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N538 Remark Code: Facility Must Pay Outside Provider

N538 means a facility is responsible for paying outside providers who furnish these services, supplies, or drugs to its patients or residents. The payer will not pay you directly; you need to bill the facility under your arrangement with it.

Quick facts

Code
N538 (RARC N538)
Status
Active In use since July 1, 2010.
Code set
Remittance Advice Remark Codes (RARC)
Group codes
  • CO (Contractual Obligation): The payer's payment to the facility covers these services. Do not bill the patient; seek payment from the facility.
Official description
A facility is responsible for payment to outside providers who furnish these services/supplies/drugs to its patients/residents.
X12 Remittance Advice Remark Codes, retrieved September 25, 2026
Last verified
against the official X12 list.

What N538 means

When a patient is in certain facility stays, the facility receives a payment that covers most services the patient needs, including some that outside suppliers furnish. The outside provider, such as a lab, ambulance company, therapy group, or supplier, must then look to the facility for payment, not the insurer.

N538 tells you your claim fell into that category. The payer is not rejecting the service as unnecessary; it is saying the facility owes you.

Common causes

  • The provider did not know the patient was a facility resident or inpatient on the date of service.
  • The service is not on the exclusion list that would allow separate billing.
  • No agreement exists with the facility, so the provider billed the insurer by default.
  • Date errors placed the service inside a stay when it actually occurred before admission or after discharge.

How to fix it

  1. Confirm the patient’s status on the date of service: admission and discharge dates, and the type of stay.
  2. Check exclusions. If the service is excluded from facility responsibility, appeal with documentation.
  3. Bill the facility under your arrangement if the service is its responsibility.
  4. Correct dates or place of service if the claim was wrong, and resubmit as a corrected claim (resubmission code 7).
  5. Do not bill the patient for services the facility is responsible for.

How to prevent it

Ask about current facility stays at intake and verify with the payer’s eligibility tools, many of which show active inpatient or SNF stays. Suppliers that regularly serve facility residents should keep written agreements in place with each facility.

Codes that may appear with N538

  • CO-190 (Payment is included in the allowance for a Skilled Nursing Facility (SNF) qualified stay.): Payment is included in the allowance for a skilled nursing facility qualified stay.
  • CO-97 (The benefit for this service is included in the payment/allowance for another service/procedure that has already been adjudicated.): The service is included in the payment for another service, here the facility's.
  • CO-109 (Claim/service not covered by this payer/contractor.): The payer is not responsible for the claim as submitted.
  • N70 (Consolidated billing and payment applies.): Consolidated billing and payment applies.
  • N106 (Payment for services furnished to Skilled Nursing Facility (SNF) inpatients (except for excluded services) can only be made to the SNF.): Payment for services to SNF inpatients, except excluded services, is made only to the SNF.
  • M97 (Not paid to practitioner when provided to patient in this place of service.): Not paid to the practitioner in this place of service; included in the facility's reimbursement.

N538 FAQ

Which settings use this rule?

Common examples are skilled nursing facility consolidated billing and inpatient hospital stays, where many outside services must be billed to the facility. Hospice and certain other settings have similar rules.

How do I get paid?

Bill the facility according to your agreement with it. Establish those agreements before providing services to its patients or residents.

Are any services excluded?

Yes. Many programs exclude certain professional services and specific items from facility responsibility. Check the payer's exclusion lists for the setting.