CO-75: Direct Medical Education Adjustment
Contractual adjustment — review against your contract terms. The patient is not liable for this amount.
What Does CO-75 Mean?
With CO (Contractual Obligation), the CARC 75 adjustment for direct medical education adjustment is a contractual reduction. The provider absorbs this amount per the payer contract or regulatory payment methodology. The patient is not responsible for the adjusted amount. Review the remittance to confirm the adjustment is consistent with your contract terms.
CARC 75 means the payer adjusted the payment based on direct medical education adjustment. The reimbursement was calculated using the payer's fee schedule, contracted rate, or regulatory payment methodology rather than the billed charge.
Common scenarios that trigger this adjustment include: teaching hospitals receive a separate DGME payment from Medicare based on a per-resident amount, the number of FTE residents, and Medicare's share of total inpatient days. CARC 75 reflects this adjustment as part of the normal payment process; The hospital's reported full-time equivalent (FTE) resident count used in the DGME calculation was inaccurate, resulting in a different adjustment than expected; Required documentation supporting the residency program's ACGME or ADA accreditation status was not submitted, incomplete, or expired, affecting the DGME payment. The group code paired with CARC 75 determines who bears the financial responsibility — CO places it on the provider as a contractual obligation, OA indicates a coordination of benefits or other payer adjustment, PR shifts it to the patient.
Common Causes
| Cause | Frequency |
|---|---|
| Standard DGME payment adjustment under Medicare Teaching hospitals receive a separate DGME payment from Medicare based on a per-resident amount, the number of FTE residents, and Medicare's share of total inpatient days. CARC 75 reflects this adjustment as part of the normal payment process | Most Common |
| Incorrect FTE resident count The hospital's reported full-time equivalent (FTE) resident count used in the DGME calculation was inaccurate, resulting in a different adjustment than expected | Common |
| Missing residency program accreditation documentation Required documentation supporting the residency program's ACGME or ADA accreditation status was not submitted, incomplete, or expired, affecting the DGME payment | Common |
| Per-resident amount calculation discrepancy The hospital-specific per-resident amount (PRA) used in the DGME formula was updated or adjusted, causing a different payment than the hospital anticipated | Common |
| Change in Medicare share of inpatient days The proportion of Medicare inpatient days relative to total inpatient days changed, altering the DGME payment calculation | Occasional |
How to Resolve
- Review the adjustment against contract terms Compare the CO-75 adjustment with your payer contract to confirm the reduction is consistent with agreed terms or regulatory methodology.
- Verify the adjustment amount Confirm the dollar amount of the adjustment is calculated correctly based on the contracted rate and the service provided.
- Appeal if the adjustment is incorrect Appeal only if the allowed amount does not match your contracted rate. Include your signed contract showing the agreed-upon rate for the billed procedure code. If the fee schedule was applied incorrectly, provide evidence of the correct rate. For Medicare, file within 120 days.
- Process the contractual adjustment If the adjustment is correct per contract terms, process it accordingly in your billing system. This amount cannot be transferred to the patient.
Appeal only if the allowed amount does not match your contracted rate. Include your signed contract showing the agreed-upon rate for the billed procedure code. If the fee schedule was applied incorrectly, provide evidence of the correct rate. For Medicare, file within 120 days.
Common RARC Pairings
The RARC code tells you exactly what triggered the CO-75:
| RARC | Description |
|---|---|
| N115 | This payment reflects the DGME adjustment applied to the claim for this teaching hospital Review the DGME calculation and verify the adjustment matches expected payment methodology → |
| N381 | Consult your contractual agreement for billing and payment information related to these charges Review your contractual agreement for billing restrictions and payment terms for this service → |
How to Prevent CO-75
- Maintain accurate and current FTE resident count data and submit updates to CMS promptly when residency program sizes change
- Ensure all residency program accreditation documentation is current and filed with the MAC before annual cost report submissions
- Monitor the hospital-specific per-resident amount and reconcile it against CMS updates annually
- Train billing and finance staff on the DGME payment formula so they can identify discrepancies between expected and actual payments
- Conduct regular internal audits of GME cost report data to prevent errors in the DGME calculation inputs
Also Filed As
The same CARC 75 may appear with different Group Codes: