How To Fix Denial Code 104 | Common Reasons, Next Steps & How To Avoid It

Denial Code 104 means that a claim has been denied due to managed care withholding. Below you can find the description, common reasons for denial code 104, next steps, how to avoid it, and examples.

2. Description

Denial Code 104 is a Claim Adjustment Reason Code (CARC) and is described as ‘Managed Care Withholding’. This denial code indicates that the insurance company has withheld payment for the billed service due to managed care arrangements. Managed care withholding refers to the practice of insurance companies retaining a portion of the payment for services rendered, typically as part of a contractual agreement with the healthcare provider.

2. Common Reasons

The most common reasons for denial code 104 are:

1. Contractual Agreements: Denial code 104 often occurs when healthcare providers have contractual agreements with insurance companies that include provisions for managed care withholding. These agreements may specify a percentage or fixed amount that will be withheld from the payment for each service rendered.
2. Out-of-Network Providers: Insurance plans may have different reimbursement rates for in-network and out-of-network providers. Denial code 104 can be triggered when an out-of-network provider submits a claim and the insurance company applies managed care withholding as per the terms of the policy.
3. Non-Covered Services: Some services may be excluded from coverage under the insurance policy. In such cases, denial code 104 may be used to indicate that the insurance company is withholding payment for these specific services, even if the provider is in-network.
4. Pre-Authorization Requirements: Insurance plans often require pre-authorization for certain services or procedures. If a provider fails to obtain the necessary pre-authorization, denial code 104 may be used to indicate that the insurance company is withholding payment due to the lack of pre-authorization.
5. Documentation and Coding Errors: Denial code 104 can also be triggered by documentation and coding errors. If the provider fails to submit the required documentation or if there are coding errors that result in the service being deemed ineligible for payment, the insurance company may use denial code 104 to withhold payment.

3. Next Steps

You can address denial code 104 as follows:

1. Review Contractual Agreements: If denial code 104 is triggered due to contractual agreements, review the terms of the agreement between the healthcare provider and the insurance company. Ensure that the managed care withholding is being applied correctly and in accordance with the agreed-upon terms.
2. Verify Network Status: For out-of-network providers, confirm the network status of the provider and the reimbursement rates specified in the insurance policy. If denial code 104 is triggered due to being an out-of-network provider, consider negotiating with the insurance company to become an in-network provider to avoid future denials.
3. Check Coverage and Pre-Authorization Requirements: Review the insurance policy to determine if the service in question is covered and if pre-authorization is required. If denial code 104 is triggered due to non-covered services or lack of pre-authorization, ensure that future claims comply with the policy requirements.
4. Improve Documentation and Coding Practices: To avoid denial code 104 due to documentation and coding errors, implement processes to ensure accurate and complete documentation. Train staff on proper coding practices and conduct regular audits to identify and address any coding errors.
5. Appeal and Resubmit: If denial code 104 is triggered in error or if there are grounds for appeal, prepare a strong appeal letter and resubmit the claim with any additional supporting documentation. Follow up with the insurance company to ensure that the appeal is properly reviewed and resolved.

4. How To Avoid It

You can prevent denial code 104 in the future by taking the following steps:

1. Understand Contractual Agreements: Familiarize yourself with the terms of any contractual agreements with insurance companies. Ensure that you are aware of any managed care withholding provisions and that you are complying with the agreed-upon terms.
2. Verify Network Participation: If you are an out-of-network provider, consider joining the insurance company’s network to avoid denial code 104. Verify the reimbursement rates and requirements for network participation to make an informed decision.
3. Check Coverage and Pre-Authorization: Before providing services, verify the coverage and pre-authorization requirements outlined in the insurance policy. Obtain the necessary pre-authorization to ensure that services will be eligible for payment.
4. Improve Documentation and Coding: Implement processes to ensure accurate and complete documentation. Train staff on proper coding practices and conduct regular audits to identify and address any coding errors that could lead to denial code 104.
5. Monitor and Appeal: Regularly monitor claim denials and appeals. If denial code 104 is triggered in error or if there are grounds for appeal, be proactive in appealing and resubmitting the claim with any necessary supporting documentation.

5. Example Cases

Below are two examples of denial code 104:

• Example 1: A healthcare provider submits a claim for a service rendered to an out-of-network patient. The insurance company applies managed care withholding as per the terms of the policy, resulting in denial code 104.
• Example 2: A provider fails to obtain pre-authorization for a procedure and submits a claim for reimbursement. The insurance company withholds payment due to the lack of pre-authorization, triggering denial code 104.

Source: Claim Adjustment Reason Codes