What is Denial Code CO 45?

Nearly 15% of all claims get denied according to AARP. This amounts to over 200 million claim rejections each day! But thankfully there are ways you can avoid claim rejections and thus keep your revenue flowing.
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Being in the medical billing field, you have to stay on your toes. Knowing the different denial codes and what they stand for is just part of the job.
One common denial that we see healthcare organizations struggling with is denial code CO-45. Let’s take a closer look at what it is, how to correct it and how to collect on it.
For those who are just getting started in their medical billing journey, let’s talk about denial codes and what they even are.
A denial code is a standard message that provides information about a claim that an insurance company has denied.
There are a few essentials when it comes to having a proper claim denial management system. The first is to understand why the claim was denied in the first place. When an insurance company sends back a claim, they will indicate the reason for the denial, which can be found in a claim adjustment reason code otherwise known as a CARC.
Denial code CO-45 is an example of a CARC. The “CO” in this instance stands for “Contractual Obligation”. These contractual obligations are held between healthcare providers and insurers, and offer a binding agreement between both parties on what services and prices they’ll cover.
There are a couple of reasons why a payer may use this kind of code. First, a joint payer/payee agreement might result in an adjustment that the member isn’t responsible for. Or, the provider’s charge may exceed the customary amount for which a patient is responsible.
So what does denial code CO-45 mean? CO-45 marks a fee that exceeds the maximum allowable amount for a service charge. Or when those charges exceed a contracted fee arrangement.
This adjustment amount cannot equal the total service or claim charge amount and must not duplicate provider adjustment amounts that have resulted from prior payer(s) adjudication.
The good news is that CO-45 codes generally come in a paid claim. So this means when the claim processes there will be some of the total amount that insurance can accept while the rest is a write-off for the provider.
To better illustrate this, here is an example of an instance where CO-45 is used.
Let’s say a provider sends out a charge for $100 dollars but the insurance company only covers the service for $80.
The insurance company will pay the $80 and then send back a return code of CO-45. In this case, you got paid. The payer is just letting you know what portion of the bill exceeds the amount in the insurance contract, and that $20 would be your write-off.
Here is another example: the insurance company and the provider agree to make the max allowable fee for surgery $100. But for a post-surgery bill, the provider bills the insurer for $150.
The additional $50 will be a Contractual Obligation and will fall under the CO-45 code. $50 is the adjustment that the provider needs to write-off.
Medical billing and coding aren’t easy. Just dealing with which denials code means what can be tough in itself. Clearinghouses can let you know before sending a claim if the return of a denial code is a possibility, so that you can prepare or adjust a bill if necessary.
With there being hundred of codes and statuses that insurance companies utilize, like CO-45 for instance, why not leave sorting through those codes to a third party?
This way you can continue with your billing duties and not have to face an enormous pile-up.
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Nice... I need help

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Contractual Obligations