Quick Explanation
Denial code CO-137 occurs when a payer adjusts or denies a claim because it contains regulatory surcharges, health-related taxes, or state-mandated assessments that are not reimbursable. These charges represent government-imposed fees rather than direct patient care services and are typically excluded from payer reimbursement or must be written off per provider-payer contracts.
Common Causes for CO-137
Denials with code CO-137 typically happen for the following specific reasons:
- Billing state-mandated health-care surcharges (such as New York's HCRA surcharge) as separate, billable line items to payers that do not reimburse them.
- Submitting state-specific regulatory assessments to ERISA-exempt self-insured plans or federal programs (like Medicare) that are legally exempt from local state health taxes.
- Provider contracts explicitly designating local and state-level healthcare taxes as non-reimbursable administrative expenses that must be absorbed by the provider.
- Billing system configuration errors that automatically append state-specific tax percentages to the total claim charge instead of adjusting them off prior to submission.
How to Prevent CO-137 Denials
To avoid receiving this denial in the future, implement these specific checks:
- Configure billing software and practice management systems to automatically write off or exclude state regulatory assessments from claims submitted to non-paying or federally-exempt plans.
- Regularly review payer contract agreements to identify specific guidelines and clauses regarding health-related taxes and surcharge reimbursement.
- Identify out-of-state, self-funded ERISA, and government plans during the eligibility verification process to ensure local surcharges are not billed to them.
- Implement billing scrubbers that flag and remove non-covered regulatory surcharge line items before claims are transmitted to the clearinghouse.
Appeal Letter Template for CO-137
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-137 - Regulatory surcharges, assessments, allowances or health related taxes
Dear Appeals Department,
I am writing to appeal the denial of the above-referenced claim, which was denied with code CO-137: "Regulatory surcharges, assessments, allowances or health related taxes".
We are appealing the adjustment applied under denial code CO-137 regarding regulatory surcharges or health-related taxes. Pursuant to state regulatory guidelines governing healthcare assessments, these mandatory surcharges are legally required components of the reimbursement rate for medical services rendered within this jurisdiction. These assessments are not optional billing additions but represent mandatory funding mechanisms legislated by state law that payers are obligated to recognize and reimburse, unless the plan is explicitly exempt under federal ERISA guidelines. We request that you review the patient's plan type and contract terms, reprocess this claim, and remit the full payment including the legally mandated regulatory surcharge.
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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