CO-42 denial code
Charges exceed the fee schedule or maximum allowable amount
How to fix it
Confirm the allowed amount matches your contracted rate. If it is lower than contracted, this is an underpayment to dispute, not a write-off.
How to prevent it
Load contracted rates and compare every payment against them. Underpayments hide inside routine contractual adjustments.
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 bills $400 for a procedure with a contracted rate of $265. The remittance shows $135 adjusted under CO-42, and the posting team writes it off as routine.
That is usually right, and it is the reason this code is dangerous. Because contractual adjustment is the expected state of affairs, an adjustment that is larger than the contract permits looks exactly the same as one that is correct.
The check is straightforward but has to actually happen: compare the allowed amount against the contracted rate for that code, payer and date. Where the allowed amount is short, this is an underpayment to dispute through provider relations, not a write-off to post.
What sits behind it
Underpayment hides here more reliably than anywhere else in the remittance because the code is genuinely benign most of the time. A practice posting adjustments without validation cannot distinguish a contract honoured from a contract misloaded, and the two produce identical remittance lines.
The common mechanisms are worth knowing. Fee schedules load late after an annual update, so January claims price at last year's rates. Amendments negotiated for one location fail to apply at another. And new codes are frequently absent from the payer's schedule entirely, which produces CO-220 instead.
This code overlaps substantially with CO-45, and payers are inconsistent about which they send. Treat them as the same operational category: both are contractual adjustments, both are non-billable to the patient, and both deserve the same reconciliation against loaded rates.
Related codes
Terms used here — Contractual Adjustment · Allowed Amount · Underpayment
How we handle it — Practice Analytics · AR Management · Revenue Cycle Management
Primary sources
The rules behind CO-42, 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-42
Operationally very little — both report the difference between the billed charge and the contracted maximum, and payers use them inconsistently. Treat them as one category: contractual, not billable to the patient, and worth reconciling against your loaded rates before posting.
By comparing the allowed amount against the contracted rate for that code, payer and date of service. This requires rates loaded in the system, which is the step most practices skip. Without it, a misloaded fee schedule is indistinguishable from a correctly applied one.
No. The contractual adjustment is the discount you agreed to in exchange for network participation, and billing it to the patient is balance billing in breach of the contract. Only patient cost sharing identified with a PR-prefixed code is collectable.
Find out what your denials are costing you
A free billing audit reviews your denial rate, AR aging and clean claim rate against industry benchmarks. Takes about two minutes to request. No sales pitch.
No setup fees · You pay when we collect · Pricing from 3% of net collections