What is CO‑197?
In medical claims terminology, CO 197 (or “CO‑197”) is a denial adjustment code used by payers to indicate that a claim (or line item) was rejected because precertification, authorization, or required notification was not obtained prior to providing the service. The “CO” stands for Contractual Obligation — meaning this denial is tied to the contract between provider and payer, and the provider typically cannot shift the cost to the patient.
In essence, the payer is saying: “This service needed our prior approval or confirmation, which was missing, so we won’t pay.”
There are variations or related denial codes, depending on payer systems:
- PR‑197: The denial is coded as patient responsibility (in some cases), shifting the burden to the patient.
- OA‑197: “Other Adjustment” version of the same – still tied to missing authorization/notification.
But the core issue remains: a required prior approval or notification step was missing or improperly processed.
Why Does CO‑197 Occur? Common Root Causes
Here are the usual reasons why claims get denied with the CO‑197 code:
- No Prior Authorization / Precertification Obtained: Many services—especially imaging (MRI, CT, PET), elective surgeries, outpatient procedures, durable medical equipment (DME), behavioral health sessions, and certain therapy services—require prior approval from the insurer. If this step is overlooked, CO‑197 may be triggered.
- Authorization Number Missing / Not Applied to Claim: Sometimes the authorization was obtained, but the claim submission failed to include the authorization or unique tracking number (UTN) or was placed in the wrong field. For example, certain Medicare contractors require a 14‑byte UTN in a specific claim loop (e.g. loop 2300 or 2400) with REF01 = “G1” to indicate prior authorization.
- Expired or Invalid Authorization: Authorizations have effective dates or validity windows. If the service occurs outside that window or if the authorization has expired, the payer may deny under CO‑197.
- Notification Requirements Not Met: Some payers don’t demand full precertification but require that the provider notify them (advance notification) of planned services. Failure to do so can also trigger CO‑197.
- Incomplete or Insufficient Clinical Justification: Even if an authorization request was made, the payer may deny retroactively if the submitted clinical documentation is inadequate to justify medical necessity. So the claim may be denied under CO‑197 (or related code) due to weak documentation.
- Administrative / Workflow Errors
- Authorization request never followed through
- The payer’s authorization was misfiled or lost
- The billing team was unaware that a service required authorization
- Mistakes or omissions when entering the authorization number in the claim
- Delays in requesting pre-certification beyond allowed timing windows
- Policy or Coverage Changes Unnoticed: If a payer changes its policy to require prior authorization for additional procedures and the provider is unaware, claims may begin to incur CO‑197 denials.
Because CO‑197 is one of the more common denial codes in medical billing, it’s critical for billing departments and providers to have robust processes to catch and prevent it.
How the CO‑197 Denial Appears on EOB / Remittance Advice
When a claim is rejected under CO‑197, here is how you may see it:
- Adjustment Code: CO 197
- Description: “Precertification/Authorization/Notification absent” or similar wording
- Remark Codes: e.g. N290 (authorization not obtained), MA120 (missing authorization) in some payers’ EOBs
- In Medicare DME contexts (for example with Noridian), you may see Reason Code 197 + Remark Code N210, which instructs that a 14‑byte UTN must be appended.
- On paper claims (CMS‑1500), the authorization number often belongs in Box 23.
The EOB or remittance advice may also include payer-specific instructions for reprocessing, or may explicitly state whether retroactive authorization is allowed in this situation.
Steps to Resolve / Appeal CO‑197 Denials
When you receive a CO‑197 denial, here is a practical step‑by‑step approach to address it:
- Review the EOB and Denial Notice Carefully: Check for the reasons and any remark codes or instructions. Determine which line(s) were denied, and confirm whether the payer allows for reprocessing or appeal.
- Verify Whether Authorization Was Required: Consult the payer’s policy manual (or online portal) to confirm whether the denied service (by CPT/HCPCS) mandates prior authorization or notification. Sometimes services you assumed are exempt might actually require approval.
- Check Your Records for Authorization
Look through your internal pre-certification logs, prior authorization systems, EHR notes, or the payer’s response letter to find the authorization number, dates, and effective window.- If you find a valid authorization that aligns with the date of service, gather that documentation.
- If authorization was denied by the insurer, evaluate whether an appeal is feasible.
- Contact the Payer’s Authorization / Medical Review Department
Ask them:- Why the claim was denied specifically (authorization missing vs incomplete)
- Whether a retroactive authorization is allowed in your case
- What additional documentation is required
- The correct method to resubmit (resubmit vs appeal)
Note: Some payers permit retroactive authorization in certain circumstances (e.g., emergencies, administrative oversight), but not all.
- Prepare and Submit an Appeal / Reconsideration
- Draft a formal appeal letter citing the EOB, denial reason, patient’s name, claim number, date(s) of service, provider, etc.
- Attach the original claim or a corrected claim form as needed.
- Include the authorization document (or proof of attempt), signed physician orders, clinical notes, diagnostic reports, and justification of medical necessity.
- Emphasize any urgency or extenuating circumstances (e.g. emergent condition) that justify retroactive approval.
- Ensure you submit within the payer’s appeal timeframe (often 30 or 45 days from denial date).
- Resubmit / Rebill Correctly
- If reprocessing is allowed, submit a corrected claim including the required authorization number and any special modifiers (if required by the payer) in the correct claim fields.
- For Medicare DME claims (in certain jurisdictions), include the 14‑byte UTN in the correct loop (e.g. REF with code “G1”) per payer instructions.
- Follow Up and Track
- Monitor the appeal or reprocessing status.
- Maintain a denial log and track resolution outcomes, turnaround times, and success rates.
- If the payer upholds the denial, escalate if possible (e.g. internal appeals, external review, or state insurance board, depending on payer).
- Document Lessons Learned / Update Workflow
After resolving, evaluate what breakdowns occurred (e.g. staff forgot to request authorization, system overlooked requirement) and revise your protocols, staff training, or systems accordingly.
Preventing CO‑197 Denials: Best Practices for a Billing Company
Prevention is always better than cure. For a billing company like Allzone having a robust denial‑prevention strategy around CO‑197 is essential. Below are best practices and operational strategies:
- Maintain a Pre-Authorization Matrix / Rule Library
For each payer you deal with, maintain a detailed table/matrix that lists:- CPT/HCPCS codes needing prior authorization
- Notification requirements
- Deadlines (how far before service date the request must be submitted)
- What documentation is needed
- Special modifiers to append
Regularly update this matrix as payer policies change.
- Implement Real-time Eligibility & Benefits Verification Tools
Use software or service that, at scheduling time, automatically checks:- Whether the patient’s plan requires prior authorization for the service being scheduled
- Whether an authorization is already in place
- Whether the effective window covers the scheduled date
Alert the scheduler or care coordinator if authorization is required but missing.
- Assign Authorization Responsibility / Workflow Ownership
Designate one or more staff (or a team) specifically responsible for:- Requesting authorizations
- Tracking their status
- Documenting authorization numbers, effective dates, expiration
- Entering the correct authorization numbers into the billing system when claims are submitted
Clear ownership avoids responsibility gaps.
- Integrate EHR / Billing Systems with Authorization Data
Where possible, integrate your clinical system with billing and payer portals so that authorization numbers entered in clinical workflows propagate to billing claims. This reduces manual error. - Audit / Denial Trend Monitoring
Regularly run denial‑trend reports to see how many CO‑197s are occurring, for which payers, for which CPT codes, and identify recurring weak spots.
Conduct root‑cause analysis: is the issue mostly missing authorizations, expired ones, mismatched numbers, or documentation errors? - Staff Training and Awareness
- Ensure that front‐desk, scheduling, medical staff, referral coordinators, and billing staff are aware of which services require advance authorization.
- Provide quick reference tools or cheat sheets for common CPTs needing authorization per payer.
- Conduct periodic refreshers whenever payer policies change.
- Implement Pre‑Submission Checks / Claim Validation
Before claims are batched/submitted, run an internal validation that flags claims with services that require prior authorization but lack an authorization number or have an invalid one.
These claims can be held out, corrected, or reviewed manually. - Proactive Appeals / Retroactive Authorization Strategy
Establish standard templates and escalation procedures for appealing CO‑197 denials and requesting retroactive authorization when possible.
Some payers permit emergency or exception-based retroactive approvals; have protocols to act fast. - Communicate With Providers / Clinical Staff
Ensure physicians or clinical staff know when a procedure may require authorization, and embed that into ordering systems — e.g. if a physician orders an MRI, the system warns: “Authorization needed — please confirm you’ve requested it.”
This upstream awareness helps catch missing authorizations before services are scheduled or performed. - Negotiate with Payers / Clarify Policies
For high‑volume payers, engage in discussions or contract negotiations to clarify or even reduce prior authorization burdens (where possible).
Get written clarifications from payers about when retroactive authorizations are allowed, and under what documentation.
By combining these preventive strategies with a disciplined appeals/denial‐resolution workflow, a billing company like Allzone can significantly reduce its CO‑197 denial rate, improve cash flow, and maintain better relationships with providers, payers, and patients.
Challenges, Pitfalls & Tips
- Retroactive Authorization Denials: Some payers flatly refuse retroactive authorizations except in narrow emergency cases. Knowing which payers allow retroactive approval — and under what documentation — is vital.
- Service Date Outside Authorization Window: Even if you have an authorization, if the dates don’t include the exact date the service occurred, you may still get CO‑197.
- Mismatched Provider / Location: If the authorization was granted for a different provider, facility, or location than what was billed, the payer may reject it. Always ensure alignment.
- Authorization Number Formatting / Positioning: Some payers have strict rules on where in the claim the authorization number must go (e.g. in REF segments, or Box 23 on CMS‑1500). Incorrect placement may cause them to ignore it.
- Expiration / Validity Issues: Authorizations often have defined start and end dates. If service date falls outside, denial is likely.
- Payer Policy Changes: Payer rules about what services require authorization change over time. If your team doesn’t stay updated, you’ll see new denials.
- Emergency / Urgent Services: If a service was emergent, some payers waive prior authorization requirements, but you may need to provide justification.
- High Volume / Complex Payers: Some payers have more opaque or restrictive authorization policies or change them frequently. Higher attention is needed there.
“Allzone” Considerations & How to Embed Best Practices
Here are some ideas for integrating this denial‑management knowledge into your operations:
- Internal SOPs (Standard Operating Procedures): Develop a CO‑197 resolution SOP: every CO‑197 denial triggers a set of steps (review, lookup, contact payer, appeal, reprocess, document). Train all staff to follow it.
- Denial Dashboard / KPI Monitoring
Maintain dashboards that report:- Total claims submitted
- Number / percentage denied as CO‑197 (by payer, provider, CPT code)
- Appeal success rate
- Time to resolution
Use this to spot trends, e.g. a particular provider or payer has a higher CO‑197 rate needing targeted action.
- Pre‑submission Claim Edits / Rules Engine: Before claims are submitted, filter them through logic that checks: “Does this CPT code typically require authorization for this payer? If yes, is there a valid auth number entered?” If not, flag or hold the claim for review.
- Authorization Tracking Module: Use or build (or integrate) a module within your billing system or software to log authorization requests, statuses, expiration dates, notes, communication records, and mapping to claim numbers.
- Provider Education & Collaboration: Partner with your provider clients to create awareness. Encourage them to help with early identification of services needing preauthorization, involve their clinical teams in requesting authorizations promptly, and understand payer policies.
- Payer Communication / Clarifications: For your major payers, seek formal clarifications or written policies about retroactive authorization, documentation requirements, and reprocessing rules. Keep an updated payer policy manual accessible to all staff.
- Periodic Audits & Quality Control: Conduct internal audits on a sample of claims to see if CO‑197 denials could have been prevented (e.g. missed authorization, wrong coding). Use findings for continuous improvement.
- Risk Buffering / Financial Planning: Accept that some CO‑197 denials may not be recoverable. Build into your revenue projections a buffer or reserve for write-offs. Prioritize appeals for high-dollar claims.
- Technology / Automation Investments: If feasible, invest in or subscribe to platforms that automatically check payer authorization requirements, transmit authorization requests, or integrate with payer APIs to fetch authorization responses in real time.
Conclusion
CO‑197 is one of the more frequent and preventable denial codes in medical billing. While it can cause frustration and revenue leakage, with the correct mix of education, workflow controls, denial tracking, and appeals strategy, its impact can be minimized.
For a Medical billing company like Allzone, a disciplined approach combining preventive checks (pre‑submission validation, authorization tracking) and strong denial resolution (appeal protocols, payer follow-ups) is key to controlling CO‑197 write‑offs.