How Does An Insurance Payer Deny A Medical Claim Due To Entity Code Error?

Medical Claim

Medical Claim Due To Entity Code

This is the most complex and extremely challenging task for the medical billers to understand the entity code error and rectify the claims. Due to its complexity, this procedure leads medical billers to invest a huge amount of time in identifying the real issues with the claims. As a result, they often fail to submit and appeal claims within the given time window to the payers. Therefore, it causes a significant loss of revenue for the medical practitioners and impacts their bottom-line negatively. Before diving into further details of medical billing mistakes, let’s probe into the introduction of entities involved in medical billing services;

What Is A Billing Entity:

This term refers to a relationship, any limited liability company or any well-defined entity that is directly or indirectly involved in the medical billing process. It involves the information of entities such as hospitals, patients, doctors, insurance companies, etc. The information on these factors is used in generating medical bills and codes for the patient’s visit and collecting payments for healthcare practitioners.

A healthcare center emphasizes collecting the information of each entity and verifying this information prior to the medical billing services. Because the authenticity of this information helps medical billers to file clean claims (reimbursable claims) and collect payments for professional medical technician services on behalf of an affiliated medical group or a subordinate, which transmits all of its revenue on a regular basis to such affiliated groups.

An Insurance Company Denies Medical Claims Due To The Following Reasons:


1. Inappropriate NPI:

The entity code error occurs due to the submission of medical claims with the wrong billing NPI (the equivalent of Box 33 on the CMS-1500). Most of the insurance payers have NPI that a medical biller shares with them on certain areas of the file. When an insurance company receives a medical claim then they verify NPI in their system to see that they have the same NPI in their records. If they have not recorded this NPI on the file then they would likely deny the medical claim.

2. Incorrect Tax ID:

Moreover, medical billers should also verify and mention the correct Tax ID in addition to NPI on file. Therefore,  an entity code error can also occur when a medical claim contains the wrong Tax ID (the equivalent of Box 25).

3. Wrong Payer ID:

If the medical billers submit any claim against the number of several patients then it may also result in a pile of claim denials. As every patient has its own payer information although two or more than that, patients have received the same medical services. For example, in a single day, two patients with the same heart disease walk in for the same medical treatment. Remember that they still have different payers with different payer IDs.Therefore, the front desk staff must verify the information of insurance payers in advance to the processing of medical billing services.

4. Incorrect Patient’s demographic Information:

Medical coders and billers should carefully mention accurate information about the patients’ demographics (such as name, date of birth, address, phone number, etc.). Front desk staff should verify the insurance eligibility criteria of the patient as soon as they enter the clinic or hospital to visit the doctor. They should collect their payer’s information and transmit it to the medical billing department. If a medical claim contains inadequate information regarding patient’s demographics and insurance information then they will end up in claim denials.

5. Newborn patient:

If a newborn baby is a patient of a particular disease or it is added to the guarantor’s insurance policy recently then it would result in entity code error.


  • Medical billers should always make sure that they use the same NPI and Tax ID that is recorded in the file of third-party payers or insurers for your healthcare center.
  • Medical billers should browse through the information of entity code errors before submitting the claims.
  • If they don’t find appropriate information then they should call the third-party payers firsthand to get additional information.
  • Let them know that you have forwarded the medical claim via electronic medium.
  • If the medical billers have submitted the medical claims to the wrong payer ID then they rectify the payer ID as soon as they receive the claim back from the insurance company.
  • Medical billers should verify the patient’s admissibility criteria if they have mentioned the wrong patient’s demographics.
  • If later on, practitioners find out that the claim denial has occurred because the patient is a newborn baby or recently added to the guarantor’s policy then they can immediately contact the insurance payer in order to verify the patient is enlisted in the active members under the insured’s policy.

After resolving all the issues with the medical claims and implementing all the required corrective actions, medical billers can validate the claim from medical technicians and rebill the services in order to resubmit all affected claims.

It is a very daunting task to deal with the denied claims that come back from the payers to haunt medical practitioners. Due to the lack of a dedicated team for medical billing services that can consistently follow-up with paid and unpaid claims, most of the medical practitioners lose millions of dollars between the cracks.

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