Skip to main content

CO-137 Denial Code: Regulatory Surcharges and Taxes

CO-137 means the payment includes an adjustment for regulatory surcharges, assessments, allowances, or health-related taxes. A law or regulation requires the payer to add, deduct, or report the amount, so it is informational rather than a coverage decision.

Quick facts

Code
CO-137 (CARC 137)
Status
Active In use since February 28, 1999; last modified September 30, 2007.
Code set
Claim Adjustment Reason Codes (CARC)
Group codes
  • CO (Contractual Obligation): The surcharge or assessment is a provider-side adjustment. It is not billed to the patient.
  • CR (Correction and Reversal): Used when the surcharge is applied through a correction or reversal of a prior claim.
  • OA (Other Adjustment): Some payers report it as an other adjustment because it is required by regulation and assigns no liability.
Official description
Regulatory Surcharges, Assessments, Allowances or Health Related Taxes.
X12 Claim Adjustment Reason Codes, retrieved September 25, 2026
Last verified
against the official X12 list.

What CO-137 means

CARC 137 covers regulatory surcharges, assessments, allowances, or health related taxes. Some states and localities require payers or providers to pay surcharges or assessments on health care services, often to fund public programs. When the payer applies or reports one of those amounts on a claim, it uses CARC 137.

The adjustment can go either way. It may reduce your payment (for example, a surcharge deducted) or increase it (an allowance paid on top), depending on the rule. It says nothing about whether the service was covered.

Example: a state requires a surcharge on certain hospital payments. The payer’s remittance shows the allowed amount and a separate CARC 137 line for the surcharge.

Common causes

  • A state health care surcharge or assessment on payments for certain services or facility types.
  • A health-related tax that the payer must collect or report.
  • A regulatory allowance paid in addition to the claim.
  • A correction to a prior claim to add or remove a surcharge, reported with the CR group.
  • A payer applying a surcharge in a jurisdiction where the service is exempt.

How to fix it

  1. Identify the regulation. Ask the payer which surcharge, assessment, or tax the adjustment represents.
  2. Check whether it applies to your facility type, service, and location on the date of service.
  3. If it applies, post it to a dedicated account so finance can reconcile it with any required filings.
  4. If it does not apply, such as a service in an exempt jurisdiction, contact the payer and request reprocessing.
  5. No corrected claim is needed unless claim data such as the service location caused the payer to apply the wrong rule.

How to prevent problems with CO-137

  • Maintain a list of the surcharges and assessments that apply in each state where you provide services.
  • Make sure service facility addresses (box 32) are correct, because location can determine which rules apply.
  • Map CARC 137 to its own adjustment code rather than a general write-off.
  • Monitor these adjustments with an ERA Analyzer and review them with your finance team.
  • Keep regulatory adjustments out of denial reporting. See how to read CARC and RARC codes.

Remark codes that may appear with CO-137

  • N834 (Jurisdiction exempt from sales and health tax charges.): The jurisdiction is exempt from sales and health tax charges.
  • CO-235 (Sales Tax): Sales tax, reported separately from other regulatory items.
  • CO-105 (Tax withholding.): Tax withholding from the provider payment.
  • CO-223 (Adjustment code for mandated federal, state or local law/regulation that is not already covered by another code and is mandated before a new code…): Adjustment for a mandated federal, state, or local law or regulation.
  • CO-212 (Administrative surcharges are not covered): Administrative surcharges are not covered.

CO-137 FAQ

What kinds of surcharges does CO-137 cover?

State or local surcharges, health care assessments, provider taxes, and similar amounts that a law requires the payer to apply or report. Which ones apply depends on the state and program.

Is CO-137 a denial?

No. It explains a regulatory amount added to or taken from the payment.

Can I bill the patient for CO-137?

No, not under CO. Surcharges and assessments are handled between the payer, provider, and the government.