Inconsistent CFC Use Is Unnecessarily Burdening Labs

By Kouri Andrews and Clarisa Blattner

Summary:
Inconsistent use of claim frequency codes (CFCs)—especially around replacement claims—is causing costly inefficiencies in healthcare billing, prompting urgent calls for industry-wide standardization.

Takeaways:

Administrative and revenue strain: Misuse of CFC “7” leads to claim rework, payment delays, and increased operational costs for providers.
Patient and system disruption: Duplicate billing and confusing EOBs hurt patient trust and break automated workflows built around standard rules.
Call for reform: Industry stakeholders are urged to advocate for clear, enforceable guidelines that restore the intended use of CFCs and reduce payer-by-payer inconsistencies.

Amid ongoing efforts to streamline healthcare billing, one technical issue is quietly generating disruption: inconsistent use of claim frequency codes (CFCs), particularly around replacement claims.

What may seem like a technical detail is impacting reimbursement timelines, process efficiency, provider revenue, and the patient experience. It’s time for the industry, from providers to payors, associations, and standards bodies, to come together and agree on a standardized approach.

What’s the CFC Problem?

CFCs were designed to standardize how providers indicate whether a claim is original, replacement, or voided. But that standardization is breaking down. The growing issue? Some payors, especially Medicare Advantage and managed care plans, require providers to resubmit entire claims using CFC “7” (replacement) even when only a single line-item procedure code was denied.

This approach ignores the code’s original intent and defies efforts to streamline the process. Rather than allowing resubmission of only the denied line items as part of a corrected claim, some payors require a full replacement with CFC “7,” even if only one service line was denied.

Why This Matters

This is not just a backend billing issue; it’s a business issue. Here’s how it impacts the industry:

Increased administrative costs: Reconstructing claims creates unnecessary rework and manual processing that drives up costs.
Revenue disruption: Reprocessing previously paid items can trigger payment delays, takebacks, and timely filing denials.
Rising use of replacement claims: XiFin data shows that the use of replacement claims by payors grew from 2% to 3% of post-initial claims before 2022 to 5% to 7% of claims post-2022. The growth is even more dramatic for Medicare Advantage plans, which increased from 2% to 3% to 11% to 13% over the same period.
Patient confusion: Duplicate billing, inconsistent Explanation of Benefits (EOBs), and unpredictable out-of-pocket statements erode trust and make it harder to collect patient responsibility balances.
Customized software workflows: Revenue cycle management (RCM) systems built on standard CFC rules now require custom, payor-specific workflows, which break automation and add technical debt.
Undermining HIPAA’s goals: This practice undermines the goals of HIPAA’s Administrative Simplification provisions, which aim to reduce administrative burden, improve data consistency, and increase efficiency across healthcare transactions.

A Better Approach

There is a more logical, efficient path forward. The industry must:

Allow resubmission of only the denied line items using CFC “1” (original), not force a full replacement with CFC “7”
Preserve adjudicated services that have already been paid; don’t undo what’s been correctly processed
Promote clarity and consistency across payors to enable automation and reduce rework

This isn’t just about what’s easier for providers. It’s about restoring the purpose of standardization, improving patient billing experiences, and building a more resilient reimbursement system.

What Needs to Happen Next

Industry stakeholders must speak up. We’re calling on providers, clearinghouses, RCM vendors, and industry associations to engage with the standards-setting bodies, payor organizations, and regulators to:

Advocate for clear guidelines that differentiate when CFC “1” and CFC “7” should be used, especially in partial denials.
Push for enforceable operating rules that eliminate payor-by-payor variation.
Submit feedback to CMS and other regulatory bodies through upcoming RFIs and Notices of Proposed Rulemaking (NPRMs).
Participate in working groups and surveys to document the operational and financial impact of CFC misuse.

The Bottom Line

This is a fixable issue. But we need a coordinated industry response to make it happen.

If you’re a healthcare leader frustrated by inefficiencies caused by claim resubmission rules, now is the time to act. Contact your payor representatives, association contacts, and CMS comment channels. Share your experience and advocate for smarter, more consistent CFC usage rules.

Together, we can remove one more unnecessary hurdle from an already challenging reimbursement landscape—and take one step closer to the administrative simplicity HIPAA promised.

Featured Image: Niall W | Dreamstime.com

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