CO-256 denial code
Service not payable per managed care contract
How to fix it
Review the contract terms. Where the service should be covered, dispute through provider relations.
How to prevent it
Know what your managed care contracts exclude before delivering excluded services.
The CO prefix marks this a contractual obligation. The balance is absorbed by the provider under the payer agreement and cannot be transferred to the patient.
In practice
A practice performs a service it has always billed successfully, and a newly contracted managed care plan returns CO-256 because the contract excludes it.
This is a contract question rather than a coverage or coding one. The service may be entirely covered by the plan and simply not payable to this practice under the terms it signed.
Read the contract before disputing. Where the exclusion is genuine, the options are to stop delivering the service under that contract or to renegotiate. Where the service should be included, provider relations is the route.
What sits behind it
Managed care contracts are frequently signed without a service-level review, and exclusions surface years later when a service is first billed. The document the practice holds and the one being adjudicated against are sometimes not even the same version.
Carve-outs are a common mechanism and easy to miss. Behavioural health, laboratory, imaging and therapy services are often carved out to separate vendors, meaning the plan covers them but not through this contract, and billing the primary plan will always fail.
The renewal cycle is where this is actually fixed. A practice that tracks which services generate contract exclusions arrives at renegotiation with evidence rather than impressions, which is a materially stronger position.
Related codes
Terms used here — Contractual Adjustment · Out-of-Network · Allowed Amount
How we handle it — Revenue Cycle Management · Practice Analytics · Denial Management
Primary sources
The rules behind CO-256, at the bodies that publish them.
- Medicare Physician Fee Schedule lookup (opens in a new tab)
Centers for Medicare & Medicaid Services — Official allowed amounts by CPT/HCPCS code and locality. The reference point most commercial contracts are written against as a percentage.
- Medicare Claims Processing Manual (opens in a new tab)
Centers for Medicare & Medicaid Services — The operative manual for how Medicare claims must be coded, submitted, adjusted and appealed. When a payer policy and a vendor's advice disagree, this settles it.
- Claim Adjustment Reason Codes (CARC) (opens in a new tab)
X12 — The authoritative, maintained CARC list. Our denial code lookup explains these in plain English; X12 is where the canonical definitions live.
Looking for a different code? Search all 190 CARC and RARC codes
Questions about CO-256
No, it is a contract denial. The plan may cover the service entirely while your contract does not make it payable to you, which is a different problem with a different remedy — the contract, not the coverage policy.
An arrangement where a service category is administered by a separate vendor rather than through the main contract. Behavioural health, laboratory, imaging and therapy are commonly carved out, meaning the plan covers them but billing the primary contract will always fail.
At renewal. Tracking which services generate contract exclusions over the year produces evidence rather than impressions, and a practice arriving at renegotiation with a documented list of excluded services it routinely performs is in a much stronger position.
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