CO · Contractual ObligationCARC 256

Denial Code CO-256

Q: What does CO-256 mean?

CO-256 is a Contractual Obligation (CO) denial: "Service not payable per managed care contract." Your managed-care contract with this payer doesn't make this service payable — it's carved out, excluded, or outside the contract's terms, so it was denied under the contractual group code.

Q: Is CO-256 the patient's responsibility or a provider write-off?

CO-256 carries the CO group code (Contractual Obligation): Provider/contractual responsibility — not billable to the patient while denied. A CO adjustment is the provider's responsibility, not the patient's: balance-billing the patient for a CO amount is a contract (and often compliance) violation. But CO does not automatically mean “write it off.” When the cause is fixable — missing information (CO-16), a modifier problem (CO-4), or NCCI bundling (CO-97) — you correct and resubmit, or appeal with documentation. You only truly write the amount off when it is a final contractual adjustment, such as the fee-schedule difference on CO-45.

Service not payable per managed care contract.

Source: X12 Claim Adjustment Reason Codes (CARC) & Group Codes. Maintained by the D3rx Clinical Billing Team.

What CO-256 means

Your managed-care contract with this payer doesn't make this service payable — it's carved out, excluded, or outside the contract's terms, so it was denied under the contractual group code.

Why CO-256 happens

The service is carved out of the managed-care contract to a different entity
The provider's contract excludes this procedure type
A network arrangement required for the service isn't in place
The service falls outside the contract's covered scope

What to do when you get CO-256

1Review your managed-care contract to confirm whether the service is payable under it
2If it should be covered, contact the payer's provider relations with the contract terms
3If it's carved out, bill the correct entity that handles the service
4Document the contract basis if you intend to dispute the determination

Got this denial right now?

Ask D3 whether to appeal or correct CO-256

Ask D3 about CO-256 Ask D3 about CO-256

CO-256 can go either way depending on the claim. Ask D3 tells you whether to appeal, correct, or just confirm status — free.

CO group code: who absorbs the charge

Contractual Obligation — Provider/contractual responsibility — not billable to the patient while denied.

A CO adjustment is the provider's responsibility, not the patient's: balance-billing the patient for a CO amount is a contract (and often compliance) violation. But CO does not automatically mean “write it off.” When the cause is fixable — missing information (CO-16), a modifier problem (CO-4), or NCCI bundling (CO-97) — you correct and resubmit, or appeal with documentation. You only truly write the amount off when it is a final contractual adjustment, such as the fee-schedule difference on CO-45.

Appeal, correct, or write off CO-256?

CO-256 is decided by your contract, so the contract is the evidence. If the service is covered under your agreement, dispute with provider relations citing the specific terms. If it's genuinely carved out or excluded, route it to the correct entity rather than appealing. Under the CO group code the amount is a provider/contractual responsibility, not a patient balance.

Timing & deadlines

If disputing, follow the payer's provider-dispute/reconsideration window (commonly ~90-180 days from the remittance). There's no separate filing deadline for a correctly applied contract exclusion, but route carved-out services to the right entity promptly to protect their filing window.

Example

A behavioral-health service is billed to a managed-care medical contract that carves behavioral health out to a separate vendor. The payer returns CO-256. Billing the carve-out vendor resolves it.

Prevent CO-256 going forward

Maintain a map of which services are covered vs. carved out under each contract
Flag behavioral-health, dental, and vision carve-outs at scheduling
Confirm network arrangements are in place for contract-gated services
Keep contract terms accessible to billing staff

Code families most affected

Carved-out behavioral-health, dental, and vision services
Services excluded from a provider's managed-care contract
Network-arrangement-dependent services

Related codes

Denial codes you'll often see alongside CO-256

CO-24 CO-109 CO-242

Payer notes

CO-256 is a contract-terms denial (distinct from CO-24 capitation and CO-109 wrong-payer). The contract is both the cause and the evidence — read it before disputing or rerouting.

Not sure how to work CO-256?

Ask D3 whether CO-256 should be appealed, corrected, or simply confirmed — free, backed by CMS, Medicare, and major-payer data.

Ask D3 about CO-256 Ask D3 about CO-256 All denial codes

Medical billing disclaimer

CARC/RARC definitions are the standardized X12 set; group-code semantics follow the X12 Claim Adjustment Group Code standard. Filing and appeal windows vary by payer — the standard anchors shown (Medicare redetermination 120 days from the remittance; Medicare timely filing 12 months from date of service; most commercial payers ~90-180 days) are general references, not a guarantee for any specific plan. Always confirm the rule in the payer's provider manual before acting. D3rx is not responsible for claim outcomes.