CO-45: Not a Denial

A contractual adjustment is a reduction in the amount a provider is paid for a service, based on the terms of their contract with the payer. CO-45 is a specific type of contractual adjustment, which indicates that the charge exceeds the payer's fee schedule or allowed amount. This is a normal part of the billing process, and it's not a denial. In fact, the payer is still paying the allowed amount, and the provider is writing off the difference. For example, if a provider bills $100 for a service, but the payer's allowed amount is $80, the provider would write off $20 as a contractual adjustment, and the payer would pay $80.

To illustrate this, let's consider a scenario where a behavioral health practice submits a claim for a psychotherapy session, coded as 90832. The payer's allowed amount for this code is $75, but the practice billed $100. In this case, the payer would pay $75, and the practice would write off $25 as a contractual adjustment, coded as CO-45. It's essential to understand that this is not a denial, and the practice should not attempt to balance-bill the patient for the difference.

To spot a contractual adjustment on an Explanation of Benefits (EOB), you need to look for the CARC code, which is usually listed on the EOB along with the adjustment amount. CO-45 is a specific CARC code that indicates a contractual adjustment. You should also review the payer's allowed amount and the provider's billed amount to ensure that the adjustment is correct. Additionally, you should check the EOB for any other adjustment codes, such as CO-16 or CO-18, which may indicate other types of adjustments. For instance, CO-16 indicates that the claim lacks information, while CO-18 indicates a duplicate claim.

When reviewing an EOB, it's crucial to understand the different types of adjustments and how they affect the payment. A contractual adjustment, like CO-45, is different from a denial, which is indicated by a different CARC code, such as CO-50. CO-50 indicates that the service is not medically necessary, and the payer is not paying for it. In contrast, a contractual adjustment is a reduction in the payment amount, based on the contract between the provider and the payer.

Billing teams often waste time on contractual adjustments because they don't understand the difference between a denial and a contractual adjustment. They may mistakenly appeal a contractual adjustment, which can lead to delays and additional work. Additionally, billing teams may not have the necessary training or resources to handle contractual adjustments correctly. To avoid wasting time, it's essential to educate billing teams on the different types of adjustments and how to handle them. For example, if a billing team receives an EOB with a CO-45 adjustment, they should review the payer's allowed amount and the provider's billed amount to ensure that the adjustment is correct. If the adjustment is correct, they should write off the difference and move on to the next claim.

Mistreating contractual adjustments can have significant consequences, including delayed payments, additional work, and even audits. If a billing team mistakenly appeals a contractual adjustment, it can lead to delays in payment and additional work for the team. Additionally, if a billing team fails to write off a contractual adjustment correctly, it can lead to audits and penalties. To avoid these consequences, it's essential to understand the difference between a denial and a contractual adjustment and to handle them correctly. For instance, if a billing team receives an EOB with a CO-45 adjustment, they should write off the difference and avoid attempting to balance-bill the patient.