The CO-197 denial code is common in medical billing. It is used to indicate that a payer found required precertification, authorization, notification, or pre-treatment review to be missing from the claim.
In such a scenario, the payer can delay or deny payment, and your billing team spends time checking records, contacting the payer, and correcting claims.
These issues can affect cash flow and increase administrative costs.
To avoid that, read this content, which discusses what CO-197 means, why it occurs, how financial responsibility works, and which steps your practice can take to resolve and prevent these denials over time.
What is the CO-197 Denial Code?
CARC 197 is used to indicate that the payer has found that a required authorization, precertification, notification, or pre-treatment review was missing. It is used in claim adjustment.
CARC 197 is composed of two elements: Claim Adjustment Reason Code (CARC) and Claim Adjustment Group Code (CO). CARC indicates why the claim/service line was adjusted, and CO classifies the adjustment as a Contractual Obligation.
Refer to the payer agreement for details on the financial responsibility assigned to the provider. Read the X12 Claim Adjustment Reason Code List and Claim Adjustment Group Code List for a detailed description of the standard elements.
Common Causes of CO-197 Denials
There are many workflow gaps that can result in CO-197. The payer uses this code when any required authorization, precertification, notification, or pre-treatment review is missing.
- Doesn’t obtain prior authorization: The practice schedules or performs a service without securing prior approval required by the patient’s plan.
- Incomplete precertification or pre-treatment review: Some plans require advance review of a procedure or treatment. If not done in advance, that claim will be denied.
- Missing Pre-Treatment Documentation: Code 197 may be used when supporting documents, for example, medical records or test results, are not provided to the insurance company prior to the treatment or the procedure.
- Doesn’t send required payer notification: Certain services require a notice to the payer within the payer’s timeframe even without a prior authorization. A missed notice can lead to an adjustment.
- Fails to include authorization on the claim: Payer approved the service, but staff failed to include the authorization number on the claim.
- Mismatched authorization details to the claim: Different member IDs, CPT/HCPCS codes, service dates, approved scope, providers, and/or facilities can prevent the payer from matching the approval. Certain variations result in a different CARC.
- Overlooked authorization requirements: The practice verified active insurance coverage but overlooked the prior authorization requirement. Out-of-date payer information and policy changes also led to the oversight of prior authorization requirements.
- Unmet emergency-service requirements: Some payers require notice or supporting documents after emergency treatment. Missing these can affect payer reimbursement.
CO-197 Denial Code Reimbursement and Financial Responsibility
A denial for CO-197 means that there is an unpaid balance in your practice. The payer’s adjustment defines the provider’s financial obligation and whether that amount qualifies for a contractual write-off or patient billing.
Provider Responsibility and Contractual Adjustments
CO stands for Contractual Obligation. It identifies an adjustment based on a payer-provider agreement or regulatory requirement. The adjustment amount is often a provider write-off, but CO-197 does not mean the entire claim is unrecoverable.
Patient Billing and Write-Off Considerations
A CO adjustment is different from a patient balance. CMS states that Medicare beneficiaries can only be billed for Patient Responsibility (PR) adjustments.
Follow the terms of the payer contract and pertinent billing guidelines for other payers. Review the options for correction or appeal before transferring the amount to the patient or writing it off.
How to Fix the CO-197 Denial Code
Resolving a CO-197 denial requires the billing team to determine why the payer reported a missing authorization, verify the approval requirements, and evaluate whether the claim is eligible for correction/reprocessing, whether an authorization should be retroactively sought, or whether an appeal is necessary.
The following 9 steps outline how to verify the denial and obtain appropriate reimbursement.
- Review the EOB/ERA and Accompanying Remark Codes: Find CARC 197 and the CO group code on the Explanation of Benefits (EOB) or Electronic Remittance Advice (ERA).
Check the adjustment amount and see whether it applies to the entire claim or only specific service lines. Look at any Remittance Advice Remark Codes (RARCs) for more information about the adjustment.
- Confirm If Prior Authorization is Required: Check the member’s exact plan, date of service, procedure, and provider against payer policy. Prior authorization is commonly required for select services and items under Traditional Medicare.
- Check the Validity of Authorization: Look through payer portals, EHRs, authorization trackers and logs, and approval letters. Verify the authorization number, effective dates, approved services, and unit or visit limits.
- Compare Authorization Details with the Submitted Claim: Verify the patient/member ID, CPT/HCPCS code, date of service, billing and rendering provider NPIs, facility details, and number of units authorized.
Provider and facility authorization differences can lead the payer to conclude that no authorization exists and adjust the claim accordingly.
- Request the Denial Reason from the Payer: Determine if authorization was necessary, if approval is on file, and if there was a failure to match, if correction/reprocessing/retroactive review is permitted. Obtain the payer representative’s name, date, and the call reference number.
- Re-submit Corrected Claims: Resubmit a corrected claim if details needed for authorization are omitted or entered incorrectly on the original claim. Follow payer correction rules.
Don’t submit a claim for correction if a payer asks you to adjust the original claim and resubmit. In that case, request reprocessing.
- Request Retroactive Authorization If Allowed: Payer policy must permit retroactive requests. Submit explanation and documentation. Approval is not guaranteed.
- File Appeal with Supporting Documentation: File an appeal when you have evidence showing approval was obtained; authorization was not required; or the payer misapplied its policy.
Include approval, original claim, EOB/ERA, relevant medical records, and payer correspondence. Follow the payer’s timeframe for filing an appeal.
- Follow Up on the Claim and Verify Reimbursement: Find out the status of the claim or appeal. Check the next ERA/EOB to see whether the adjustment was reversed and a payment was issued.
How to Prevent CO-197 Denials
Prevent CO-197 denials by confirming payer requirements, keeping accurate authorization records, and verifying approval details before submitting claims.
Your practice needs dependable authorization workflows across the scheduling, clinical, authorization, and billing teams.
- Verify Insurance Eligibility and Authorization Requirements Before Scheduling: Determine if the member’s insurance coverage is active, and confirm if the service requires authorization, precertification, or notification.
- Maintain Accurate Authorization Records: Store approval numbers, codes, service dates, units, provider details, facility information, and other authorization record details in your EHR/authorization tracker in an accessible manner.
- Track Authorization Expiration Dates and Service Limits: Always check the validity dates, the number of units approved, and the number of visits remaining before scheduling additional services.
- Validate Authorization Information Before Claim Submission: Ensure member ID, CPT/HCPCS code, service date, billing and rendering provider NPIs, facility, and approved units match the authorization.
- Build a Payer Authorization Matrix: Create a central document or spreadsheet. List each payer’s authorization requirements and codes, along with other important information, such as timely notification requirements, approval processes, and plan-specific information.
- Review Payer Policy Updates: Modify the authorization matrix and connected workflows when payer rules change.
- Train Staff on Authorization Workflows: Assign responsibilities to employees across scheduling, front desk, clinical, authorization, and billing to identify process lapses.
- Use EHR and Electronic Prior Authorization (ePA) Tools: Record approval details and use accessible electronic tools to check authorization requirements, submit requests, and track payer decisions.
CO-197 vs PR-197 vs OA-197 vs PI-197: Key Differences
CARC 197 specifies the reason for the claim adjustment. The two-letter group code classifies financial responsibility. CO, PR, OA, and PI do not modify the reason code description. They identify different adjustment classifications.
| Code | Group code | Financial classification |
| CO-197 | Contractual Obligation | Generally assigns financial responsibility to the provider. |
| PR-197 | Patient Responsibility | Classifies the adjustment as patient responsibility, subject to applicable billing rules. |
| OA-197 | Other Adjustment | Classifies the adjustment under other financial adjustments. |
| PI-197 | Payer Initiated Reductions | Classifies the adjustment as a payer-initiated reduction. |
Important: The group code identifies who is financially responsible for an adjustment, but it does not automatically determine whether the provider can bill the patient.
CO generally assigns responsibility to the provider, while PR classifies the amount as patient responsibility.
Providers must follow applicable payer contracts and billing regulations before transferring an adjustment to the patient.
For abnormal code combinations, check the accompanying RARC, the CAQH CORE Code Combinations, and the payer’s companion guide.
- CO-198 vs CO-197: CARC 198 means “Precertification/notification/authorization/pre-treatment exceeded.” This is unlike CARC 197, which signifies an absence of a requirement.
- CARC 15 vs CO-197: CARC 15 previously described an authorization number that was missing, invalid, or did not apply to the billed services or provider. However, CARC 15 was deactivated on May 1, 2018, and is no longer a valid alternative to CARC 197.
How FC Billing Helps Practices Manage CO-197 Denials
CO-197 denial code issues highlight the importance of accurate authorization verification, claim submission, and timely follow-up on denials. These activities require coordination across the revenue cycle to protect your practice’s reimbursement.
FC Billing provides full revenue cycle management services, including Denial Management Services for Medical Practices, to help healthcare practices manage billing operations, claims, denials, and reimbursement follow-up. Contact FC Billing to discuss how our RCM services can support your practice.
Frequently Asked Questions About Denial Code 197
Does CO-197 Apply to the Entire Claim or Only One Service Line?
CO-197 can apply to the entire claim or to a single service line. It depends on how the payer processes the encounter and whether a missing prior authorization or notification affected all procedures billed or just one.
How Long Does a Provider Have to Appeal a CO-197 Denial?
There is no set deadline to file a CO-197 appeal. In the case of Original Medicare FFS providers, the first-level redetermination request must be filed within 120 days from the date of the initial claim determination. Other plan types (e.g., Medicare Advantage, Medicaid, Commercial) may also vary by Plan, State, and contract conditions.
Can a CO-197 Denial Be Corrected and Resubmitted Without an Appeal?
Yes. A payer may allow a corrected claim to be submitted if the authorization was omitted or entered incorrectly and the payer rules permit correction. A request for reprocessing can be made if the payer improperly processed an accurate claim. An appeal can be filed to dispute the payer’s denial decision.
