In the complex medical coding and medical billing world, denials have the ability to disrupt your cash flow and leave staff and patients bewildered. Of the more obscure denials, Denial Code 253 or CO 253 is one that is easily forgotten. Though not technically a denial, it is nonetheless a type of denial impacting reimbursement and possible extreme loss of revenue if not well recognized and treated.
For medical offices, especially smaller ones with narrower margins, comprehending the mechanism of code 253 is important. In this article, we will walk you through what CO 253 is, why it happens, and how your practice can steer clear of its impact.
What is Denial Code 253?
Code 253 Denial is a reduction in payment due to Medicare sequestration — a process of federal budget reduction established under the Budget Control Act of 2011. Sequestration is a phrase that refers to across-the-board spending cuts across many government programs, including Medicare.
Starting April 1, 2013, every Medicare Fee-for-Service (FFS) claim was paid less by 2%. So, when you see CO 253 or code 253 on your remittance notice, it doesn’t mean that your claim was denied due to an error; instead, Medicare paid you 98% of the allowed value in comparison with the full 100%.
Why Physician Practices Should Care
For larger health systems, cutting 2% might be survivable. For solo or small-to-medium-size physician practices, however, reductions like these accrue quickly and can erode profitability. Decreasing a small number of claims might not be noticeable initially, but across hundreds or thousands of Medicare claims every year, total revenue loss could be significant.
Additionally, not knowing why you’re being refused a code like 253 can lead your billing staff to perform unnecessary rework, result in patient billing delays, and provide inaccurate financial reports.
Common Scenarios Leading to CO 253
Although sequestration is the primary cause of Denial Code 253, additional problems in billing might occur alongside sequestration and cause more serious issues:
- Incorrect Billing Details
Medical coding mistakes, under documentation, or incorrect patient demographics might increase the sequestration reduction and cause subsequent claim denials that are more serious than CO 253. - Lack of Medical Necessity
If the service provided does not qualify as “medically necessary” to Medicare, the claim could be reduced or denied entirely, with CO 253 included in a list of denial codes. - Non-covered Services
Experimental, cosmetic, or otherwise non-covered treatments under a patient’s Medicare policy could be flagged with code 253, particularly if the payer reduces payment in accordance with policy rules.
How to Address and Minimize CO 253 Impact
Although you can’t avoid sequestration cuts, you can take active steps to cushion their impact and ensure that Denial Code 253 won’t disrupt your practice workflow:
- Educate Your Billing Team
Make your medical billing and coding teams aware that CO 253 is a reduction — not a typical denial. This prevents unnecessary appeals or rework. - Use Accurate Coding
Ensure correct medical coding for all services rendered. Even though sequestration is automatic, accurate codes will help prevent additional denials or payment reductions. - Track CO 253 Adjustments Separately
Modify your billing software or reports to track code 253 adjustments. This makes it easier to measure how sequestration is affecting your bottom line over time. - Communicate with Patients
Although Denial Code 253 may not directly affect patient amounts due, it is still a best practice to educate patients on Medicare payment processes. Disclosure builds trust and reduces billing disputes. - Budget for the Cut
Build sequestration into your budgeting. By budgeting for a 2% reduction on all Medicare payments, you can more effectively predict and avoid surprise shortfalls.
Example of CO 253 in Action
Assume your practice files a claim for a Medicare-covered office visit with an allowed amount of $150. A 2% sequestration reduction would have you receive only $147.00 instead of the full amount. The remittance advice would indicate the difference on the claim using code 253 to describe the reduction.
Even though the claim is indeed “paid,” the savings quietly cuts into your earnings — especially when aggregated across hundreds of claims.
Is There a Way to Appeal CO 253?
Overall, CO 253 is not appealable. It’s a necessary adjustment done at the federal level, not because of provider mistake. But if you notice an excessively high reduction or feel another denial code is inappropriately attached to 253, you can investigate further or call Medicare for clarification.
Final Thoughts
Code 253 denial can appear insignificant, yet to physician practices, discounting its impact can cost big dollars in the end. While sequestration in itself is something you can’t do anything about, knowing it — and acting in advance — allows you to have a solid revenue cycle.
Through tracking the cuts, training your medical billers, accurate medical coding, and patient education, you will be able to control the dynamics of code 253 and keep your practice running smoothly.
