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CO-70 Denial Code: Cost Outlier Adjustment

CARC 70 is a cost outlier adjustment: an amount added to, or recalculated within, an institutional payment to compensate for extraordinarily high costs on a case. It's informational and often increases payment rather than reducing it.

Quick facts

Code
CO-70 (CARC 70)
Status
Active In use since January 1, 1995; last modified June 30, 2001.
Code set
Claim Adjustment Reason Codes (CARC)
Group codes
  • CO (Contractual Obligation): The common group. The adjustment is part of the contractual or regulatory payment calculation and isn't billed to the patient.
  • OA (Other Adjustment): Some payers use OA for outlier amounts that don't shift responsibility to either party.
Official description
Cost outlier - Adjustment to compensate for additional costs.
X12 Claim Adjustment Reason Codes, retrieved September 25, 2026
Last verified
against the official X12 list.

What CARC 70 means

CARC 70 is a cost outlier adjustment to compensate for additional costs. Case-rate methods like DRGs pay a fixed amount regardless of how expensive a particular stay turns out to be. For extraordinarily costly cases, a cost outlier provision pays an additional amount so the facility isn’t carrying all of the extreme cost. The payer reports that amount with CARC 70.

Under Medicare’s inpatient prospective payment system, a case qualifies when its estimated cost exceeds the DRG payment plus a fixed-loss threshold set each year. Estimated cost comes from applying the hospital’s cost-to-charge ratio to covered charges. Medicare then pays a percentage of the cost above the threshold. Medicaid programs and commercial contracts often have their own versions, sometimes based on charges rather than costs.

This is an institutional code, and it’s informational. On an 835, a payment increase is often reported as a negative adjustment amount.

Common causes

  • Very high-cost cases, such as long ICU stays, complex surgeries, or expensive devices or drugs.
  • Contract outlier terms applied to charges above a threshold.
  • Outlier caps or limits that reduce the payment (N523).
  • Denied days or charges removed before the outlier was calculated.

How to check it

  1. Identify the outlier methodology in your contract or the payer’s published rules.
  2. Recalculate the expected outlier using covered charges, the applicable cost-to-charge ratio or charge threshold, and the payment percentage.
  3. Check covered charges. Denied lines, non-covered days, or charges reclassified on review reduce the outlier.
  4. Compare the ERA to your calculation.
  5. Dispute or request reprocessing when the outlier doesn’t match the terms, with your calculation attached.

How to prevent problems

  • Load outlier terms into your contract modeling tools for each payer.
  • Keep charge capture complete on high-cost cases, since missing charges lower the outlier.
  • Document medical necessity for high-cost services likely to be reviewed.
  • Track outlier payments separately. An ERA Analyzer can isolate CARC 70 amounts so underpaid outliers are easy to find.

Specialty notes

Trauma centers, transplant programs, burn units, and neonatal intensive care units generate most cost outlier claims. Outlier payments on these cases can make up a meaningful share of reimbursement, so they merit dedicated review.

Remark codes that may appear with CO-70

  • N523 (The limitation on outlier payments defined by this payer for this service period has been met.): The payer's limit on outlier payments has been met, so the outlier payment was reduced or eliminated.
  • CO-69 (Day outlier amount.): A day outlier, based on length of stay rather than cost.
  • CO-A5 (Medicare Claim PPS Capital Cost Outlier Amount.): The capital portion of a Medicare PPS cost outlier.
  • CO-A8 (Ungroupable DRG.): Ungroupable DRG, which prevents normal DRG and outlier calculation.
  • CO-45 (Charge exceeds fee schedule/maximum allowable or contracted/legislated fee arrangement.): The standard contractual adjustment to the allowed amount.

CO-70 FAQ

How is a cost outlier calculated?

In general, the payer estimates the cost of the case (for Medicare, by applying the hospital's cost-to-charge ratio to covered charges) and compares it with the regular payment plus a fixed-loss threshold. A share of costs above that threshold is paid as an outlier. Commercial and Medicaid methods vary.

Why is CARC 70 shown as a negative amount?

On an 835, a negative adjustment amount increases payment. Cost outliers that add to reimbursement are often reported that way.

Can outlier payments be recovered later?

Under Medicare, outlier payments can be reconciled at cost report settlement when a hospital's cost-to-charge ratio changes significantly. Commercial contracts may include audit rights for outlier claims.