CO-97 means the payer won't pay the service separately because it considers the service already covered by the payment for another service it has adjudicated. "CO" is the group code for a contractual obligation, and 97 is the claim adjustment reason code (CARC). The usual causes are an NCCI procedure-to-procedure edit, a global surgery rule or the payer's own bundling policy. The fix is not automatically a modifier: first find which rule bundled the line, then check the record to see whether the payer was right.
The CARC itself is standard across payers. The rules behind it are not. Medicare applies CMS's National Correct Coding Initiative (NCCI) edits and global surgery rules, state Medicaid programs apply the separate Medicaid NCCI edits, and commercial payers apply their own policies and contracts. Edits change every quarter, so the rule that matters is the one in effect on the date of service.
What does CARC 97 say?
X12, which maintains the code list, defines reason code 97 as: "The benefit for this service is included in the payment/allowance for another service/procedure that has already been adjudicated." Its usage note tells you to look at the Healthcare Policy Identification segment of the 835 remittance (loop 2110 REF), if the payer sent one. That segment can name the policy the payer applied, so read it before anything else.
The related service may be on the same claim or on an earlier one, depending on how the payer processes claims. Teams call the line a "CO-97 denial", but strictly it is an adjustment: the line is reduced, usually to zero, because its payment is treated as included elsewhere.
What does the CO group code mean?
X12 group codes categorize an adjustment. CO is "Contractual Obligation"; the others are PR (patient responsibility), OA (other adjustment) and PI (payer-initiated reduction). A CO adjustment generally means the payer is treating the amount as something the provider can't collect from the patient under its contract. Check your contract and the payer's rules before moving any CO-97 balance to a patient.
Why do claims get a CO-97 adjustment?
These are the common reasons. Your job is to work out which one applies to the line in front of you.
- An NCCI procedure-to-procedure (PTP) edit. Two codes reported for the same patient, by the same provider, on the same date form a pair that generally shouldn't be billed together.
- A global surgery rule. The service falls inside the global package of a procedure, such as a routine follow-up visit during the postoperative period.
- A component reported with its comprehensive code. A code that is part of a more comprehensive code was billed alongside it. This is a coding error, not a payer error.
- A modifier that is missing or doesn't fit. The services really were distinct, and the record shows it, but the claim didn't carry the modifier that says so. (A modifier that doesn't fit the code has its own reason code, CARC 4: the procedure code is inconsistent with the modifier used.)
- A payer-specific bundling policy. Commercial payers can bundle services that Medicare NCCI doesn't, or use their own edit software. Check the payer's published policy for the date of service.
How does CO-97 relate to NCCI edits?
CO-97 is the remittance reason. NCCI is one of the rule sets that can produce it. The two aren't the same thing.
Each NCCI PTP edit has a Column One and a Column Two code. CMS's NCCI Policy Manual explains that when both codes of an edit are reported, the Column One code is eligible for payment and the Column Two code is denied, unless an NCCI PTP-associated modifier is clinically appropriate. Each edit also carries a Correct Coding Modifier Indicator (CCMI):
| CCMI | What CMS says it means | What it means for your review |
|---|---|---|
| 0 | NCCI PTP-associated modifiers cannot be used to bypass the edit | No modifier will make both codes payable. Look for a coding error, or accept the adjustment. |
| 1 | NCCI PTP-associated modifiers may be used under appropriate circumstances | A modifier is allowed only if the record documents the circumstances it describes. |
| 9 | Use of modifiers is not specified | CMS uses it for code pairs whose deletion date equals their effective date. It is not permission to add a modifier. |
CMS posts changes to the Medicare PTP edit files every quarter. When you research an older claim, use the edit that was in effect on its date of service, not today's file.
When is a modifier appropriate?
Only when the record documents what the modifier says. The NCCI Policy Manual states that a modifier must not be appended solely to bypass an NCCI PTP edit if the clinical circumstances don't justify it, and that the record must meet the criteria for any NCCI PTP-associated modifier used.
A CO-97 on the remittance is not evidence of a distinct service. The evidence is in the chart.
Modifier 59 and the X modifiers
For NCCI, CMS says the main purpose of modifier 59 is to show that procedures were performed at different anatomic sites or at different patient encounters. It is used only when no more specific modifier describes the situation. Since January 1, 2015, CMS has offered four more specific HCPCS modifiers, which it says may be used instead of 59 whenever possible:
- XE: a separate encounter on the same date of service.
- XS: a separate organ or structure.
- XP: a different practitioner.
- XU: a service that doesn't overlap the usual components of the main service.
The NCCI Policy Manual also names the common misuses:
- Two codes describing different procedures is not enough. An edit exists precisely because the two procedures generally can't be billed together at the same site and encounter.
- A different diagnosis for each procedure is not enough either.
- Procedures on contiguous structures in the same organ or anatomic region, at the same encounter, generally don't qualify as separate sites.
- Modifier 59 is not appended to an E/M service. A separately identifiable E/M service on the same day as a procedure is reported with modifier 25, when the documentation supports it.
How do global surgery rules cause CO-97?
Medicare pays for a surgical procedure as a package. The global surgery indicator in the Physician Fee Schedule look-up tells you the package:
- 000: endoscopies and some minor procedures. No postoperative days. A visit on the procedure day generally isn't paid separately.
- 010: other minor procedures. The procedure day plus 10 days after it.
- 090: major procedures. The day before, the procedure day and 90 days after it.
Routine follow-up visits, dressing changes, local incision care and complications that don't need a return to the operating room are inside the package. A visit billed for that work during the global period will be bundled, and the adjustment is correct.
Some services fall outside the package, and Medicare's global surgery guidance names a modifier for each:
- 25: a significant, separately identifiable E/M service on the day of a minor procedure. The decision to perform a minor procedure is part of the procedure, not a separate E/M.
- 57: the visit where the surgeon decided to perform a major procedure.
- 24: an E/M service during the postoperative period that is unrelated to the surgery. CMS says documentation supporting the unrelated service must be sent.
- 58: a staged or related procedure during the postoperative period.
- 78: an unplanned return to the operating or procedure room for a related procedure during the postoperative period.
- 79: an unrelated procedure during the postoperative period.
Each applies only when the record shows it. If the visit was routine postoperative care, no modifier applies. The surgery CPT codes guide covers global surgery in more detail.
How do you work a CO-97 line?
- Read the whole remittance line. Note the adjusted code, units, modifiers, date of service, any remark codes and any policy reference in the 835.
- Find the service it was bundled into. Look on the same claim first, then at recent claims for the same patient and provider.
- Identify the rule. For Medicare, look up the code pair in the PTP edit file in effect on the date of service, and note its CCMI. Check the procedure's global indicator. For Medicaid, check the Medicaid NCCI files and the state's own guidance. For commercial plans, check the payer's bundling policy and your contract.
- Review the record. Does the documentation show a separate encounter, a separate site or structure, a different practitioner, a separately identifiable E/M service or an unrelated postoperative service? If it doesn't, the services were bundled correctly.
- Choose the outcome. The outcomes are covered in the next section.
- Record the cause. Log the payer, provider, code pair and the reason it was bundled, so you can fix the step that produced it.
Corrected claim, appeal or adjustment?
| What you found | What to do | Common mistake |
|---|---|---|
| The original coding was wrong (for example, a component billed with its comprehensive code) | Correct the claim and resubmit it under the payer's corrected-claim rules | Adding a modifier instead of fixing the codes |
| The services were distinct, the record shows it, and the edit allows a modifier, but the claim didn't carry one | Send a corrected claim, or follow the payer's reopening or reconsideration process | Adding modifier 59 when a more specific X modifier fits |
| The payer applied an edit that doesn't apply to this date of service, or processed the claim against its own published policy | Appeal, citing the edit or policy and the record | Appealing without naming the rule the payer got wrong |
| The service really was included in the other service or the global package | Post the contractual adjustment | Resubmitting with an unsupported modifier |
Appeal windows vary by payer and contract. For a Medicare claim, a redetermination must be requested within 120 calendar days of receiving the notice of initial determination. For other payers, check the provider manual or your contract.
An appeal is stronger when it names the code pair and the edit or policy that applies, explains why the adjustment is wrong, and attaches the documentation that supports separate reporting.
How do you prevent CO-97 adjustments?
- Scrub claims against current edits. Run claims through NCCI PTP edits and known payer bundling policies before submission, and update your edit tables when CMS posts its quarterly changes.
- Write a modifier policy. Set out when modifiers 25, 59 and XE, XS, XP and XU may be used and what the record must show. Audit a sample of modifier use against the records.
- Teach documentation, not modifiers. Clinicians should know what the record needs to show when services really are separate: a different site, a separate encounter or a separately identifiable visit.
- Track CO-97 by cause. Group adjustments by payer, code pair and cause. A pattern tells you which step to fix. Some will be correct adjustments, and the fix is to stop billing the pair.
CO-97 is one of many denial reasons. For the rest, see why insurance claims get denied. For what a claim needs to get through first time, see what a clean claim is. The workflow gaps behind repeat denials are in common medical billing mistakes.
If CO-97 adjustments are piling up in your unpaid claims, Highview's A/R recovery team can look at them with you, or you can contact us with questions.
Sources
- X12, Claim Adjustment Reason Codes: CARC 97 and its usage note; CARC 4.
- X12, Claim Adjustment Group Codes: CO, PR, OA and PI.
- CMS, Medicare NCCI Policy Manual, Chapter 1 (effective January 1, 2026): PTP edits, CCMI values, NCCI PTP-associated modifiers, modifiers 25, 58, 59 and XE, XS, XP and XU, global surgery rules for same-day E/M services.
- CMS, Medicare NCCI Procedure to Procedure (PTP) Edits: quarterly updates.
- CMS, Medicaid NCCI: how the Medicaid program differs from Medicare NCCI.
- CMS, Global Surgery booklet, MLN907166 (December 2025): global indicators, what the package includes and excludes, modifiers 24, 25, 57, 58, 78 and 79.
- eCFR, 42 CFR 405.942: time frame for a Medicare redetermination request.