How To Fix Denial Code 256 | Common Reasons, Next Steps & How To Avoid It

Denial Code 256 means that a claim has been denied because the service is not payable per the managed care contract. Below you can find the description, common reasons for denial code 256, next steps, how to avoid it, and examples.

2. Description

Denial Code 256 is a Claim Adjustment Reason Code (CARC) and is described as ‘Service not payable per managed care contract’. This denial code indicates that the insurance company will not make payment for the billed service because it is not covered under the terms of the managed care contract. In simpler terms, the service provided is not eligible for reimbursement according to the agreement between the healthcare provider and the insurance company.

2. Common Reasons

The most common reasons for denial code 256 are:

1. Service Exclusion: Denial code 256 often occurs when the specific service provided is explicitly excluded from coverage under the managed care contract. This could be due to limitations on certain procedures, treatments, or medications that are not considered medically necessary or are deemed experimental or investigational.
2. Out-of-Network Provider: If the healthcare provider is not part of the insurance company’s network, denial code 256 may be triggered. Managed care contracts typically require patients to seek services from in-network providers, and claims from out-of-network providers may be denied.
3. Preauthorization Requirement: Some services may require preauthorization from the insurance company before they can be covered. If the provider fails to obtain the necessary preauthorization, the claim may be denied under denial code 256.
4. Benefit Limitations: Managed care contracts often have limitations on the frequency or duration of certain services. If the service exceeds these limitations, the claim may be denied under denial code 256.
5. Documentation Insufficiency: In some cases, the denial may be due to insufficient or incomplete documentation submitted with the claim. The insurance company may require specific documentation to support the medical necessity of the service, and failure to provide this documentation can result in denial.

3. Next Steps

You can address denial code 256 as follows:

1. Review Managed Care Contract: First, review the managed care contract between your healthcare practice and the insurance company. Identify the specific terms and conditions that pertain to the denied service to understand why it is not payable.
2. Appeal the Denial: If you believe the denial is incorrect or unjustified, you can appeal the decision. Gather any additional documentation or evidence that supports the medical necessity of the service and submit an appeal to the insurance company. Follow their specific appeals process and provide a clear and concise explanation of why the denial should be overturned.
3. Consider Negotiation: If the denial is due to being an out-of-network provider, you may consider negotiating with the insurance company to become an in-network provider. This can help ensure future claims are not denied under denial code 256.
4. Seek Preauthorization: If the denial was due to a lack of preauthorization, ensure that you obtain preauthorization for future services that require it. Familiarize yourself with the insurance company’s preauthorization requirements and ensure that all necessary steps are taken before providing the service.
5. Improve Documentation: To avoid denials due to insufficient documentation, ensure that all necessary documentation is complete, accurate, and submitted with the claim. Familiarize yourself with the insurance company’s documentation requirements and ensure that you meet them to support the medical necessity of the service.

4. How To Avoid It

You can prevent denial code 256 in the future by taking the following steps:

1. Verify Coverage: Before providing any service, verify the patient’s coverage and eligibility under the managed care contract. Ensure that the service is covered and not excluded under the terms of the contract.
2. Stay In-Network: If you are an out-of-network provider, consider joining the insurance company’s network to ensure that services are eligible for reimbursement. This can help prevent denials under denial code 256.
3. Obtain Preauthorization: Familiarize yourself with the insurance company’s preauthorization requirements and ensure that you obtain preauthorization for any services that require it. This will help ensure that the service is eligible for reimbursement.
4. Document Thoroughly: Maintain accurate and detailed documentation for all services provided. Ensure that the documentation supports the medical necessity of the service and meets the insurance company’s requirements.
5. Stay Informed: Stay updated on any changes or updates to the managed care contract. Be aware of any new exclusions, limitations, or requirements that may affect reimbursement for services.

5. Example Cases

Below are two examples of denial code 256:

• Example 1: A healthcare provider submits a claim for a cosmetic procedure that is explicitly excluded from coverage under the managed care contract. The claim is denied under denial code 256.
• Example 2: A provider fails to obtain preauthorization for a specialized imaging test that requires prior approval. The claim is denied under denial code 256.

Source: Claim Adjustment Reason Codes