Quick Explanation
Denial code CO-118 represents an administrative adjustment applied to End-Stage Renal Disease (ESRD) prospective payment system claims to fund regional ESRD Networks. Under CMS regulations, Medicare deducts a small statutory fee per dialysis treatment from the provider's reimbursement to support these quality-of-care networks. This is a mandatory regulatory reduction rather than a traditional billing error or coverage denial.
Common Causes for CO-118
Denials with code CO-118 typically happen for the following specific reasons:
- The claim submitted was for outpatient dialysis services under the ESRD Prospective Payment System (PPS), triggering the standard statutory network reduction.
- The billing system failed to automatically recognize and write off the standard per-treatment administrative assessment applied by Medicare.
- The adjustment was incorrectly categorized by the clearinghouse as an actionable, unpaid balance instead of a mandatory federal assessment.
How to Prevent CO-118 Denials
To avoid receiving this denial in the future, implement these specific checks:
- Configure the practice management system to automatically post and write off CO-118 adjustments as non-collectible administrative contractual adjustments.
- Educate billing and collections staff to ensure they do not appeal standard CO-118 adjustments or incorrectly bill patients or secondary payers for this amount.
- Regularly audit remittance advices to verify that the CO-118 reduction matches the current CMS-mandated per-treatment assessment rate.
Appeal Letter Template for CO-118
If you believe this claim was denied incorrectly, you can use the following template to submit an appeal.
[Your Practice Header]
[Date]
[Payer Name]
[Appeals Department Address]
RE: Appeal for Claim [Claim Number]
Patient: [Patient Name]
ID: [Patient ID]
Date of Service: [Date]
Denial Code: CO-118 - ESRD network support adjustment
Dear Appeals Department,
I am writing to appeal the denial of the above-referenced claim, which was denied with code CO-118: "ESRD network support adjustment".
While the CO-118 code represents a federally mandated administrative adjustment under Section 1881(b)(7) of the Social Security Act and is generally non-appealable, we are requesting a recalculation and adjustment review because the network reduction was applied incorrectly. The remittance advice indicates that the adjustment amount exceeds the standard statutory per-treatment cap for the number of dialysis sessions actually performed during this billing cycle. In accordance with CMS Medicare Claims Processing Manual, Chapter 8, we request that the Medicare Administrative Contractor (MAC) audit the session count and adjust the payment to reflect the correct prospective payment system rate minus only the standard, authorized network support reduction.
Attached please find:
1. A copy of the original claim.
2. The relevant medical records supporting the service.
3. [Any other supporting documents].
We respectfully request that you reprocess this claim for payment.
Sincerely,
[Your Name]
[Title]
[Practice Name]
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