CO-78: Non-Covered Days / Room Charge Adjustment
Contractual adjustment — review against your contract terms. The patient is not liable for this amount.
What Does CO-78 Mean?
With CO (Contractual Obligation), the CARC 78 adjustment for non-covered days / room charge 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 78 indicates non-covered days / room charge adjustment. The payer determined that the service or a portion of it does not meet coverage criteria under the patient's current plan benefits or the applicable coverage rules.
Common scenarios that trigger this adjustment include: the payer determines that the patient's inpatient stay exceeded what is medically necessary based on clinical criteria, and the excess days are denied as non-covered; The provider did not obtain or renew prior authorization for continued inpatient days, resulting in the unauthorized days being denied; The patient was placed in a private room when only semi-private room charges are covered, and the difference is adjusted as non-covered. The group code paired with CARC 78 determines who bears the financial responsibility — CO places it on the provider as a contractual obligation, PR shifts it to the patient, OA indicates a coordination of benefits or other payer adjustment.
Common Causes
| Cause | Frequency |
|---|---|
| Inpatient days exceed medically necessary length of stay The payer determines that the patient's inpatient stay exceeded what is medically necessary based on clinical criteria, and the excess days are denied as non-covered | Most Common |
| Failure to obtain continued stay authorization The provider did not obtain or renew prior authorization for continued inpatient days, resulting in the unauthorized days being denied | Most Common |
| Room type upgrade not covered by plan The patient was placed in a private room when only semi-private room charges are covered, and the difference is adjusted as non-covered | Common |
| Admission date discrepancy The billed admission date does not match the payer's records or the utilization review determination, causing certain days to be classified as non-covered | Common |
| Custodial care days billed as acute inpatient Days that should be classified as custodial or skilled nursing level of care were billed at the acute inpatient rate, and the payer denied the higher-level charges | Occasional |
How to Resolve
- Review the adjustment against contract terms Compare the CO-78 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 with clinical documentation demonstrating medical necessity for the denied inpatient days. Include physician notes, nursing assessments, lab results, and any utilization review correspondence. Show that the patient's condition required continued acute inpatient care. 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 with clinical documentation demonstrating medical necessity for the denied inpatient days. Include physician notes, nursing assessments, lab results, and any utilization review correspondence. Show that the patient's condition required continued acute inpatient care. For Medicare, file within 120 days.
Common RARC Pairings
The RARC code tells you exactly what triggered the CO-78:
| RARC | Description |
|---|---|
| N381 | Consult your contractual agreement for information about non-covered day charges and billing restrictions Review your contractual agreement for billing restrictions and payment terms for this service → |
| M20 | Missing or incomplete documentation to support the number of covered inpatient days Submit additional clinical documentation to support medical necessity for the denied days → |
How to Prevent CO-78
- Obtain and track prior authorization for all inpatient admissions and request continued stay reviews before authorization expires
- Implement utilization review processes to assess medical necessity throughout the inpatient stay
- Ensure accurate room type coding that matches the patient's covered benefit level
- Verify admission dates against payer records and correct discrepancies proactively
- Monitor length of stay metrics by DRG and investigate outliers that may trigger non-covered day denials
Also Filed As
The same CARC 78 may appear with different Group Codes:
Related Denial Codes
Sources
- https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps
- https://www.aapc.com/resources/claim-adjustment-reason-code-carc
- https://www.mdclarity.com/denial-code/78
- Codes maintained by X12. Visit x12.org for official definitions.