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N566 Remark Code: Procedure Needs Functional Reporting

N566 is an alert that the procedure billed requires functional reporting. Future claims with this procedure code must also include an applicable non-payable reporting code and the appropriate modifiers, or the payer will not process them.

Quick facts

Code
N566 (RARC N566)
Status
Active In use since November 1, 2012.
Code set
Remittance Advice Remark Codes (RARC)
Group codes
  • CO (Contractual Obligation): If an adjustment appears, it relates to missing required reporting. The provider must correct future claims; the patient is not responsible.
  • OA (Other Adjustment): Used by some payers when the alert accompanies an informational adjustment.
Official description
Alert: This procedure code requires functional reporting. Future claims containing this procedure code must include an applicable non-payable code and appropriate modifiers for the claim to be processed.
X12 Remittance Advice Remark Codes, retrieved September 25, 2026
Last verified
against the official X12 list.

What N566 means

N566 targets the procedure code, not the reporting code. It tells you this service is one the payer requires functional reporting for: each claim must also carry a non-payable code describing the patient’s functional status, with modifiers for details like severity. This claim was processed, but future claims without that reporting will not be.

The code was designed for Medicare’s outpatient therapy functional limitation reporting. That requirement no longer applies to Medicare claims, so an N566 today most likely reflects a specific payer’s or program’s own rule.

What to do

  1. Read the payer’s policy for this procedure to see which reporting codes and modifiers it wants and how often, for example at the start of care or at set intervals.
  2. Build the requirement into your templates so clinicians document functional status and coders add the reporting line.
  3. Check the paired CARC. If this claim was actually reduced or denied, correct it according to that code.

For CARC and RARC basics, see how to read CARC and RARC codes.

Codes that may appear with N566

  • CO-246 (This non-payable code is for required reporting only.): Non-payable reporting codes are for required reporting only.
  • CO-16 (Claim/service lacks information or has submission/billing error(s).): Used when the claim lacked required information, here the functional reporting codes.
  • N565 (Alert: This non-payable reporting code requires a modifier.): The reporting code was present but lacked its required modifier.
  • N572 (This procedure is not payable unless appropriate non-payable reporting codes and associated modifiers are submitted.): The procedure is not payable until the reporting codes and modifiers are sent.
  • N620 (Alert: This procedure code is for quality reporting/informational purposes only.): The procedure code is for quality reporting only.

N566 FAQ

What is functional reporting?

A requirement to report a patient's functional limitation and status using non-payable codes with severity modifiers alongside the billed service. Medicare required it for outpatient therapy from 2013 until CMS discontinued it starting in 2019.

Did N566 reduce my payment?

As an alert it warns about future claims. Check the CARC on the same line to see whether anything was actually adjusted.

Do other payers still require it?

Some payers or programs may have their own reporting rules. Check the current policy of the payer that sent N566.