CO-108 Denials Explained: How to Identify, Appeal, and Prevent Them

Durable medical equipment (DME) denials are a common challenge for healthcare revenue cycle management (RCM) teams, and CO-108 is among the most frequently encountered codes. This denial, which occurs when rent or purchase guidelines for DME are not satisfied, can result in delayed payments, operational inefficiencies, and lost revenue.

In this article, we’ll break down exactly what CO-108 means, the common causes behind this denial, and strategies your RCM team can use to appeal and prevent it. By understanding this denial code, healthcare organizations can reduce revenue leakage and streamline their operations.

What Is a CO-108 Denial?

The CO-108 denial code indicates that the rent/purchase guidelines for durable medical equipment were not met. The "CO" prefix stands for "Contractual Obligation," meaning the payer is not financially responsible for the denied amount. Instead, the provider must address the issue, either by appealing the denial or absorbing the financial loss if an appeal is unsuccessful.

CO-108 denials often appear in claims related to DME, with the payer citing unmet criteria. In many cases, the 835 Healthcare Policy Identification Segment (loop 2110 Service Payment Information REF) provides additional context for the denial, which can be used to craft an effective appeal.

Comparison: CO-108 vs Similar Denial Codes

Denial Code	Prefix Meaning	Reason/Description	Who's Financially Responsible
CO-108	Contractual Obligation	Rent/purchase guidelines for DME were not met.	Provider
CO-109	Contractual Obligation	Claim not covered under payer’s policy guidelines.	Provider
PR-96	Patient Responsibility	Non-covered service under patient’s benefit plan.	Patient

CO-108 and CO-109 are similar in that both refer to unmet payer policy guidelines, but CO-108 is specific to DME rent/purchase requirements. In contrast, PR-96 places financial responsibility on the patient due to benefit exclusions.

Common Causes of CO-108 Denials

1. Incomplete Documentation: Missing or insufficient documentation to prove medical necessity or compliance with payer policies.
2. Incorrect Coding: Use of improper HCPCS or modifier codes for DME billing, leading to rejection of the claim.
3. Eligibility Issues: Patient coverage does not include the specific DME item rented or purchased.
4. Failure to Meet Timelines: Late submission of claims or appeals can result in denial under payer-specific timelines.
5. Policy Misalignment: Lack of alignment with payer-specific rent/purchase criteria for DME items.

Impact on Revenue Cycle Teams

CO-108 denials can create financial and operational burdens for healthcare organizations:

Financial Impact:

• Loss of revenue due to denied claims and delayed reimbursements.
• Increased accounts receivable (AR) days, leading to cash flow disruptions.
• Write-offs of denied claims if appeals fail or deadlines are missed.
• Higher costs from expanded denial management efforts.

Operational Impact:

• Diverted staff resources to investigate and resolve denials, reducing efficiency in other RCM functions.
• Need for detailed understanding of payer policies and DME billing requirements.
• Coordination challenges between clinical, billing, and coding teams to resolve claims.
• Difficulty tracking trends and patterns in DME denials without robust analytics tools.

CombineHealth.ai’s AI-powered solutions, including Adam (AI Denial Manager), offer automated tracking and resolution of CO-108 denials. By streamlining workflows with intelligent analytics, Adam helps RCM teams reduce operational strain and improve cash flow.

Steps To Appeal a CO-108 Denial

Step 1: Review the Denial Notice
Carefully examine the explanation of benefits (EOB) or electronic remittance advice (ERA) to understand the reason for the denial. Check the 835 Healthcare Policy Identification Segment for additional details.

Step 2: Gather Documentation
Compile all required documentation, including physician orders, proof of medical necessity, patient eligibility records, and compliance with payer guidelines for DME rent/purchase.

Step 3: Verify Eligibility
Confirm that the patient’s coverage includes the denied DME item and that policy requirements were satisfied.

Step 4: Prepare Appeal Letter
Draft a clear and concise appeal letter that addresses the payer’s specific denial reason. Include supporting evidence, patient information, and references to payer guidelines.

Step 5: Submit Within Deadline
Ensure that the appeal is submitted within the payer’s specified timeframe to avoid automatic rejection.

Step 6: Track and Follow Up
Monitor the status of the appeal and follow up with the payer if necessary. Maintain records of communication and outcomes for future reference.

How To Prevent CO-108 Denials

Front-End Prevention

• Implement robust eligibility verification processes to ensure patients meet coverage requirements for DME items.
• Train front-end staff to collect comprehensive documentation, including physician orders and prior authorizations.

Billing Best Practices

• Use accurate HCPCS codes and modifiers for DME claims to avoid coding errors.
• Perform claim scrubbing to identify and address issues before submission.

Technology Solutions

• Utilize CombineHealth.ai’s automated claim validation tools to detect potential errors and compliance issues preemptively.
• Leverage Rachel (AI Appeals Manager) to streamline appeals and reduce turnaround time for denied claims.

CombineHealth.ai’s intelligent platform empowers RCM teams with real-time eligibility verification, automated claim scrubbing, and advanced denial management tools to minimize CO-108 denials and optimize revenue cycles.

FAQs

Q1: What does CO-108 mean in medical billing?
CO-108 indicates that rent/purchase guidelines for durable medical equipment were not satisfied, resulting in claim denial.

Q2: Can CO-108 denials be appealed?
Yes, CO-108 denials can be appealed by addressing the payer’s reason for denial and providing supporting documentation.

Q3: How long do I have to appeal?
Appeal deadlines vary by payer and are typically outlined in the denial notice.

Q4: How can I prevent these denials?
Prevention strategies include front-end eligibility verification, accurate coding, and leveraging automated claim scrubbing tools. See our complete guide on denial prevention.