CO-256: Service Not Payable Per Managed Care Contract
CO-256 means the service is not payable per your managed care contract. Review the contract, verify coding, and appeal if you believe the service qualifies for payment.
What Does CO-256 Mean?
When paired with Group Code CO, the managed care contract denial is a contractual adjustment. The provider agreed to the contract terms and cannot transfer the denied amount to the patient. If the denial is incorrect, the provider must appeal or correct the claim.
CARC 256 indicates that the payer denied or reduced the claim because the billed service is not payable under the terms of the managed care contract. This is a contract-based denial, meaning the payer evaluated the claim against the managed care agreement and determined the service does not qualify for payment.
The denial can stem from multiple contract-related issues. The service may be explicitly excluded from the managed care contract. It may require pre-authorization that was not obtained. The provider may be out of network for the patient's managed care plan. The patient may have exceeded benefit limits for this service category. There may be billing or coding issues that cause the service to appear non-covered when it actually should be payable.
The first step is always to review the managed care contract to understand why the service was denied. If the denial is correct — the service truly is not payable — the provider must absorb the cost under the contract. If the denial resulted from a correctable error (wrong code, missing authorization, billing issue), correcting and resubmitting or appealing is the appropriate path.
Common Causes
| Cause | Frequency |
|---|---|
| Service excluded from managed care contract The specific healthcare service billed is explicitly excluded from coverage under the managed care contract between the provider and the payer | Most Common |
| Missing pre-authorization required by contract The managed care contract requires pre-authorization for the service but the provider did not obtain it before rendering the service | Common |
| Out-of-network provider for managed care plan The healthcare provider is not part of the managed care network and the patient's plan does not cover or limits out-of-network services | Common |
| Service exceeds benefit limits under contract The patient has exceeded the benefit limits for this service category as defined in the managed care contract | Common |
| Non-compliance with contract-specific billing requirements The claim does not meet specific billing requirements outlined in the managed care contract such as modifier requirements or billing timeframes | Occasional |
| Coding errors misaligning service with contract coverage Incorrect procedure codes were used causing the service to appear as not covered under the managed care contract when the actual service may be covered | Occasional |
How to Resolve
- Review the managed care contract Identify the specific contract provision that caused the denial — exclusion, authorization requirement, benefit limit, or billing guideline.
- Verify procedure codes and modifiers Check that the correct codes and modifiers were submitted to accurately represent the service under the contract terms.
- Correct coding errors and resubmit If incorrect coding triggered the denial, correct the codes and resubmit the claim.
- Compile supporting documentation Gather medical records, physician notes, and evidence of medical necessity to support the claim.
- File a formal appeal Submit an appeal with documentation including relevant contract provisions, medical records, and a detailed explanation of why the service is payable.
- Evaluate contract terms for future claims If denials for this service type are recurring, consider whether contract renegotiation is needed.
Review the managed care contract to confirm the service should be covered. If so, file a formal appeal with documentation including the relevant contract provisions, medical records, and a letter explaining why the service is payable under the contract terms. Reference specific contract language in the appeal.
Common RARC Pairings
The RARC code tells you exactly what triggered the CO-256:
| RARC | Description |
|---|---|
| N381 | Alert: Consult your contractual agreement for restrictions, billing, and payment information. Review the managed care contract to determine the specific service exclusion or billing requirement that triggered the denial → |
| N657 | This should be billed with the appropriate modifier. Review whether the service requires a specific modifier under the managed care contract and resubmit with correct modifiers → |
How to Prevent CO-256
- Verify patient eligibility and covered services under the managed care contract before rendering services
- Obtain required prior authorizations for all services that need pre-approval under the contract
- Maintain an updated reference of services covered and excluded under each managed care contract
- Educate patients about coverage gaps and out-of-pocket costs for services not covered under their managed care plan
- Ensure accurate coding and documentation that aligns with managed care contract requirements
- Stay current with contract modifications and policy updates from managed care payers
General Prevention
- Obtain required prior authorizations for all services that mandate pre-approval under the contract
Also Filed As
The same CARC 256 may appear with different Group Codes:
Related Denial Codes
Sources
- https://www.mdclarity.com/denial-code/256
- https://avenuebillingservices.com/co-256-denial-code/
- https://medibillmd.com/blog/co-256-denial-code/
- https://x12.org/codes/claim-adjustment-reason-codes
- Codes maintained by X12. Visit x12.org for official definitions.