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CO-256 Denial Code: Not Payable per Managed Care Contract

CO-256 means the service is not payable per the managed care contract. The provider's agreement with the managed care plan excludes separate payment for this service, often because it is included in a capitation or case rate, or carved out of the contract.

Quick facts

Code
CO-256 (CARC 256)
Status
Active In use since June 2, 2013.
Code set
Claim Adjustment Reason Codes (CARC)
Group codes
  • CO (Contractual Obligation): The denial rests on the provider's own contract, so the provider absorbs it and generally cannot bill the patient.
Official description
Service not payable per managed care contract.
X12 Claim Adjustment Reason Codes, retrieved September 25, 2026
Last verified
against the official X12 list.

What CO-256 means

CARC 256 says the service is not payable per managed care contract. The key word is contract: the reason sits in your agreement with the managed care organization, not in the patient’s benefits. The patient may be fully covered for the service, but the terms you signed say the plan will not pay you separately for it.

Common contract structures behind CO-256 include capitation (a fixed per-member payment that covers a defined scope of services), case rates or global fees that include related services, and carve-outs where a different vendor handles a category of care such as lab, behavioral health, or imaging.

Example: a primary care group is capitated for a defined set of office services. It bills one of those services fee-for-service, and the plan denies it with CO-256 because the capitation already covers it.

Common causes

  • Service included in capitation for the group or provider.
  • Service carved out to another vendor (lab, radiology, behavioral health, pharmacy).
  • Case rate or global payment already covers the service.
  • Contract exclusion list naming services the plan does not pay.
  • Contract amendment not loaded in the payer’s system, so an added service still denies.

How to fix it

  1. Pull your contract and its exhibits, including fee schedules, capitation scope, and carve-out lists.
  2. Confirm whether the service is included, excluded, or carved out for this product and date of service.
  3. If the contract makes it payable, file a dispute or reconsideration citing the specific section, and ask your payer representative to fix the configuration.
  4. If it belongs to a carve-out vendor, check whether you should bill that vendor instead, and whether you are in its network.
  5. If the denial reflects the contract correctly, post it as a contractual adjustment. Do not bill the patient.

How to prevent it

  • Keep a summary of each managed care contract’s capitation scope, carve-outs, and exclusions where billers can see it.
  • Configure claim scrubbing rules so capitated services are recorded as encounters, not billed as fee-for-service claims when the contract says otherwise.
  • Verify which vendor manages carved-out services before referring or performing them.
  • Review CO-256 patterns after contract renewals, since changes often surface here first. See provider enrollment and network denials.

Remark codes that may appear with CO-256

  • N381 (Alert: Consult our contractual agreement for restrictions/billing/payment information related to these charges.): Points directly to the contractual agreement as the basis for the denial.
  • N52 (Patient not enrolled in the billing provider's managed care plan on the date of service.): The patient was not enrolled in the billing provider's managed care plan on the date of service.
  • OA-24 (Charges are covered under a capitation agreement/managed care plan.): The charges are covered under a capitation agreement, a common reason managed care contracts exclude fee-for-service payment.
  • CO-242 (Services not provided by network/primary care providers.): The service was not provided by a network or primary care provider.
  • CO-96 (Non-covered charge(s).): A non-covered charge under the patient's plan, rather than under the provider's contract.
  • CO-45 (Charge exceeds fee schedule/maximum allowable or contracted/legislated fee arrangement.): The service is payable but reduced to the contracted rate.

CO-256 FAQ

Why would my own contract make a service not payable?

Managed care contracts often include services in capitation or case rates, carve out certain services to other vendors, or list services the plan does not pay separately. CO-256 reflects one of those terms.

Can I appeal CO-256?

Yes, if the contract actually makes the service payable, such as a fee-for-service carve-in or an amendment the payer has not loaded. Send the contract language with your dispute.

Can I bill the patient?

No. The limitation comes from your contract, and managed care agreements generally prohibit billing members for covered services the plan does not pay.