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CO-A5 Denial Code: Medicare PPS Capital Cost Outlier

CARC A5 reports the Medicare claim PPS capital cost outlier amount: the part of an outlier payment attributable to capital costs under Medicare's inpatient prospective payment system. It's an institutional, informational adjustment that often increases payment.

Quick facts

Code
CO-A5 (CARC A5)
Status
Active In use since January 1, 1995.
Code set
Claim Adjustment Reason Codes (CARC)
Group codes
  • CO (Contractual Obligation): The usual group. The amount is part of Medicare's payment calculation for the facility and isn't billed to the patient.
  • OA (Other Adjustment): Some payers report outlier components under OA as informational adjustments.
Official description
Medicare Claim PPS Capital Cost Outlier Amount.
X12 Claim Adjustment Reason Codes, retrieved September 25, 2026
Last verified
against the official X12 list.

What CARC A5 means

CARC A5 is the Medicare claim PPS capital cost outlier amount. Medicare’s inpatient prospective payment system (IPPS) pays hospitals two federal amounts for each discharge: one for operating costs and one for capital costs. When a case is extraordinarily expensive and qualifies as a cost outlier, both components can include an outlier payment. A5 identifies the capital share.

It sits beside CARC 70, which covers cost outlier adjustments more generally. A remittance for a high-cost stay may show both, with A5 isolating the capital portion.

This is an institutional code. It’s informational rather than a denial, and outlier add-ons are commonly shown as negative adjustment amounts on the 835, which increase payment.

Example: a long, complex surgical stay exceeds the outlier threshold. Medicare’s remittance shows the DRG payment, an operating outlier, and an A5 capital outlier. The hospital’s reimbursement team checks both against its own calculation.

Common causes

  • High-cost inpatient cases exceeding the fixed-loss threshold for the fiscal year.
  • Capital cost-to-charge ratio applied to covered charges on outlier cases.
  • Outlier reconciliation at cost report settlement adjusting earlier payments.
  • Denied charges that lower covered charges and shrink the outlier.

How to check it

  1. Confirm covered charges after any denied or non-covered lines.
  2. Use the correct cost-to-charge ratios (operating and capital) for the discharge date.
  3. Apply the fixed-loss threshold in effect for that fiscal year.
  4. Compare the calculated capital outlier to the A5 amount.
  5. Contact the Medicare contractor or follow its reopening process if the calculation doesn’t match.

How to prevent problems

  • Keep charge capture complete on high-cost cases.
  • Update cost-to-charge ratios in your contract modeling when Medicare changes them.
  • Review outlier claims separately from routine claims. An ERA Analyzer can isolate A5 and CARC 70 amounts for reconciliation.

Specialty notes

Acute care hospitals paid under IPPS, especially trauma centers and tertiary referral hospitals, see A5 most. Critical access hospitals, paid on a cost basis, generally don’t.

Remark codes that may appear with CO-A5

  • 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, reducing or eliminating the outlier.
  • CO-70 (Cost outlier - Adjustment to compensate for additional costs.): Cost outlier adjustment, typically covering the operating portion.
  • CO-A4Deactivated (Medicare Claim PPS Capital Day Outlier Amount.): Capital day outlier amount, deactivated along with day-based outliers.
  • CO-69 (Day outlier amount.): Day outlier amount.
  • CO-A8 (Ungroupable DRG.): Ungroupable DRG, which prevents DRG and outlier calculation.

CO-A5 FAQ

What is a capital cost outlier?

Medicare pays hospitals separately for operating costs and capital costs under the inpatient PPS. When a case qualifies as a high-cost outlier, the outlier payment has an operating piece and a capital piece. CARC A5 shows the capital piece.

Why does the A5 amount appear negative?

On an 835, a negative adjustment amount increases payment. Outlier add-ons are often reported that way.

Should physician practices see A5?

No. It applies to institutional inpatient claims under Medicare's prospective payment system or payers that mirror it.

How do I verify A5?

Recalculate the outlier with your hospital's capital cost-to-charge ratio, covered charges, and the fixed-loss threshold for the discharge date, then compare it to the remittance.

Can capital outlier payments change after the claim is paid?

Yes. Medicare can reconcile outlier payments at cost report settlement when a hospital's actual cost-to-charge ratio differs significantly from the one used at payment.