If a claim comes back from the payer marked CO 167, the message is blunt: the diagnosis reported on the claim is not covered under the patient’s benefit plan. It is one of the most frequently triggered Claim Adjustment Reason Codes (CARC) in U.S. healthcare billing, and under the CO group code the balance cannot be billed to the patient.

This guide breaks down the official description of Denial Code 167, the reasons it fires, the resolution workflow, and prevention strategies your billing team should bake into the front-end process.

What Is Denial Code 167?

Denial Code 167 is a standardized CARC maintained by ASC X12 and published in the HIPAA-mandated code sets used across all U.S. electronic remittance. Its official X12 descriptor reads:

“This (these) diagnosis(es) is (are) not covered. Usage: Refer to the 835 Healthcare Policy Identification Segment (loop 2110 Service Payment Information REF), if present.”

In plain terms, the payer reviewed the ICD-10-CM diagnosis code(s) on the claim and determined that the patient’s health plan does not reimburse care tied to those conditions. The claim was not rejected at the clearinghouse—it was fully processed and denied at adjudication, so a corrected claim or formal appeal is required to overturn it.

CARC 167 appears on the Explanation of Benefits (EOB) or Electronic Remittance Advice (ERA), and the referenced 835 Healthcare Policy Identification Segment points to the specific policy, Local Coverage Determination (LCD), or National Coverage Determination (NCD) behind the non-coverage decision.

CO 167 vs PR 167 vs OA 167: Group Code Matters

Like every CARC, 167 is paired with a Claim Adjustment Group Code (CAGC) that assigns financial liability:

• CO 167 (Contractual Obligation): The most common variant. Provider liability under the payer contract. The balance cannot be passed to the patient; the practice must appeal, rebill with a covered diagnosis, or write off the amount.
• PR 167 (Patient Responsibility): The patient’s plan shifts responsibility to the member when the diagnosis falls outside covered benefits. Verify contract language before billing.
• OA 167 (Other Adjustment): Appears in coordination-of-benefits (COB) scenarios when neither CO nor PR applies cleanly.

Understanding the group code is the first triage step because it dictates whether you appeal, resubmit, or pursue the patient.

Common Reasons for a CO 167 Denial

Although the code looks self-explanatory, several distinct root causes push a claim into this bucket:

1. Non-covered diagnosis under the plan. The patient’s policy (HMO, PPO, EPO, or tiered ACA plan) excludes the billed condition. Common exclusions: cosmetic procedures, experimental or investigational treatments, pre-existing conditions, and lifestyle-related services.
2. Incorrect, incomplete, or outdated ICD-10-CM codes. ICD-10-CM is revised annually. Typos, unspecified codes where specific ones are required, or deleted codes flag the claim as uncovered.
3. LCD / NCD mismatch. For Medicare and Medicare Advantage, the diagnosis must satisfy the applicable Local or National Coverage Determination. Services outside that criteria return CO 167 (or the closely related CO 50).
4. Diagnosis–procedure pairing not on the payer’s approved list. The diagnosis may be valid, but the payer’s policy does not cover that specific ICD-10 and CPT/HCPCS combination.
5. Insufficient documentation of medical necessity. Missing physician notes, diagnostic test results, or a Letter of Medical Necessity (LOMN) can cause a technically covered diagnosis to be denied as unsupported.
6. Policy or benefit update missed. Payers routinely revise coverage; a diagnosis reimbursed last quarter may be excluded today.
7. Frequency or age-based limitations. Some plans cap visits per year or restrict coverage to specific age groups.
8. Missing prior authorization for condition-specific services that require pre-approval even when the procedure normally does not.

CO 167 vs Related Denial Codes

Because multiple CARCs sit near CO 167 in meaning, teams often misclassify them:

• CO 11 Denial code – Diagnosis inconsistent with procedure (linkage issue).
• CO 47 Denial code – Diagnosis not covered, missing, or invalid.
• CO 50 Denial code – Not deemed medical necessity (LCD/NCD failure).
• CO 96 Denial code– Non-covered charge, requires an accompanying RARC.

CO 167 specifically addresses the diagnosis-to-plan coverage relationship, not code linkage or medical necessity narrative.

Step-by-Step Resolution Workflow

Once a CO 167 denial hits the ERA, work it systematically rather than batching it into a generic rework queue.

1. Pull the EOB/ERA line details. Capture the CARC, any accompanying Remittance Advice Remark Code (RARC), and the group code. Review the 835 Healthcare Policy Identification Segment for the specific policy citation.
2. Re-verify coverage. Log into the payer portal or call provider services to confirm whether the submitted ICD-10 codes are truly excluded under the patient’s plan, LCD, or NCD.
3. Audit the coding. Pull the medical record and confirm the documented clinical picture was coded to the highest specificity. Certified Professional Coders (CPCs) often uncover a more specific—and covered—ICD-10 code buried in the chart.
4. Submit a corrected claim if the issue was a coding error, typo, or missing secondary diagnosis that supports coverage.
5. File a formal appeal if the denial was unjust. Include a clear appeal letter citing the ICD-10 and CPT/HCPCS billed, clinical documentation proving medical necessity, a Letter of Medical Necessity for high-risk services, references to the applicable LCD/NCD, and any prior authorization details.
6. Respect the filing window. Most payers require appeals within 30 to 180 days; Medicare redeterminations follow a 120-day timeline.
7. Track the appeal with weekly follow-ups, documenting every representative name and reference number.
8. Bill the patient only as a last resort and only when contract and group code allow it—typically under PR 167, not CO 167.

How to Prevent CO 167 Denials

A disciplined front-end process eliminates most CO 167 denials before they are created.

• Verify eligibility and benefits at scheduling using real-time 270/271 eligibility transactions or payer portals. Confirm the planned diagnosis category is covered.
• Build a diagnosis–procedure validation matrix inside your PM or EHR system. Cross-reference each CPT code against the payer’s covered ICD-10 list and flag mismatches before submission.
• Keep coders current. Train annually on ICD-10-CM updates, CMS transmittals, and payer bulletins. Certified Professional Coders and continuing-education credits pay for themselves in reduced denials.
• Document medical necessity in the chart. Clinical indicators, test results, duration of symptoms, and attempted alternatives should appear in the note—not be added after a denial.
• Run clean-claim scrubbing. Modern clearinghouses catch outdated ICD-10 codes and unspecified diagnoses before the claim leaves your system.
• Monitor payer policy updates. Subscribe to payer bulletins and review LCDs/NCDs quarterly.
• Obtain prior authorization for diagnoses in gray zones. A written approval is your strongest defense if the payer later questions coverage.
• Audit denial trends monthly. If CO 167 clusters around specific providers, payers, or diagnosis codes, fix the upstream workflow rather than reworking individual claims.

For practices struggling with recurring rejections, partnering with a specialized team offering denial management services can streamline the appeal process, recover lost revenue, and reduce CO 167 write-offs long-term.

Final Thoughts

CO 167 is a coverage denial, it tells you the diagnosis on the claim falls outside what the patient’s plan will reimburse. Sometimes that is a true benefit exclusion, but more often it is preventable: an outdated ICD-10 code, a missing specific diagnosis, a skipped eligibility check, or an overlooked LCD. Teams that verify coverage up front, code to the highest specificity, and maintain strong medical-necessity documentation keep their CO 167 rate low and their clean-claim rate high.

In 2025, prior authorization denials accounted for nearly 11% of all initial claim denials across commercial payers, and denial code 197 sits at the center of that problem. Before discussing how to fix this problem, you first must understand one important distinction between a denial and a rejection. 

A rejection is when a claim is stopped at the clearinghouse, and the payer has not seen the claim. A denial means the payer has processed the claim through adjudication, and the payer has decided to deny payment. This distinction will affect how you proceed to resolve either denial type and affect your time for filing an appeal. 

This guide breaks down the CO 197 denial code description, its root causes, and the exact steps your team needs to take to resolve and prevent it.

What is Denial Code 197?

Denial code 197 is a standardized Claim Adjustment Reason Code (CARC) maintained by the Washington Publishing Company (WPC), the official body managing HIPAA-mandated code sets used in U.S. claims processing. Its official description reads: “Precertification/authorization/notification/pre-treatment absent.”

Payers post this code on the EOB or the EDI 835 Electronic Remittance Advice (ERA). It means the payer’s adjudication engine found no approved authorization record tied to the submitted CPT or HCPCS code, date of service, and patient benefit plan. In plain terms, the claim was denied because the required prior authorization was either never obtained, not submitted with the claim, or could not be matched to the patient’s active coverage.

Denial code 197 comes almost always with an accompanying RARC. Always check both before taking any action:

• CARC 197 + N210: A missing or invalid prior authorization number. In Medicare DME claims, N210 instructs the biller to append a 14-character Unique Transaction Number (UTN) before resubmission.
• CARC 197 + N706: The submitted procedure requires prior authorization under this patient’s specific benefit plan.

What Does CO 197 Denial Code Mean in Medical Billing?

The CO-197 denial code combines two components, the Claim Adjustment Group Code and the CARC number, each with specific financial weight.

“CO” is for contractual obligation; thus, the provider has the financial responsibility under the payer’s contract. A provider cannot balance-bill a patient for a CO denial; hence, it is up to the practice to “write off” that expense (unless there is an overturn of the denial).

“197” relates to a pre-authorization being required to bill the patient, and therefore, no valid pre-authorization was found during the claim scrubbing process by the payer.

It is also important to recognize the variant codes that may appear alongside or instead of CO 197:

• PR-197 (Patient Responsibility): The financial liability shifts to the patient most often when the patient’s benefit plan requires the member, not the provider, to secure authorization.
• OA-197 (Other Adjustment): Applied in coordination-of-benefits (COB) scenarios or when neither CO nor PR applies cleanly.

In practical billing terms, the co 197 denial code description tells the biller that no pre-service approval was granted and that reimbursement will be withheld until the issue is resolved through corrected resubmission, retroactive authorization, or a formal appeal.

What is Pre-authorization in Medical Billing?

Pre-authorization, also called prior authorization, precertification, or pre-approval, is the formal process of obtaining advance written approval from a patient’s insurer before offering a specific service. Payers use it to confirm medical necessity, manage utilization costs, and ensure treatments align with the patient’s active benefit plan.

Three distinct requirements fall under the CO 197 denial code umbrella:

Pre-authorization/Precertification: 

This is the formal approval process initiated by the insurer prior to any services being rendered. The payer will review clinical documentation (i.e., physician notes, nursing notes, etc.) and provide an authorization number for the procedure with an authorized time frame.

Pre-notification: 

This allows the insurer to provide advance notice that a service will be provided (typically required for emergency admissions of inpatient hospital services within 24 to 48 hours). No formal pre-authorization will be provided, but if the request is not submitted prior to the service being performed, a CO 197 denial will be processed.

Pre-treatment: 

It is predominantly used for behavioral health or dental claims. This is a time when a treatment plan is coordinated and reviewed to ensure that the patient meets the criteria for receiving a service before the treatment plan begins.

Claims form mapping:

It is important for claims submissions. For example, for CMS 1500 (professional claims), the authorization number should be placed in Box 23 or Loop 2300 on an EDI 837P. For UB-04 (institutional/hospital claims), the authorization number should be placed in Form Locator 63 or Loop 2300 on an EDI 837I. Placing the authorization number in the wrong location is a common 197 denial reason, even when there is a valid authorization present.

Medicare Advantage (Part C) note:

Traditional Medicare has limited prior authorization requirements. Medicare Advantage plans operate under private contracts and frequently require authorization for services that traditional Medicare covers without it. Always verify MA authorization requirements separately, never apply traditional Medicare rules to an MA plan.

How to Obtain Pre-authorization?

Verify requirements at scheduling — not at billing:

Before scheduling an appointment for pre-authorization, determine if a CPT/HCPCS code requires pre-authorization by reviewing your insurance’s member portal (or the payer’s website) for all the necessary codes, procedures, and requirements specific to this patient’s health plan and location; there should be a page indicating if there is a pre-authorization requirement.

Gather clinical documentation:

Gather the appropriate clinical documentation (physician orders, relevant diagnostics, letter of medical necessity) and align the language of the documentation to the payer’s clinical criteria sets (MCG or InterQual) to the extent possible.

Submit and log the request:

Once all clinical data is gathered, submit the request as per the criteria specified by the payer. Log the request by entering the date/time of the submission, mode of submission (portal, fax, or EDI), and obtaining a confirmation number. Enter the confirmation number into the accounting records.

Document every detail of the approval:

Document all details pertaining to the auth, such as authorization number, approved CPT codes, and valid period/quantity. If you are submitting a claim, enter the authorization number in the applicable claims field; establish automated follow-ups to remind you to check on the authorization 14 days before it expires.

Confirm authorization before every encounter:

Verify that the authorization is still active immediately prior to each encounter with the patient. If there is a change to the scope of a procedure during an encounter, you must contact the payer within 24 hours to update the authorized CPT code or you will be subject to a new CO 197 denial code for that line item.

Common Reasons for Denial Code 197

No Authorization Was Ever Requested 

The team was operating under the assumption that the service was ineligible for the authorization or that the requirement was overlooked during scheduling. In the absence of a pre-authorization on record, the payers’ claim scrubbing engine automatically denies the claim.

Expired Authorization 

An authorization for a service has been obtained. However, the service was provided outside of the approved service dates. The most common timeframe for an authorization is 90 days. An example would be an MRI that was authorized to be done on/before March 15 and later rescheduled to March 28; therefore, the claim is denied as CO-197, regardless of the fact that the authorization was obtained for service.

Authorization Scope Mismatch 

The billed CPT code does not match the CPT code that was originally authorized for the patient. Payers will match claims to authorizations using exact CPT codes; therefore, if the modifier changed on the procedure that was provided to the patient or if an upgrade occurred on the procedure compared to the original CPT code approved in the authorization, this would break the match and lead to a denial.

Authorization Number Missing from the Claim 

An authorization number was obtained but never entered into the appropriate field on the CMS-1500, UB-04, or electronic billing form (EDI 837); thus, the payer has no way to appropriately match the claim to the authorization.

Late Notification for Emergency Admissions 

In the case of an emergency admission, the provider must notify the payer of the admission after the fact by submitting a late notification claim within 24-48 hours after the date of admission. Failure to submit this claim in a timely manner will result in a denial of the claim (CO-197) regardless of whether the emergency service was covered.

Undetected Payer Policy Changes

Payers periodically expand authorization requirement lists. A CPT code exempt last quarter may now require auth. Practices that do not audit payer policy bulletins regularly are frequently caught off guard.

How to Manage and Resolve Denial Code 197 (Step-by-Step)

Step 1: Read the RARC alongside the CARC

Pull the EDI835 or EOB for both codes N210, N706, N290, and MA120, which will reference a different CO 197 denial code solution. Do not proceed until you are absolutely sure of what issue the remark code is referencing.

Step 2: Confirm whether authorization was truly required

You will either need to verify through your payer portal or through provider services. Some CO-197 denials are due to payer-system errors. If the payer confirmed that authorization wasn’t required, document the finding in your records and initiate the appeal based on the payer’s confirmation.

Step 3: Search your records

Check your prior authorization log, EHR, and the payer portal’s authorization history. If a valid auth exists covering the date of service and the billed CPT code, you have an administrative error — correct the claim and resubmit using Claim Frequency Code 7 on the EDI 837.

Step 4: Request retroactive authorization

If no auth was obtained, contact the prior authorization department of the payer. UnitedHealthcare and Aetna will accept retro-auth requests for an admin error or if there is clinical urgency, within 30 days of the date of service. Cigna retro-auth cases are reviewed on an individual case basis, so they do allow waivers for the notification of an emergency admission within 48 hours. The Medicare Advantage retro-auth policy varies depending on the plan. Always contact that plan directly.

Step 5: File a formal appeal

If the retro-auth is denied, a formal appeal must be filed within the payer’s timely filing window, which is usually between 60 and 180 days from the date of denial. The appeal letter must include the following:

A formal letter of appeal, which cites medical necessity, complete clinical documentation, physician orders, a copy of the original EOB, and any proof of a good faith effort to obtain an authorization.

Step 6: Fix the root cause

To fix the root cause of CO-197 denials, update your self-created prior auth matrix for that particular payer and provide retraining to the staff member involved in the denial, and log the denial in your tracking system after addressing the CO-197.

Pro-Tip: Build an “authorization scrub” into your pre-submission workflow. Before any claim is submitted, run it against your authorization log. Unmatched claims get held and flagged — not submitted. This single step eliminates the most common cause of CO-197: valid authorizations that never make it onto the claim form.

Conclusion

To summarize, CO-197 denials are preventable, correctable, and resolvable. Your staff needs to be able to differentiate between a CO-197 denial and a rejection. It is important that they review the accompanying remark codes before they can implement a documented resolution workflow. With 33 million people in the Medicare Advantage program by 2026, and an increase in the number of authorization requests by payers, 197 denial reasons will continue to increase for practices that do not have a systematic process for checking pre-authorization prior to submitting claims.

The CO-197 denial reason reflects one common problem of failure to obtain the necessary pre-authorization: missing, expired, mismatched, or improperly entered on the claim. Fix your workflow, and you fix the denial rate. If your team cannot afford to manually track the authorization process, monitor payer policy changes, or appeal denials, exploring a medical billing services partner that handles pre-authorization management and denial resolution as part of a complete revenue cycle workflow is worth considering — particularly if CO-197 denials are recurring across multiple payers or specialties. 

To learn more about how Nexus io approaches systematic denial management services, get in touch with our denial specialists today.