CO-108: Rent/Purchase Guidelines Not Met

What Does CO-108 Mean?

CO-108 is a contractual adjustment indicating the provider did not follow the payer's rental or purchase guidelines for the billed DME item. The provider must absorb the denied amount as a write-off until the issue is resolved. Common violations include missing prior authorization, incorrect rent-to-purchase timing, wrong HCPCS modifier for the rental month, or insufficient medical necessity documentation.

CARC 108 fires when a payer determines that the billing for a rented or purchased item — almost always durable medical equipment (DME) — did not comply with the payer's specific rental/purchase guidelines. Every major payer, and Medicare in particular, maintains detailed rules governing how DME items transition from rental to purchase, what documentation is required at each stage, and what modifiers indicate the current billing phase.

Medicare's capped rental program is the most common context for this denial. Under capped rental, certain DME items (wheelchairs, hospital beds, CPAP machines) must be rented for up to 13 months before ownership transfers to the patient. Each month requires a specific modifier, and the billing must reflect the correct point in the rental cycle. Submitting a purchase claim during the rental window, using the wrong month's modifier, or missing the certificate of medical necessity (CMN) will all trigger CARC 108.

The financial outcome depends on the Group Code. CO-108 is the standard assignment, meaning the provider must absorb the denied amount as a contractual write-off until the guideline violation is corrected. PR-108 occurs less frequently and typically involves patient non-compliance with equipment use requirements — such as failing to meet CPAP compliance thresholds — where the patient's plan transfers the denied amount to the patient.

Common Causes

How to Resolve

Identify which specific rental/purchase guideline was violated, correct the documentation or coding, and resubmit or appeal with proof of compliance.

1. Identify the guideline violation Review the denial notice and any RARC codes to determine exactly which rental/purchase rule was not met — prior authorization, CMN, rental month timing, or modifier selection.
2. Verify the rental cycle position Confirm the equipment's current position in the rental-to-purchase timeline and ensure the billing month, modifier (RR, NU, KH, KI, KJ, etc.), and HCPCS code are correct for this billing period.
3. Gather missing documentation If the CMN was missing or incomplete, obtain a completed certificate from the ordering physician. If prior authorization was not obtained, request retroactive authorization if the payer allows it.
4. Correct and resubmit or appeal Resubmit with corrected coding and complete documentation. If all guidelines were met, file a formal appeal with the CMN, physician order, delivery records, and proof of timeline compliance.

Common RARC Pairings

The RARC code tells you exactly what triggered the CO-108:

How to Prevent CO-108

• Implement DME rental cycle tracking systems that automatically calculate the correct billing month, modifier, and rent-to-purchase conversion date for each piece of equipment
• Verify all rental/purchase guideline requirements before claim submission, including CMN completion, prior authorization status, and correct HCPCS modifier for the billing period
• Obtain and file certificates of medical necessity before initiating equipment rentals — do not wait until the claim is denied
• Stay current with payer-specific DME policies, which vary significantly between Medicare, Medicaid, and commercial payers
• Train DME billing staff on proper HCPCS code and modifier selection for each phase of the rental cycle
• Audit DME claims monthly to identify recurring CARC 108 patterns by equipment type and payer

General Prevention

• Verify all rental/purchase guidelines specific to the payer and equipment type before submitting claims, including prior authorization requirements, CMN requirements, and rental period rules
• Implement tracking systems for DME rental cycles to ensure correct billing month, modifier, and rent-to-purchase conversion dates for each piece of equipment
• Obtain and file certificates of medical necessity (CMN) and physician orders before initiating equipment rentals
• Stay current with payer-specific DME policies, as rental/purchase rules vary significantly between Medicare, Medicaid, and commercial payers
• Train DME billing staff on proper HCPCS code and modifier selection for rental versus purchase scenarios
• Conduct regular audits of DME claims to identify recurring CARC 108 patterns by equipment type and payer

Also Filed As

The same CARC 108 may appear with different Group Codes:

Related Denial Codes