policies, which may vary between organizations. Providers can find further details in the 835 Healthcare Policy Identification Segment (loop 2110 Service Payment Information REF), if available.

Understanding CO-56 denials is essential, as they directly affect a provider’s reimbursement and require a proactive approach to resolution.

Comparison: CO-56 vs Similar Denial Codes

Denial Code	Prefix Meaning	Reason/Description	Who's Financially Responsible
CO-56	Contractual Obligation	Procedure/treatment has not been deemed 'proven to be effective' by the payer.	Provider
CO-50	Contractual Obligation	These services are not deemed "medically necessary."	Provider
PR-96	Patient Responsibility	Non-covered charges.	Patient

While CO-56 and CO-50 both involve medical necessity or effectiveness, CO-56 specifically relates to the lack of clinical evidence supporting the treatment. In contrast, PR-96 denotes services that are entirely excluded from coverage, making the patient financially responsible.

Common Causes of CO-56 Denials

1. Insufficient Clinical Evidence: The payer may determine that the submitted documentation does not support the efficacy of the treatment based on their medical policy.
2. Outdated or Non-Approved Procedures: Experimental or investigational treatments often trigger CO-56 denials.
3. Lack of Supporting Documentation: If the claim is missing key clinical records, payers may deny it under CO-56.
4. Payer-Specific Medical Policies: Variations in payer guidelines can lead to discrepancies in what is considered "effective."
5. Coding Errors: Incorrect coding of the procedure might misrepresent its intent or effectiveness.

Impact on Revenue Cycle Teams

CO-56 denials pose significant challenges for RCM teams, both financially and operationally.

Financial Impact:
- Revenue delays due to the need for additional documentation and appeals.
- Increased days in accounts receivable (AR), leading to cash flow issues.
- Potential write-offs if the appeal process fails or deadlines are missed.
- Higher operational costs as denial management resources are allocated to address these claims.

Operational Impact:
- Staff time diverted from other priority tasks to manage and appeal CO-56 denials.
- Increased need for expertise in payer-specific medical guidelines and clinical documentation.
- Coordination challenges between clinical, billing, and coding teams.
- The necessity to track and analyze denial trends to improve processes and outcomes.

To mitigate these impacts, healthcare organizations can leverage advanced denial management solutions. CombineHealth.ai’s AI-powered platform, including Adam (AI Denial Manager), enables RCM teams to identify, track, and resolve CO-56 denials more efficiently, reducing revenue leakage and improving financial performance.

Steps To Appeal a CO-56 Denial

Successfully appealing a CO-56 denial requires a systematic approach. Follow these steps to increase your chances of overturning the denial:

Step 1: Review the Denial Notice
Thoroughly examine the Explanation of Benefits (EOB) or Remittance Advice to confirm the denial reason and identify supporting documentation requirements.

Step 2: Gather Documentation
Collect all necessary medical records, including physician notes, lab results, imaging reports, and clinical studies that demonstrate the effectiveness of the treatment.

Step 3: Verify Eligibility
Ensure the patient’s insurance plan covers the service and that the policy criteria for the procedure are met.

Step 4: Prepare Appeal Letter
Draft a clear and concise appeal letter. Include patient details, claim information, a summary of the clinical evidence, and references to peer-reviewed studies or guidelines supporting the treatment.

Step 5: Submit Within Deadline
Adhere to the payer’s appeal submission deadlines, as missing these can result in forfeiting the appeal process.

Step 6: Track and Follow Up
Monitor the status of your appeal and maintain clear communication with the payer to ensure timely resolution.

How To Prevent CO-56 Denials

While appeals are crucial, prevention is even more critical for maintaining a healthy revenue cycle. Implement the following strategies:

Front-End Prevention

• Verify Payer Policies: Before providing services, confirm the payer’s medical policies regarding coverage for specific treatments.
• Obtain Preauthorization: Secure prior authorization for procedures that may be flagged as investigational or experimental.

Billing Best Practices

• Accurate Coding: Ensure that the correct procedure codes and modifiers are used to avoid misrepresentation.
• Comprehensive Documentation: Submit thorough clinical documentation that supports the medical necessity and effectiveness of the treatment.

Technology Solutions

• Claim Scrubbing Tools: Leverage automated claim scrubbing tools, like Adam from CombineHealth.ai, to identify potential issues before claim submission.
• AI-Powered Appeal Management: Use Rachel (AI Appeals Manager) to streamline the appeal process, improving success rates and reducing administrative burden.

CombineHealth.ai’s intelligent platform integrates cutting-edge technology to help prevent CO-56 denials and expedite the appeals process when necessary, ensuring a smoother revenue cycle for healthcare organizations.

FAQs

Q1: What does CO-56 mean in medical billing?
CO-56 indicates that a procedure or treatment is not considered "proven to be effective" by the payer, based on their medical policy.

Q2: Can CO-56 denials be appealed?
Yes, with appropriate documentation and a well-crafted appeal letter, CO-56 denials can often be successfully overturned.

Q3: How long do I have to appeal?
Appeal deadlines vary by payer, but it’s critical to act promptly and submit appeals within the timeframe specified in the denial notice.

Q4: How can I prevent these denials?
Proactively verify payer policies, secure preauthorization, ensure accurate coding, and provide comprehensive documentation. See our complete guide on denial prevention.