Audit Complaints
EDI Noncompliance

3. 277 STC Invalid: Reject Category/Code

Last update
September 20, 2022

Audit Complaint Data

Bill Transmission: 277 STC Invalid - Reject Category/Code

Claims administrator sent providers 277 ACKs with invalid STC Category-Codes that indicated a non-compliant payment denial reason. Each 277 ACK rejected the e-bill and denied payment. Claims administrator failed to process e-bills providers transmitted to claims administrator.

Claims administrator failed to issue an Explanation of Review (EOR) explaining the payment denial. Without an EOR, the provider cannot appeal the denied reimbursement with a Second Bill Review.

EDI Noncompliance: California DWC Medical Billing and Payment Guide Rule 7.1 requires the claims administrator to either accept an e-bill as complete or reject the e-bill as incomplete, using the X12 277 Acknowledgement (277 ACK) EDI standard. This 277 ACK must be sent within two working days after receipt of an e-bill. The purpose of a 277 Acknowledgment is a notice of whether or not the bill submission is complete and will be processed.

This e-bill processing step, prior to adjudication, is to verify that the bill concerns an actual employment-related condition that has been reported to the employer and subsequently reported to the claims administrator.

Claims administrator is failing use the required 277 Acknowledgements to alert the provider that either:  

  • The complete e-bill submission was received and accepted (including supporting documentation), or
  • If the e-bill was rejected (and will not be processed) what errors are present, and if necessary, what action the submitter should take

Per DWC Rule  7.1 (a)(3)(A)(B)(i) through (vii), claims administrator failed to properly document a valid bill rejection error message as follows:

  1. Invalid form or format - indicate which form should be used.
  2. Missing information - indicate specifically which information is missing by using the appropriate 277 Claim Status Category Code with the appropriate Claim Status Code.
  3. Invalid data - Indicate specifically which information is invalid by using the appropriate Claim Status Category Code with the appropriate Claim Status Code
  4. Missing attachments - indicate specifically which attachment(s) are missing.
  5. Missing required documentation - indicate specifically what documentation is missing.
  6. Injured workers’ claim of injury is denied.
  7. There is no coverage by the claims administrator.

Targeted Profile Audit Review

This Audit Complaint Data submitted to the DWC represents a credible complaint and credible information of a claims handling violation.

CCR §10106.1(c)(3) instructs that the Audit Unit “shall review and compile complaints” that indicate a claims administrator is “failing to meet their obligations under Divisions 1 or 4 of the Labor Code or regulations of the Administrative Director.”

Pursuant to LAB §129, CCR §10106.1(c)(3) provides the DWC Audit Unit may target audit subjects based on: “...credible complaints and/or information received by the Division of Workers' Compensation that indicate possible claims handling violations, except that the Audit Unit will not target audit subjects based only on anonymous complaints unless the complaint(s) is supported by credible documentation.

Per California DWC Medical Billing and Payment Guide 7.2, any electronically submitted bill determined to be completed, not paid or objected to within the 15 working day period, shall be subject to audit penalties per Title 8, California Code of Regulations section 10111.2(b)(10),(11).

Pursuant to CCR §10111.2(b)(10), the penalty for each failure to pay or object, in the manner required by law or regulation, to a bill for medical treatment provided or authorized by the treating physician, including medical treatment provided pursuant to LAB §5402(c), is as follows when the bill remains unpaid at the time the audit subject is notified that the claim was selected for audit:

  • $100 for each bill of $100 or less, excluding interest and penalty;
  • $200 for each bill of more than $100, but no more than $500 excluding interest and penalty;
  • $300 for each bill of more than $500, but no more than $1,000, excluding interest and penalty;
  • $500 for each bill of more than $1,000, excluding interest and penalty.

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