How To Fix Denial Code 204 | Common Reasons, Next Steps & How To Avoid It

Denial Code 204 means that the service, equipment, or drug being billed is not covered under the patient’s current benefit plan. Below you can find the description, common reasons for denial code 204, next steps, how to avoid it, and examples.

2. Description

Denial Code 204 is a Claim Adjustment Reason Code (CARC) that indicates the service, equipment, or drug being billed is not covered under the patient’s current benefit plan. This means that the insurance company will not make the payment for the specific item or service because it is not included in the patient’s coverage. In simpler terms, the claim is denied because the insurance policy does not provide coverage for the particular service, equipment, or drug being billed.

2. Common Reasons

The most common reasons for denial code 204 are:

1. Limited Coverage: Denial code 204 often occurs when the patient’s insurance plan has specific limitations or exclusions for certain services, equipment, or drugs. These limitations may be related to medical necessity, experimental treatments, cosmetic procedures, or specific medications. Providers need to carefully review the patient’s benefit plan to determine if the item or service being billed is covered.
2. Out-of-Network Providers: Denial code 204 can also occur when the patient receives services from an out-of-network provider. Insurance plans often have different coverage levels for in-network and out-of-network providers, and certain services may only be covered when obtained from an in-network provider. Providers should verify the patient’s network status before rendering services to avoid denials under code 204.
3. Preauthorization Requirements: Some insurance plans require preauthorization for certain services, equipment, or drugs. If the provider fails to obtain the necessary preauthorization before providing the item or service, the claim may be denied under code 204. It is essential for providers to understand the preauthorization requirements of the patient’s insurance plan and ensure compliance.
4. Non-Covered Services: Denial code 204 may also occur when the item or service being billed is explicitly listed as a non-covered service in the patient’s benefit plan. Providers should familiarize themselves with the patient’s insurance policy and identify any services, equipment, or drugs that are not covered to avoid denials.
5. Incorrect Coding: Inaccurate coding can lead to denials under code 204. If the provider assigns an incorrect code to the item or service being billed, it may not align with the coverage criteria outlined in the patient’s benefit plan. Providers should ensure accurate coding to prevent denials related to code 204.

3. Next Steps

You can address denial code 204 as follows:

1. Review Benefit Plan: Carefully review the patient’s benefit plan to determine if the item or service being billed is covered. Check for any limitations, exclusions, or preauthorization requirements that may apply.
2. Verify Network Status: Confirm the patient’s network status to ensure that services are provided by an in-network provider, if required by the insurance plan. If the provider is out-of-network, consider discussing the situation with the patient and exploring alternative options.
3. Obtain Preauthorization: If the patient’s benefit plan requires preauthorization for the item or service, ensure that the necessary preauthorization is obtained before providing the service. Failure to obtain preauthorization can result in denials under code 204.
4. Communicate with the Patient: If the item or service is not covered under the patient’s benefit plan, communicate this information to the patient. Discuss alternative options, such as seeking an in-network provider or exploring different treatment options that are covered by the insurance plan.
5. Appeal or Adjust Billing: If you believe that the denial under code 204 was incorrect or unjustified, consider appealing the denial. Provide any necessary documentation or additional information to support the claim’s validity. Alternatively, if the denial was accurate, adjust the billing accordingly and inform the patient of any out-of-pocket expenses.

4. How To Avoid It

You can prevent denial code 204 in the future by taking the following steps:

1. Thoroughly Review Benefit Plans: Familiarize yourself with the patient’s benefit plan and understand the coverage criteria, limitations, exclusions, and preauthorization requirements. This will help ensure that the items or services being provided are covered.
2. Verify Network Participation: Confirm the network participation status of the provider and ensure that services are rendered by an in-network provider, if required by the insurance plan. If the provider is out-of-network, inform the patient about potential coverage limitations.
3. Obtain Preauthorization: If the patient’s benefit plan requires preauthorization for specific services, equipment, or drugs, make sure to obtain the necessary preauthorization before providing the item or service. This will help prevent denials under code 204.
4. Accurate Coding: Assign accurate codes to the items or services being billed. Ensure that the codes align with the coverage criteria outlined in the patient’s benefit plan. Regularly train coding staff to stay updated on coding guidelines and best practices.
5. Communicate with Patients: Educate patients about their insurance coverage and any limitations or exclusions that may apply. Clearly communicate the potential out-of-pocket expenses associated with non-covered services, equipment, or drugs.

5. Example Cases

Below are two examples of denial code 204:

• Example 1: A patient undergoes a cosmetic procedure that is explicitly listed as a non-covered service in their insurance policy. The claim for the procedure is denied under code 204, indicating that the service is not covered under the patient’s current benefit plan.
• Example 2: A provider fails to obtain preauthorization for a specialized medical device before providing it to a patient. The claim for the device is denied under code 204, as the preauthorization requirement was not met.

Source: Claim Adjustment Reason Codes