CO-116 Denials Explained: How to Identify, Appeal, and Prevent Them

Denial code CO-116 is one of the more common and costly challenges that healthcare revenue cycle management (RCM) teams face. This denial occurs when an Advance Beneficiary Notice (ABN) signed by the patient fails to meet regulatory requirements. Such issues result in delayed or denied payments, increasing the burden on both providers and patients.

Understanding CO-116 denials is critical for RCM professionals aiming to optimize cash flow and reduce revenue leakage. In this guide, we’ll break down the meaning of CO-116, explore common causes, outline strategies for appeals, and share actionable prevention tips to help your organization stay compliant and improve claim success rates.

What Is a CO-116 Denial?

Denial code CO-116 indicates that the submitted Advance Beneficiary Notice (ABN) was non-compliant with regulatory requirements. ABNs are used to inform patients when a service may not be covered by Medicare and to document their acceptance of potential financial responsibility. If the ABN lacks required details or is improperly executed, payers issue a CO-116 denial.

The prefix “CO” stands for “Contractual Obligation,” meaning the denial is tied to provider responsibility. In this case, the provider cannot bill the patient for the denied amount unless a compliant ABN was issued and signed by the patient beforehand.

Comparison: CO-116 vs Similar Denial Codes

Denial Code	Prefix Meaning	Reason/Description	Who's Financially Responsible
CO-116	Contractual Obligation	The advance indemnification notice signed by the patient did not comply with requirements.	Provider
PR-31	Patient Responsibility	Patient cannot be billed for this service without a valid ABN.	Patient (if ABN is valid)
OA-121	Other Adjustment	Invalid claim adjustment due to missing or incomplete documentation.	Provider

Unlike PR-31, where the financial responsibility may shift to the patient if the ABN is valid, CO-116 places full responsibility on the provider due to non-compliance. CO-116 also differs from OA-121, as the latter typically involves general documentation errors unrelated to ABNs.

Common Causes of CO-116 Denials

1. Incomplete ABN Form: Missing required fields such as patient name, specific services, or cost estimates can render the ABN invalid.
2. Failure to Obtain a Signature: An unsigned ABN is considered non-compliant, leading to automatic denial.
3. Incorrect Use of ABNs: Issuing an ABN for services that don’t require one under payer guidelines is a common mistake.
4. Outdated ABN Version: Using an outdated ABN form that doesn’t comply with current Medicare requirements can result in a denial.
5. Improper Delivery: Failing to provide the ABN to the patient before rendering the service invalidates the document.

Impact on Revenue Cycle Teams

CO-116 denials create significant financial and operational challenges for healthcare organizations:

Financial Impact:
- Lost revenue due to denied claims and unbillable services.
- Increased accounts receivable (AR) days, delaying cash flow.
- Higher write-offs if appeals fail or are not submitted on time.
- Additional costs for denial rework and appeals processes.

Operational Impact:
- Time-consuming processes to investigate and resolve denials.
- Dependence on specialized knowledge of compliance requirements for ABNs.
- Increased need for interdepartmental coordination between billing, coding, and clinical teams.
- Greater focus on monitoring denial trends and formulating corrective actions.

To mitigate these impacts, healthcare organizations need effective denial management. CombineHealth.ai’s AI-powered Adam (AI Denial Manager) helps RCM teams identify, track, and resolve CO-116 denials with accuracy, reducing operational bottlenecks and improving cash flow.

Steps To Appeal a CO-116 Denial

Step 1: Review the Denial Notice
Carefully examine the payer's explanation of benefits (EOB) or remittance advice (RA) to confirm the denial reason and ensure it aligns with the CO-116 code.

Step 2: Gather Documentation
Collect all relevant documentation, including the ABN, patient records, and service details. Ensure the ABN includes all required elements, such as patient signature, service description, and estimated costs.

Step 3: Verify Eligibility
Double-check that the denied service required an ABN under current Medicare or payer guidelines. If not, this could indicate an error on the payer’s part.

Step 4: Prepare Appeal Letter
Draft a detailed appeal letter addressing the denial reason. Include supporting documentation and reference payer policies to demonstrate compliance or justify correction.

Step 5: Submit Within Deadline
Appeals must be submitted within the payer’s specified timeframe, often between 30-120 days of the denial date. Missing this deadline may forfeit appeal rights.

Step 6: Track and Follow Up
Monitor the status of your appeal with the payer, and be prepared to provide additional information if requested. Persistence can often determine the success of appeals.

How To Prevent CO-116 Denials

Preventing CO-116 denials requires a proactive approach across key areas of the revenue cycle:

Front-End Prevention

• Standardize ABN Processes: Train staff to properly issue and complete ABNs, ensuring compliance with payer guidelines.
• Use Updated ABN Forms: Regularly review and replace outdated forms with the latest CMS-approved versions.

Billing Best Practices

• Audit ABN Compliance: Conduct periodic audits to ensure all ABNs are complete, signed, and properly stored.
• Document Timelines: Maintain records of when and how ABNs were delivered to patients for proof of compliance.

Technology Solutions

• Automated Eligibility Checks: Use tools like CombineHealth.ai’s platform to verify coverage and identify services requiring ABNs in advance.
• Real-Time Alerts: Implement systems that flag incomplete or missing ABNs before claim submission to prevent denials.

CombineHealth.ai’s intelligent platform provides automated eligibility verification and real-time claim scrubbing to prevent CO-116 denials before they occur. Rachel (AI Appeals Manager) streamlines the appeals process for denied claims, improving success rates and reducing turnaround times.

FAQs

Q1: What does CO-116 mean in medical billing?
CO-116 denotes that the Advance Beneficiary Notice (ABN) signed by the patient did not meet regulatory requirements, resulting in claim denial.

Q2: Can CO-116 denials be appealed?
Yes, these denials can be appealed by providing corrected or additional documentation, including a compliant ABN.

Q3: How long do I have to appeal?
Appeal deadlines vary by payer but typically range from 30 to 120 days from the date of denial.

Q4: How can I prevent these denials?
Focus on staff training, process standardization, and leveraging technology solutions. See our complete guide on denial prevention.