In today’s increasingly complex reimbursement environment, denial management has evolved from a back-office task into a strategic financial priority. For healthcare providers, even small inefficiencies in claim processing can translate into significant revenue leakage over time. Among the many adjustment reason codes that disrupt cash flow, the CO 97 denial code stands out as one of the most common and one of the most misunderstood. What makes it especially costly is that a large percentage of these adjustments are preventable with the right processes in place.

This blog is designed to help healthcare providers, clinics, and billing professionals understand the main cause of this denial. Why does it occur? What will be its effect on the revenue of the organization, and what strategies can be applied to avoid this denial and improve the claim rate?

The Real Definition of CO-97 and Why It Matters

CO-97 is essentially a claim adjustment reason code used by insurance companies to indicate that the coded service has been denied or rejected because it is included in a comprehensive procedure that has already been paid by the payer. Thus, the billed service cannot be reimbursed separately. It is considered billed before or paid already.

Most of the CO-97 denials are driven by National Correct Coding Initiative (NCCI) edits, insurance company-specific coding policies, or payer contract rules that clarify which codes can be billed separately and which can be billed under a single code. These denials are not due to the lack of medical necessity or any other invalid service.

What CO-97 Actually Means in Practice

When CO-97 comes up on an Explanation of Benefits (EOB), it typically means:

• Two or more CPT codes were billed together, but the payer rules allow payment for only one
• A component service was included in a primary procedure
• A modifier was missing, incorrect, or unsupported by documentation

It does not mean that the service is invalid and cannot be performed. It simply means that the billed service cannot be paid separately, and it is considered part of a primary procedure and will be billed with that.

Inside Payer Bundling Policies

The payer’s policies vary from payer to payer. Each payer has unique and specific rules. Bundling is what makes it more complicated. Bundling is a standard reimbursement strategy that is used by both government and commercial payers. In bundling, the related services are coded together and are hence paid for by a single payment. This bundling is efficient for cost control and simplifies the billing procedure. But in practice, it causes mistakes, as the bundling rules are different for different payers. 

This difference in policies causes the CO-97 denial code to appear in applications. A service that is separately reimbursed in one payer policy might be bundled with other services in another. This is why an expert should be hired who has knowledge and understanding of payers’ policies so coding can be done efficiently and avoid claim denials.

How NCCI Edits Influence Claim Denials

National Correct Coding Initiative (NCCI) edits play a major role in CO-97 denial. These edits make sure that the payment cannot be doubled, and hence the payment is done according to the codes; whether they are bundled or separate, it should be done efficiently. It promotes consistency, as well as complicates things. NCCI edits demand correct modifiers and coding, and documentation. A single mistake can trigger a denial.

When NCCI edits are not addressed properly, it shows errors, and claims are adjusted by themselves, which means it shows the CO-97 denial code, and the processing is done from the start again. 

Documentation Gaps That Lead to Lost Revenue

Documentation is one of the important steps in reducing claim denials. It is often overlooked by the billing experts. The professionals must provide sufficient documentation to clarify that the service that is billed is separate and cannot be bundled with any other service. It is identified as a separate and independent service. 

Insufficient documentation or not explained thoroughly might cause problems later. If the documentation is not done properly and does not clearly justify that the services are separately reimbursed, then this documentation gap leads to the CO-97 denial code. Hence, the claim is denied automatically if the payer is not convinced.

Modifier Mistakes That Trigger Denials

Correct modifier application is essential in preventing inappropriate bundling. Modifiers such as those indicating distinct procedural services can signal to payers that a service should be considered separately.

However, misuse or omission of modifiers is common, particularly in busy practices with limited coding oversight. When modifiers are missing or incorrectly applied, claims are more likely to be adjusted under the co 97 denial code, even when payer policy allows separate payment.

Medical Necessity: The Key to Reimbursement

Prior authorization requirements further complicate reimbursement. Some services require additional justification or pre-approval, even when performed alongside a primary procedure.

When authorization data does not align with billed services, payers often default to adjustments rather than requesting clarification. This misalignment frequently results in the co 97 denial code appearing on remittance advice without a clear explanation.

The Hidden Cost of Denials

The true cost of this denial extends far beyond the adjusted line item. When these amounts are routinely written off as contractual obligations, they distort key financial metrics such as net collection rate and average reimbursement per encounter.

Repeated application of the co 97 denial code can mask operational inefficiencies and lead leadership to underestimate the practice’s true revenue potential.

The Cost of Overlooked Appeals

Many billing teams mistakenly assume that this adjustment is non-appealable. While some instances are valid, others result from incorrect bundling, missing modifiers, or misapplied payer rules.

Without a structured denial review workflow, staff may automatically post adjustments and move on, leaving recoverable revenue unchallenged. This mindset allows the co 97 denial code to quietly erode profitability.

Turning Denials Into Dollars: A Smart Appeal Plan

A disciplined appeal process can recover revenue when adjustments are inappropriate. Successful appeals rely on clear documentation, correct coding, and direct references to payer policy language.

Tracking appeal outcomes is equally important. Patterns in overturned denials often reveal systemic issues that, once corrected, reduce future exposure to the co 97 denial code.

Proactive Measures to Reduce Denials

Long-term reduction of this denial requires proactive controls across the revenue cycle. These include:

• Regular coding audits are aligned with current payer and NCCI guidelines
• Ongoing provider education on documentation specificity
• Payer-specific billing rule databases
• Advanced claim scrubbing before submission

When these measures are consistently applied, denial rates decrease, and first-pass acceptance improves.

Smart Technology for Clean Claims

Modern revenue cycle technology plays a critical role in prevention. Analytics tools can identify trends, flag high-risk code combinations, and highlight providers or service lines with elevated adjustment rates.

By analyzing where and why the co 97 denial code occurs most often, practices can focus corrective efforts where they will have the greatest impact.

How Ascend Safeguards Your Revenue

Ascend Revenue Cycle Management approaches denial prevention as a strategic partnership. Rather than reacting to adjustments after the fact, our team focuses on identifying root causes and implementing sustainable solutions.

Through certified coding expertise, payer contract analysis, and data-driven workflows, we help clients minimize exposure to the co 97 denial code while maintaining full regulatory compliance.

Protecting Revenue for the Long Haul

Reducing preventable write-offs requires more than fixing individual claims. It demands a culture of accountability, education, and continuous improvement across clinical and administrative teams.

Practices that address the underlying drivers of the co 97 denial code position themselves for stronger financial performance, cleaner claims, and greater confidence in their revenue cycle operations.

Conclusion

The co 97 denial code is not merely a technical billing issue; it is a reflection of how well a practice understands payer rules, documents care, and manages its revenue cycle. While bundling is an unavoidable part of modern reimbursement, unnecessary write-offs do not have to be.

With the right expertise, technology, and proactive oversight, healthcare organizations can significantly reduce preventable adjustments, protect revenue, and achieve long-term financial stability in an increasingly challenging reimbursement landscape.