CO-223: Mandated Federal/State/Local Law Adjustment
A legally mandated adjustment was applied. Verify the calculation is correct per the applicable law.
What Does CO-223 Mean?
With CO (Contractual Obligation), the legislated adjustment is applied contractually. Verify the adjustment is correct per the applicable law.
CARC 223 indicates that the payment adjustment was mandated by legislation or regulation rather than by the payer's own policies. This can include adjustments required by the Affordable Care Act, state insurance regulations, Medicaid rate mandates, workers compensation fee schedules set by law, or other legislative requirements that affect healthcare payment.
This code is informational in nature — it tells the provider that the adjustment is not the payer's discretionary decision but rather a compliance requirement with applicable law. The specific law or regulation driving the adjustment may be identified in accompanying remark codes.
Common Causes
| Cause | Frequency |
|---|---|
| New federal regulation affecting payment A recently enacted federal law or regulation requires a payment adjustment that does not fit under any existing specific CARC code | Most Common |
| State-mandated payment reduction A state law or regulation mandates a specific payment adjustment or reduction not covered by another CARC | Common |
| Regulatory compliance adjustment The payer applies an adjustment to comply with a new regulation before a specific CARC code is created for that purpose | Common |
| Local ordinance affecting healthcare payment A local government regulation requires a claim adjustment not addressed by existing codes | Occasional |
How to Resolve
- Identify the law Determine which specific legislation mandates the adjustment.
- Verify the calculation Confirm the adjustment amount is correct.
- Contest if incorrect If the law was misapplied, submit documentation.
Appeal if you believe the federal, state, or local regulation was applied incorrectly. Reference the specific regulation and demonstrate how the adjustment should have been calculated. Include any regulatory guidance documents or agency interpretations that support your position.
Common RARC Pairings
The RARC code tells you exactly what triggered the CO-223:
| RARC | Description |
|---|---|
| N381 | Alert: Consult your contractual agreement for restrictions, billing, and payment information. Review the specific regulation referenced and verify the adjustment is correctly applied → |
| N386 | This decision was based on a National Coverage Determination (NCD) or Local Coverage Determination (LCD). Review the applicable NCD or LCD for regulatory requirements → |
How to Prevent CO-223
- Stay current on federal, state, and local laws affecting healthcare payments
- Verify legislated fee schedules and adjustment requirements
- Maintain awareness of regulatory changes that may affect reimbursement
General Prevention
- Stay informed about new federal, state, and local healthcare regulations that may affect claim payments
- Subscribe to regulatory update services from CMS, your state health department, and industry associations
- Train billing staff on new regulatory requirements as they are implemented
- Work with your compliance department to understand and implement new regulatory changes
- Monitor X12 code updates for new specific CARC codes that replace CARC 223 for specific regulations
Also Filed As
The same CARC 223 may appear with different Group Codes:
Related Denial Codes
Sources
- https://x12.org/codes/claim-adjustment-reason-codes
- https://portal.ct.gov/-/media/ohs/health-it-advisory-council/apcd-advisory-group/data-submission-guide-workgroup/meeting-materials/6-30-22/carc-codes_final.pdf
- https://www.aapc.com/resources/claim-adjustment-reason-codes
- Codes maintained by X12. Visit x12.org for official definitions.