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CO-108 Denial Code: DME Rent/Purchase Guidelines Not Met

CO-108 means the rent or purchase guidelines for durable medical equipment were not met. The item may have been billed as a purchase when it must be rented, billed as a rental beyond the allowed period, or billed with rental history that does not match the payer's records.

Quick facts

Code
CO-108 (CARC 108)
Status
Active In use since January 1, 1995; last modified July 1, 2017.
Code set
Claim Adjustment Reason Codes (CARC)
Group codes
  • CO (Contractual Obligation): The supplier is responsible for following rental and purchase rules. The denied amount generally cannot be billed to the patient unless a valid advance notice applies.
  • PR (Patient Responsibility): Less common. Used when the patient chose an option outside the payer's guidelines and accepted financial responsibility in advance.
Official description
Rent/purchase guidelines were not met. Usage: Refer to the 835 Healthcare Policy Identification Segment (loop 2110 Service Payment Information REF), if present.
X12 Claim Adjustment Reason Codes, retrieved September 25, 2026
Last verified
against the official X12 list.

What CO-108 means

CARC 108 means rent/purchase guidelines were not met. It applies to durable medical equipment (DME). Payers classify DME items by how they may be paid: purchase only, rental only, or rental that converts to ownership after a set period (Medicare’s capped rental category is the best-known example). When a claim does not follow the category’s rules, the payer denies or adjusts it with CARC 108. The 835 may cite the specific policy (loop 2110 REF).

The issue is usually billing history, not medical need. The payer compares your claim with prior claims for the same item and patient, from you or another supplier.

Example: a supplier bills a monthly rental for an item after the payer’s rental period has ended and ownership has transferred to the patient. The payer denies the rental month with CO-108 and remark M7.

Common causes

  • Billing a purchase (NU or UE) for an item the payer pays only as a rental.
  • Billing a rental (RR) after the rental cap is reached or after the item was purchased.
  • Missing or wrong rental month indicator modifiers required by the payer.
  • A previous supplier’s rental history counts toward the limit, and you started a new rental series.
  • A break in service that the payer does not accept as a new medical need.
  • A change of equipment that the payer treats as a continuation of the original rental.

How to fix it

  1. Pull the item’s payment history from the payer portal or by calling the DME line, including other suppliers’ claims.
  2. Check the payment category in the payer’s DME policy for that HCPCS code.
  3. If the modifier or rental month was wrong, send a corrected claim (resubmission code 7 in box 22) with the right modifiers in box 24D.
  4. If you believe a new rental period applies, such as a documented break in need or a medically necessary change, submit the supporting documentation through the payer’s reconsideration process.
  5. If the rules were not met, write off the denied amount under CO unless you hold a valid advance notice signed before delivery.

How to prevent it

  • Check rental history with the payer before accepting a new DME patient, especially when they had equipment from another supplier.
  • Map each HCPCS code to its payment category and valid modifiers in your billing system.
  • Track rental months per patient and stop billing automatically when the cap is reached.
  • Use a Claims Validator to flag rental and purchase modifier combinations that do not fit the item.
  • Keep proof of delivery and prescription dates with every item.

Specialty notes

This is a DME-specific code. Oxygen, hospital beds, wheelchairs, and similar rented equipment carry the most risk because their rental rules and ownership transfer points differ by payer.

Remark codes that may appear with CO-108

  • M7 (No rental payments after the item is purchased, returned or after the total of issued rental payments equals the purchase price.): No rental payments after the item is purchased, returned, or rental payments reach the purchase limit.
  • M5 (Monthly rental payments can continue until the earlier of the 15th month from the first rental month, or the month when the equipment is no longer…): Monthly rental payments can continue only until a defined limit is reached.
  • N230 (Incomplete/invalid indication of whether the patient owns the equipment that requires the part or supply.): Missing or invalid indication of whether the patient owns the equipment.
  • M94 (Information supplied does not support a break in therapy.): The information does not support a break in therapy, so a new rental period will not start.
  • CO-173 (Service/equipment was not prescribed by a physician.): Equipment was not prescribed by a physician.
  • CO-174 (Service was not prescribed prior to delivery.): Service was not prescribed before delivery.
  • CO-4 (The procedure code is inconsistent with the modifier used.): The procedure code is inconsistent with the modifier, for example a rental modifier on a purchase-only item.
  • PR-119 (Benefit maximum for this time period or occurrence has been reached.): Benefit maximum for the period reached.

CO-108 FAQ

What are rent/purchase guidelines?

Payer rules that decide whether an item is rented, purchased, or rented until ownership transfers, and for how long. Medicare's capped rental category is a well-known example, and commercial payers set their own rules.

Which modifiers matter for CO-108?

Common ones include RR for rental, NU for new purchased equipment, and UE for used equipment, along with payer-specific rental month modifiers. Using the wrong one is a frequent cause of this denial.

Can I bill the patient after a CO-108 denial?

Under CO, generally not, unless the patient signed a valid advance notice before delivery. Check the payer's rules.