HI215 Unit 7 Remittance Advice Review Example

Four Claims Folded Into One Deposit: A Unit 7 Remittance Advice Review Sorting Every Line of a Composite Payer's Statement Into Payment, Contractual Adjustment, Patient Responsibility or Denial, and Finding One Underpayment and One Recoupment

[Student Name]

Purdue University Global

HI215: Reimbursement Methodologies

Unit 7 Remittance Advice Review

[Instructor Name]

[Date]

The payer, the hospital, the claims and the amounts are composite; the remittance codes, their meanings and the sources cited are real.

Header

Payer: composite commercial plan. Remittance date: June 12. Deposit: $1,412.60 by electronic funds transfer, with a trace number linking the statement to the bank deposit.

Claim 1: Office Visit

Billed $240.00. Allowed $148.00. Paid $118.40. Adjustments: group code CO with reason code 45, $92.00, meaning the charge exceeds the contracted fee schedule, a contractual obligation the provider writes off; group code PR with reason code 2, $29.60, meaning coinsurance owed by the patient. Action: post payment, write off $92.00, bill the patient $29.60. Routine.

Claim 2: Outpatient Imaging

Billed $1,850.00. Allowed $612.00. Paid $489.60. Adjustments: CO-45, $1,238.00; PR-2, $122.40. The contract rate for this procedure is $702.00, not $612.00. Action: underpayment of $90.00 before coinsurance; appeal with the contract page attached and ask the payer to correct its fee schedule load. The payer applied last year's rate. Nothing on the remittance says so; only the contract does.

Claim 3: Laboratory Panel

Billed $310.00. Paid $0.00. Adjustment: CO-16, $310.00, meaning the claim lacks information needed for adjudication, with a remark code pointing to a missing referring provider identifier. Action: not a final denial. Correct the claim by adding the ordering physician's national provider identifier and resubmit. A missing-information adjustment of this kind is the cheapest denial to fix and the most common to leave unworked, because it arrives looking like a zero payment and is easy to mistake for a final decision.

Claim 4: Emergency Visit

Billed $2,900.00. Allowed $1,610.00. Paid $1,288.00. Adjustments: CO-45, $1,290.00; PR-1, $322.00, meaning the deductible. Action: post, write off, bill the patient the deductible.

Provider-Level Adjustment

A recoupment of $483.40 appears at the bottom of the remittance, not attached to any of the four claims, with a reference to a claim paid in March. The payer has taken back an earlier payment. That explains why the deposit is smaller than the four claim payments added together: $118.40 plus $489.60 plus $0 plus $1,288.00 equals $1,896.00, and $1,896.00 minus $483.40 equals the $1,412.60 deposited. Reconciling the remittance to the bank in this way is the step that reveals a recoupment a busy poster might otherwise miss, because the four claims themselves all look normal. Action: pull the March claim, find the reason for the recoupment in the payer's earlier correspondence, and decide whether to accept or dispute it.

What Each Group Code Means

Contractual obligation adjustments are written off because the provider agreed to the payer's rates. Patient responsibility amounts are billed to the patient. Other adjustments and payer-initiated reductions are reviewed case by case. The codes follow the national standard for electronic remittance adopted under federal transaction rules (45 C.F.R. § 162.1602, 2024), which lets the same posting logic work across payers (Centers for Medicare & Medicaid Services [CMS], 2024). Posting, appeals and resubmissions are not trivial costs: in one academic health system, billing and insurance-related work cost about $20 for a primary care visit and over $200 for an inpatient surgical procedure (Tseng et al., 2018), so every avoidable denial adds to a cost the hospital already carries.

Why the Underpayment Was Caught

Nothing on the remittance itself flags claim 2 as wrong. The allowed amount looks like any other, and the codes are the same ones that appear on every routine claim. It was caught only because the posting worksheet compares each allowed amount with the contract rate loaded in the hospital's own system, a check many offices skip when volume is high. Payers update fee schedules each year, and an update applied late, or a contract amendment never entered, produces exactly this pattern: a steady stream of small underpayments, each too small to notice alone. The review recommends running a monthly report of every claim paid below its contracted rate, grouped by payer and procedure, so that one error is found once rather than claim by claim.

What the Patients Will Be Told

Two patients receive statements from this remittance. Each statement should show the billed charge, the plan's allowed amount, the plan's payment and the patient's share, and match the explanation of benefits the patient receives from the plan. The patient in claim 2 should not be billed until the underpayment appeal is decided, since a corrected allowed amount would also change the coinsurance owed.

Follow-Up Summary

Appeal the imaging underpayment. Correct and resubmit the laboratory claim. Investigate the recoupment. Bill two patients their cost share. Report the payer's fee schedule error to the contracting office so other claims for the same procedure can be checked. Finally, note the recoupment's reference number in the March claim's account history, so the next person who opens that account sees why its balance changed months after it was paid.

References

Centers for Medicare & Medicaid Services. (2024). Medicare claims processing manual, Chapter 22: Remittance advice.

45 C.F.R. § 162.1602 (2024). https://www.ecfr.gov/current/title-45/section-162.1602

Tseng, P., Kaplan, R. S., Richman, B. D., Shah, M. A., & Schulman, K. A. (2018). Administrative costs associated with physician billing and insurance-related activities at an academic health care system. JAMA, 319(7), 691-697. https://doi.org/10.1001/jama.2017.19148