Denial Codes in Behavioral Health: A CARC Guide for BH and SUD Programs (and How to Prevent Each)

A denial code on a remittance is really three codes working together. The group code (CO, PR, OA or PI) says who carries the unpaid balance, the Claim Adjustment Reason Code (CARC) says why the claim was paid differently than it was billed, and a Remittance Advice Remark Code (RARC) usually says what specifically went wrong. This guide covers eleven CARCs that behavioral health (BH) and substance use disorder (SUD) programs deal with around documentation, authorization and coding: CO-16, CO-97, CO-96, CO-197, CO-4, PR-204, CO-151, CO-50, CO-11 and CO-167, plus CO-15, which X12 deactivated in 2018.

For each code you get the official X12 description, the BH or SUD cause behind it, how to prevent it, and whether to correct or appeal. The examples are BH-specific: psychotherapy time, per diem H-codes, telehealth place of service and modifiers, and IOP, PHP and residential authorizations.

How to read a denial code: group code, CARC and RARC

X12, which maintains these code lists, defines CARCs as codes that explain why a claim or service line was paid differently than it was billed. RARCs add explanation to an adjustment a CARC already describes. RARCs that begin with "Alert:" are informational and never tied to a specific adjustment, so do not chase them as denial reasons. The group code in front of the CARC assigns financial responsibility. CMS defines them this way:

A fifth value, CR (Corrections and Reversals), is not used in version 005010 and later. Also, many CARC descriptions say to refer to the 835 Healthcare Policy Identification Segment (loop 2110 REF), if present. When a payer fills it, that segment names the policy behind the adjustment, which is the document your correction or appeal has to answer.

The 11 codes at a glance

CO-16: claim lacks information or has billing errors

Official description: "Claim/service lacks information or has submission/billing error(s)." X12 requires at least one remark code and says not to use it for attachments (that is CARC 252).

The BH cause. The RARC names the field. Examples: M53 (missing, incomplete or invalid days or units) when a per-15-minute code such as H0004 carries units that do not match the documented time; M77 (missing, incomplete, invalid or inappropriate place of service), which can follow a telehealth claim billed with POS 02 when the patient was at home (POS 10); M62 (missing, incomplete or invalid treatment authorization code); and N290 (rendering provider identifier missing or invalid).

• Build payer-specific scrubber rules for units, place of service, authorization number and rendering NPI.
• Document start and stop times for timed services and the patient's location for every telehealth visit.

Correct or appeal? Correct and resubmit. Medicare treats a claim returned as unprocessable as not denied and without appeal rights; RARC MA130 says so and asks for a new claim. Watch timely filing limits.

CO-97: included in the payment for another service

Official description: "The benefit for this service is included in the payment/allowance for another service/procedure that has already been adjudicated."

The BH cause. Per diem program codes are one trigger. The HCPCS descriptor for H0015 defines intensive outpatient alcohol and/or drug services as a program of at least 3 hours a day and 3 days a week, "including assessment, counseling; crisis intervention, and activity therapies or education." A separate psychotherapy line on the same day can come back as included. The same logic applies to per diems such as H2036, S9480 and H0018. Code pairs matter too. The 2026 Medicare NCCI Policy Manual says 90791 and 90792 are not separately reportable with psychotherapy on the same date, E/M codes shall not be reported with them, and family psychotherapy (90846, 90847) may be reported with 90832 to 90838 the same day only as a separate service in a separate time interval. On Medicare remits, failed NCCI pairs come back as CARC 236, so read a Medicare CO-97 with its remark code.

• Keep a same-day matrix per payer: which program codes absorb which professional services.
• When two same-day services are both billable, document separate times and purposes.

Correct or appeal? Appeal only when the services were genuinely separate and the contract, state manual or edit allows separate payment. Otherwise fix scheduling and charge capture.

CO-96: non-covered charges

Official description: "Non-covered charge(s)." A remark code is required, and it holds the real reason.

The BH cause. Common remarks include N776 (not a covered telehealth service), N216 (the plan does not cover this type of service, or the patient is not enrolled in that part of the benefit), N425 (statutorily excluded) and N95 (this provider type may not bill this service). Provider type is a recurring BH issue. Medicare, for example, has let marriage and family therapists and mental health counselors bill independently only since January 1, 2024, and payers generally require each clinician to be enrolled or credentialed first.

• Verify BH benefits for the specific service before the first visit, not just active coverage.
• Track enrollment per clinician, per payer, and check each payer's telehealth service list.

Correct or appeal? Appeal only if the plan document or a published policy shows the service is covered.

CO-197: authorization absent

Official description: "Precertification/authorization/notification/pre-treatment absent." CARC 198 means authorization was exceeded.

The BH cause. Days billed past the end date, units beyond the approved count, a step-down from residential to PHP or IOP billed under the old authorization, or a site or clinician the approval does not name. Remarks that explain the mismatch include N188 (approved level of care does not match the procedure code), N54 (claim inconsistent with authorized services) and N351 (service date outside the approved treatment plan dates).

For employer group health plans under ERISA, two rules help. An urgent request to extend an approved course of treatment must be decided within 24 hours if made at least 24 hours before the approved period ends. And denying a claim for lack of prior approval when getting it was impossible, or would have seriously jeopardized the patient's life or health, counts as a practice that unduly inhibits claims.

• Track each authorization: level of care, units or days, dates, approved provider and site.
• Calendar concurrent reviews and request extensions before the window closes.
• Log reference numbers, call times and reviewer names.

Correct or appeal? If authorization existed, send proof. If the admission was urgent, appeal on that basis or request retro-authorization where the plan allows it.

CO-4: procedure code inconsistent with the modifier

Official description: "The procedure code is inconsistent with the modifier used."

The BH cause. One source is telehealth modifiers: 95 describes a synchronous audio-video service and 93 an audio-only one. Novitas, a Medicare contractor, notes that FQ (audio-only) is limited to RHCs and FQHCs and that GT is only for institutional claims from critical access hospitals under Method II. Commercial and Medicaid payers publish their own rules. Program and credential modifiers are another: HE (mental health program), HF (substance abuse program), HG (opioid addiction treatment program), HN, HO and HP (bachelor's, master's and doctoral level) and HQ (group setting). Where a payer requires them, a wrong or missing modifier can come back as CO-4, or as CO-16 with N822 (missing modifier) or N519 (invalid modifier combination).

• Keep a payer-by-payer modifier matrix in the claim scrubber.
• Document modality (video or audio only) and patient location in every telehealth note.

Correct or appeal? Corrected claim. Appeal only if the modifier matched the payer's own published policy, and attach it.

PR-204: not covered under the patient's current benefit plan

Official description: "This service/equipment/drug is not covered under the patient's current benefit plan."

The BH cause. The plan excludes the service, BH benefits are carved out to a separate behavioral health plan (which can also produce CARC 109, claim sent to the wrong payer), or coverage changed (CARC 27, expenses after coverage terminated). PR means the payer assigns the amount to the patient, but collecting it depends on your contract, state law and any advance agreement. Medicaid participating providers must accept the Medicaid payment, plus required cost sharing, as payment in full, and billing an enrollee for a non-covered service depends on state rules. This is general information, not legal advice.

• Check eligibility with BH service type codes, not only code 30 (plan coverage and general benefits): MH (mental health), A6 (psychotherapy), A8 (psychiatric outpatient), AI (substance abuse), AJ (alcoholism treatment), AK (drug addiction), RT (residential psychiatric treatment).
• Confirm who manages the BH benefit before admission when the card lists a separate behavioral health plan.

Correct or appeal? If the plan document covers the benefit, support a member appeal. Parity rules can matter when a BH exclusion is stricter than comparable medical benefits.

CO-151: frequency or units not supported

Official description: "Payment adjusted because the payer deems the information submitted does not support this many/frequency of services."

The BH cause. Several psychotherapy sessions a week without documented acuity, per-15-minute units beyond the documented time, or a frequency the treatment plan never mentions. Remarks include N362 (units exceed the acceptable maximum), N640 (exceeds frequency allowed in the period) and N435 (the same, without support documentation). Medicare uses CO-151 when units exceed a Medically Unlikely Edit (MUE) and denies the whole line. CMS calls that a coding denial, not a medical necessity denial, so an ABN does not shift liability and the beneficiary cannot be billed. The NCCI manual does allow psychotherapy in a Medicare partial hospitalization or intensive outpatient setting to be reported with more than one unit per day.

• State the planned session frequency, and why, in the treatment plan.
• When frequency rises, say why in the note (crisis, safety risk, step-down).
• Convert time to units by the payer's rule and keep the minutes on the note.

Correct or appeal? Appeal with records showing time and necessity per session. For some Medicare MUEs, the MAC reviews records on redetermination to decide whether the extra units were furnished and necessary.

CO-50: not deemed a medical necessity

Official description: "These are non-covered services because this is not deemed a 'medical necessity' by the payer."

The BH cause. Level of care not tied to the assessed needs, continued stays supported by a copy of the admission note, missing functional impairment, or a stale treatment plan. One Medicare psychotherapy LCD (L33252, First Coast Service Options) says a statement such as "supportive psychotherapy given" is not adequate and expects the outpatient treatment plan to be updated generally at least every three months. Remarks include N661 (documentation does not support medical necessity), N115 (decision based on a Local Coverage Determination) and N386 (based on a National Coverage Determination).

• Tie every note to a current treatment plan goal and the impairment it addresses.
• For SUD levels of care, document why this level and why not a less intensive one, at admission and at every review.

Correct or appeal? Appeal. Group health plans must make mental health and SUD medical necessity criteria available to contracting providers on request, so get them and answer them point by point. Our free medical necessity appeal letter templates give you a starting point. Under Medicare, a valid Advance Beneficiary Notice with the GA modifier moves liability to the beneficiary; without one, the provider carries it.

CO-11: diagnosis inconsistent with the procedure

Official description: "The diagnosis is inconsistent with the procedure."

The BH cause. An SUD code such as H0015 or H0005 (alcohol and/or drug group counseling) linked only to a mental health diagnosis, a psychiatric program code such as S9480 linked only to an SUD diagnosis, or pointers that attach the wrong diagnosis to a line. For co-occurring disorders, report both and point each line to the condition the service treats. Medicare billing article A57520 adds that when a patient is referred with an organic diagnosis and a mental health diagnosis is established, the mental health diagnosis should be billed.

• Keep a diagnosis-to-service crosswalk per program and payer, and add pointer checks to the scrubber.

Correct or appeal? Corrected claim if the documented diagnosis supports the service.

CO-167: diagnosis not covered

Official description: "This (these) diagnosis(es) is (are) not covered."

The BH cause. CO-11 says diagnosis and procedure do not fit; CO-167 says the diagnosis itself is outside coverage for the service. Typical triggers: a Z code (factors influencing health status) as the only diagnosis, an unspecified code where the policy lists specific ones, or a diagnosis missing from the covered ICD-10-CM list in the applicable Medicare billing article. LCD L33252 also treats psychotherapy as not reasonable and necessary when dementia, delirium or a similar condition prevents effective communication.

• Code documented conditions to the specificity the record supports, and check covered diagnosis lists for your core services.

Correct or appeal? Corrected claim if a covered diagnosis was documented but not billed.

CO-15: the retired authorization code

Official description (deactivated): "The authorization number is missing, invalid, or does not apply to the billed services or provider." X12 lists a stop date of May 1, 2018. Today the same problems appear as 197, 198, or 16 with M62 or N54. If a portal or paper EOB still shows 15, compare the authorization number, dates, level of care and providers against the approval.

Other codes BH teams should recognize

• 5 and 58: place of service inconsistent with the code, or inappropriate.
• 18: exact duplicate, used only with group code OA except where state workers' compensation rules require CO.
• 29: the time limit for filing has expired.
• 170 and 185: provider type, or rendering provider, not eligible for the service.
• 236: code pair not compatible under NCCI or state rules.
• 252: an attachment or other documentation is required.

How to find which codes cost you most

Counting lines hides the problem: a hundred small copay adjustments outnumber three denied residential weeks. Measure dollars and root causes.

1. Pull the remits. Export at least 90 days of 835 data with group code, CARC, RARC, amount, payer and service code on every adjustment line.
2. Separate the groups. PR lines are patient balances. Analyze CO, OA and PI separately.
3. Rank by dollars. Sum adjusted dollars by CARC and RARC pair, then by payer and service.
4. Tag the root cause. Eligibility, authorization, documentation, coding, charge capture or payer error. One CARC can have several causes.
5. Track outcomes. Appeals filed, overturned and days to resolve, per code. A code you keep winning on appeal still costs staff time.
6. Fix the source and re-measure. Change the template field, scrubber rule or authorization workflow, then compare next month.

How Adentris helps

Most codes above trace back to something missing or wrong before the claim went out. Adentris reviews every active chart, not a sample, against payer and regulatory rules before claims are submitted, and each finding cites the rule that fired, so a missing session time, an overdue treatment plan update or an unjustified level of care is caught while it can still be fixed. When denials come back, Denial Fightback clusters them by root cause, pushes prevention back to the source and drafts regulation- and parity-cited appeals for staff to approve. It runs on top of any EHR, connecting through its API or FHIR, HL7 feeds, an API our agents build where none exists, or the AI Web Agent, usually with no IT project on your side.

At Resilient Recovery Treatment, a multi-site SUD network in Los Angeles, documentation accuracy went from 73% to 96% in 90 days, with a 62% denial reduction. To see it on your own charts, book a 30-minute call with our team.

Related reading

• CPT Codes for Behavioral Health and Psychotherapy: A 2026 Guide
• IOP and PHP Billing and Documentation: A 2026 Guide for Behavioral Health
• Medical Necessity Documentation for Behavioral Health: What Payers Require

Sources

• X12: Claim Adjustment Reason Codes
• X12: Remittance Advice Remark Codes
• X12: Claim Adjustment Group Codes
• X12: Service Type Codes
• CMS: Claim Adjustment Group Code definitions
• CMS MLN: Remittance Advice Resources and FAQs
• Medicare Claims Processing Manual, Chapter 1 and Chapter 23
• 2026 Medicare NCCI Policy Manual, Chapter XI
• CMS: HCPCS quarterly update (October 2026)
• CMS: Place of Service code set
• Novitas Solutions: Telehealth service modifiers
• LCD L33252 and billing article A57520
• CMS: Marriage and Family Therapists and Mental Health Counselors
• 29 CFR 2560.503-1, 29 CFR 2590.712 and 42 CFR 447.15

Frequently asked questions

What is the difference between a CARC and a RARC?

A Claim Adjustment Reason Code (CARC) explains why a claim or service line was paid differently than it was billed. A Remittance Advice Remark Code (RARC) adds a more specific explanation for that adjustment, or, if it starts with Alert, gives general information about remittance processing. CARCs 16 and 96 must come with at least one RARC.

What does CO mean on a denial?

CO stands for Contractual Obligation: a contract between payer and provider, or a regulatory requirement, resulted in the adjustment, so the provider carries the amount. Under Medicare, providers may bill the beneficiary for an unpaid amount only when the adjustment carries group code PR.

What is denial code CO-16 and how do I fix it?

CO-16 means the claim lacks information or has a submission or billing error. The required remark code names the problem, such as units (M53), place of service (M77) or authorization number (M62). Fix it and send a corrected or new claim. Medicare treats these claims as unprocessable rather than denied, so there is no appeal right.

Is CO-15 still a valid denial code?

No. X12 lists CARC 15 with a stop date of May 1, 2018. Authorization problems are now reported with codes such as 197 (absent), 198 (exceeded), or 16 with M62 or N54. If a payer still shows 15, compare the claim to the authorization approval line by line.

Can I bill the patient for a PR-204 denial?

PR-204 assigns the amount to the patient because the service is not covered under the current benefit plan. Whether you can collect depends on your contract, state law and whether the patient agreed in advance. Medicaid participating providers must accept Medicaid payment plus required cost sharing as payment in full, so check state rules first. This is general information, not legal advice.

Which behavioral health denial codes should we appeal?

Appeal when the record supports the service: CO-50 (medical necessity), CO-151 (frequency or units), CO-197 when authorization existed or could not be obtained in advance, and CO-97 when services were truly separate. Claim data errors such as CO-16, CO-4 and CO-11 are usually faster to fix with a corrected claim.