What is CO-45 in Medical Billing: What it is and How to Get Help

CO-45 is a claim adjustment reason code used in medical billing. This code indicates a contractual obligation between healthcare providers and insurance companies. The “CO” in CO-45 stands for “Contractual Obligation”. The contractual obligation determines what services and prices healthcare providers and insurers have agreed to cover. If a provider’s charge exceeds the maximum allowable amount agreed upon in the contract, the insurance company will pay the claim but issue a CO-45 code. This code informs the provider what portion of the bill exceeds the amount agreed upon in the insurance contract.

What is a denial code in Medical Billing ?

In medical billing, a denial code is a standard code used by insurance companies to indicate why a claim has been rejected or denied. It is a way for insurance companies to communicate to healthcare providers why they are not going to pay for a particular service or procedure.

A denial code can range from simple errors in coding or missing information to more complex issues like exceeding benefit limits or incorrect billing for a service. It is important for medical billers and coders to understand the specific reason for the denial in order to take appropriate action to resolve the issue and resubmit the claim.

There are many different types of denial codes, each with a unique identifier and description. Some common examples of denial codes include CO-45, which indicates that charges exceed the contracted or legislated fee arrangement, and CO-22, which indicates that the procedure was bundled and not separately reimbursable.

Understanding denial codes and how to manage claim denials is a critical aspect of medical billing. It is important to stay up to date on the latest codes and regulations to ensure that claims are submitted correctly the first time and to avoid delays in payment. With the right tools and knowledge, medical billing professionals can effectively manage claim denials and improve the revenue cycle of their organization. 

“What does “”CO”” mean in Medical Billing?

“CO” indicate that a claim has been denied or adjusted due to a contractual obligation between the healthcare provider and the insurance company. The code has been in use since 01/01/1995, and the “CO” stands for “Contractual Obligation”. These obligations stem from the valid contract held between healthcare providers and insurers, which can have a binding agreement on what services and prices they will cover.

The CO-45 code is used to indicate the difference between what the physician charges for a service and what the insurance plan allows according to the contract. This contract can include the rate, maximum number of hours, days, or units for a particular procedure. There are a few reasons why a payer may use this kind of code. For example, a joint payer/payee agreement might result in an adjustment that the member isn’t responsible for. Alternatively, the provider’s charge may exceed the customary amount for which a patient is responsible.

CO denials make it so providers cannot place financial responsibility on their patients or beneficiaries. If you receive a CO-45 denial, it’s essential to review your contract with the insurance company to determine if the denial is valid. If you believe that the denial is incorrect or unjustified, you can appeal the decision by providing additional documentation or evidence to support your claim. It may be helpful to seek the assistance of a professional billing service or consultant to navigate the complex world of medical billing and insurance.

Examples Involving CO-45

One example of when a CO-45 denial code may be used is when a healthcare provider has a contractual agreement with an insurance company that sets a specific fee for a particular service. If the provider charges more than the agreed-upon fee, the insurance company may deny the claim using the CO-45 code.

Another example is when a healthcare provider submits a claim for a service that is not covered by the patient’s insurance plan. The insurance company may deny the claim using the CO-45 code if the provider charged more than the allowed amount for the service.

In both cases, the provider will receive an adjustment amount that reflects the difference between what they charged and what the insurance company is willing to pay based on the contract or plan. This adjustment amount should not duplicate any prior payer adjustments and cannot be equal to the total service or claim charge amount.

It is important for medical billers and coders to be familiar with the CO-45 denial code and understand the specific circumstances in which it may be used. By doing so, they can take appropriate action to resolve the issue and ensure timely payment for the services provided.

CO-45 Comes in a Paid Claim: Example

There are situations when an insurance company pays a medical claim, but with a code indicating a contractual adjustment. One example of such a code is CO-45, which indicates that the charge submitted by the healthcare provider exceeds the maximum amount allowed under the contract between the provider and the insurer. In this case, the insurer pays the claim but notifies the provider of the contractual obligation and the amount that needs to be written off. This code is one of the many Claim Adjustment Reason Codes (CARCs) used in medical billing and coding.

Example 1: CO-45 Denial Code for Partial Coverage by Insurance

If the insurance company only covers part of a charge, they may pay the claim but send a CO-45 denial code to inform the healthcare provider.

The CO-45 code indicates what portion of the bill exceeds the amount covered in the insurance contract.

Example 2: CO-45 Denial Code for Exceeding Maximum Allowable Fee

If the provider bills the insurer for an amount exceeding the maximum allowable fee in the contract, the excess amount becomes a contractual obligation.

The CO-45 code assigns the financial responsibility for the excess amount to the provider, who cannot bill the patient for it.

Example 3: CO-45 Denial Code for Patient Responsibility After Insurance Payment

If the insurance approves only part of a charge, the CO-45 code may indicate a write-off amount for the healthcare provider.

The payment posting team will write-off the amount and post the payment, and the balance becomes the patient’s responsibility to pay.

Example 4: CO-45 Denial Code for Write-Off Amount After Insurance Payment

If the insurance pays only part of a charge, the write-off amount becomes a contractual obligation and the CO-45 code may be used.

The payment posting team will write-off the amount and post the payment, and the balance is sent to the patient or secondary insurance.

Is there a better way to manage CO 45?

Medical billing and coding can be a challenging profession that requires quick thinking, decision-making, and resilience. It’s common for even experienced billers to feel anxious about the job.

However, being able to anticipate denials and address them promptly can help simplify the process and reduce the burden on billers. This can make medical billing less stressful and more efficient without requiring additional work.

Fortunately, not all claims that are returned from insurance providers are unpaid. Some may require less resources but still need attention for tasks like handling write-offs. Denial code CO-45 is an example of this type of claim that can be managed effectively with proper attention.

FAQs – CO-45 in Medical Billing

What is reason code 45 on EOB? 

Reason code 45 on an Explanation of Benefits (EOB) is a common informational code that informs providers that their charges exceed the fee schedule maximum allowable by the amount indicated. It is an example of a Claim Adjustment Reason Code (CARC).

How do I fix CO-45 denial code?

To fix a CO-45 denial code, providers can resubmit the claim with a valid authorization number or authorization. They can also use Group Codes PR or CO, depending on the liability, and write off the indicated amount.

What does code 45 mean in a hospital?

In a hospital setting, code 45 refers to a Reason Code that indicates that the charge exceeds the fee schedule maximum allowable or contracted/legislated fee arrangement. It is used to communicate with healthcare providers and insurance companies about billing and payment.

Conclusion: CO-45 in Medical Billing

Denial code CO-45 is a type of claim adjustment reason code that indicates charges exceeding the fee schedule or maximum allowable amount specified in a provider’s contract with the insurance company. This code has been in use since 1995 and stems from contractual obligations between healthcare providers and insurers. Providers cannot bill patients for the adjustment amount associated with this code, as it assigns financial responsibility to the provider. To fix a CO-45 denial code, providers can resubmit claims with a valid authorization number or write off the indicated amount. Overall, medical billing and coding professionals need to be skilled at quick thinking, decision-making, and resilience to handle denials effectively.

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