CO-118 Denial Code

May 28, 2025

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Table of Contents

Direct Answer: What CO-118 Means and How to Fix It

CO-118 denial code indicates an ESRD (End-Stage Renal Disease) network support adjustment where Medicare is reducing payment because the patient receives dialysis services through an ESRD network facility. This adjustment occurs when Medicare determines that certain services should be bundled with the patient’s dialysis treatment rather than paid separately. To resolve CO-118 denials, immediately verify the patient’s ESRD status in Medicare’s systems, check if the denied service is included in the ESRD bundled payment, and either accept the adjustment if appropriate or appeal with documentation proving the service was medically necessary and separate from routine dialysis care.

The most common trigger for CO-118 is billing separately for services that Medicare considers part of the ESRD Prospective Payment System (PPS) bundle. This includes certain lab tests, medications, and supplies that dialysis facilities receive as part of their composite rate. Understanding this distinction is crucial for AR specialists working with nephrology practices, dialysis centers, and hospitals treating ESRD patients.

Root Causes: What Triggers CO-118 Denials

CO-118 denials occur primarily due to Medicare’s ESRD Prospective Payment System, which bundles many services into a single payment to dialysis facilities. The system was designed to control costs and improve care coordination for ESRD patients who require ongoing dialysis treatments.

Primary triggers include:

Billing Non-Dialysis Providers for Bundle-Included Services: When physicians, hospitals, or other providers bill Medicare for services that should be included in the dialysis facility’s bundled payment. Common examples include certain injectable medications like erythropoiesis-stimulating agents (ESAs), iron supplements, and specific laboratory tests performed on dialysis days.

Incorrect Place of Service Coding: Using place of service codes that don’t accurately reflect where ESRD patients received treatment. For instance, billing with POS 11 (office) when the patient received treatment at a dialysis facility (POS 65) can trigger CO-118 adjustments.

Missing or Incorrect ESRD Network Information: When claims lack proper identification of the patient’s assigned ESRD network or dialysis facility. Medicare uses this information to coordinate benefits and determine which provider should receive bundled payments.

Timing Issues with ESRD Status Changes: Patients transitioning into or out of ESRD status may generate CO-118 denials if providers aren’t aware of status changes. This includes patients beginning dialysis, receiving transplants, or experiencing transplant failure.

Coordination of Benefits Errors: When patients have multiple insurance coverage and the ESRD network support adjustment isn’t properly coordinated between Medicare and secondary payers.

Real-World Case Study: Nephrology Practice CO-118 Resolution

Patient: Maria Rodriguez, Medicare Primary, BCBS Secondary
Denial Code: CO-118
Amount: $847.50
Provider: Mountain View Nephrology Associates

Scenario: Dr. Smith’s nephrology practice billed Medicare $847.50 for epoetin alfa injections (J0885) administered to Maria Rodriguez during her dialysis session at Desert Springs Dialysis Center. The claim was denied with CO-118, indicating an ESRD network support adjustment. The practice had been billing these injections separately, not realizing they were included in the dialysis facility’s bundled payment under the ESRD PPS.

Resolution Steps:

Day 1: AR specialist Jennifer accessed the Medicare Administrative Contractor (MAC) portal and located Maria’s ESRD network assignment to Network 15
Day 2: Contacted Desert Springs Dialysis Center to confirm they receive bundled payment for epoetin alfa as part of their composite rate
Day 3: Reviewed Medicare’s ESRD PPS final rule to confirm J0885 is included in the bundle when administered during dialysis
Day 5: Contacted Maria’s nephrologist to discuss care coordination and billing protocols for ESRD patients
Day 7: Updated practice management system to flag ESRD patients and prevent future separate billing for bundled services

Outcome: The practice accepted the CO-118 adjustment as appropriate since the service was correctly included in the dialysis facility’s bundled payment. They recovered no additional payment but prevented future denials by implementing proper ESRD billing protocols.

Lesson Learned: Nephrology practices must coordinate with dialysis facilities to understand which services are included in ESRD bundled payments versus those that can be billed separately.

What to Check: Specific Form Fields and Portal Locations

When encountering CO-118 denials, AR specialists must verify specific information in multiple locations to determine the appropriate resolution path.

CMS-1500 Form Verification

Box 1: Confirm Medicare is marked as primary payer for ESRD patients (unless patient has group health plan coverage that takes precedence)

Box 11: Check for secondary insurance information that may require coordination with ESRD network adjustments

Box 14: Verify date of current illness matches ESRD diagnosis and treatment timeline

Box 21: Ensure ESRD-related diagnosis codes (N18.6, Z99.2) are properly sequenced and support medical necessity

Box 24A-24J: Review each service line for:

Correct CPT/HCPCS codes
Appropriate place of service (POS 65 for dialysis facilities)
Proper units and dates matching dialysis schedule
Valid modifiers (especially -59, -25 for separate services)

Box 32: Confirm service facility information matches patient’s assigned ESRD network facility

UB-04 Form Verification (Hospital/Facility Claims)

Box 1: Verify correct provider identification for ESRD network coordination

Box 12-17: Check admission and discharge dates align with ESRD treatment episodes

Box 18-28: Review condition codes, especially code 70 (ESRD patient) and G6 (ESRD network assignment)

Box 39-41: Confirm revenue codes align with ESRD bundling rules:

Revenue code 821 (Hemodialysis) should include bundled services
Revenue codes 636, 637 (Drugs) may require separate justification

Box 42-49: Verify HCPCS codes and units match ESRD payment methodology

Box 50-55: Check payer information for proper Medicare/secondary coordination

Online Portal Verification Points

Medicare Administrative Contractor Portals:

Patient ESRD network assignment lookup
Bundled payment status verification
Claims history for coordination checks
Appeal status tracking for CO-118 disputes

Provider Enrollment Chain Ownership System (PECOS):

Verify provider enrollment allows ESRD billing
Check specialty designations affecting bundle eligibility
Confirm facility certifications for dialysis services

Dialysis Facility Compare Database:

Identify patient’s assigned dialysis facility
Verify facility’s Medicare certification status
Check for ownership relationships affecting billing

Prevention Strategies: Step-by-Step Denial Avoidance

Preventing CO-118 denials requires systematic front-end processes and ongoing staff education about ESRD billing complexities.

Pre-Service Verification Protocol

Step 1: ESRD Status Identification (Daily)

Run eligibility checks using real-time verification systems
Flag all patients with ESRD diagnosis codes in practice management system
Verify current dialysis facility assignment through Medicare portals
Document ESRD network information in patient demographics

Step 2: Service Authorization Review (Per Encounter)

Cross-reference planned services against current ESRD bundling requirements
Use Medicare’s ESRD PPS final rule as reference for bundled services
Obtain prior authorization for services outside the bundle when required
Document medical necessity for separately billable services

Step 3: Provider Coordination Protocol (Monthly)

Establish communication channels with local dialysis facilities
Share patient care plans to avoid duplicate billing
Coordinate appointment scheduling to minimize conflicts
Review bundled payment responsibilities with all providers

Clean Claim Submission Checklist

Verification Point	Action Required	Frequency
ESRD Status Check	Query Medicare eligibility	Every visit
Network Assignment	Verify current dialysis facility	Monthly
Service Bundle Status	Check ESRD PPS inclusion rules	Per service
Modifier Usage	Apply appropriate modifiers for separate services	Per claim
Documentation Review	Ensure medical necessity support	Pre-submission
Payer Coordination	Verify primary/secondary responsibilities	Every visit

Technology Implementation Strategy

Practice Management System Configuration:

Create ESRD patient alerts with network information
Build edit checks for common bundled services
Establish workflow queues for ESRD claim review
Generate reports tracking CO-118 denial patterns

Staff Training Requirements:

Monthly updates on ESRD bundling rule changes
Hands-on practice with Medicare portal navigation
Role-playing exercises for complex scenarios
Competency testing on ESRD billing knowledge

Resolution Process: Detailed Step-by-Step Fix

When CO-118 denials occur, follow this systematic approach to determine whether acceptance or appeal is appropriate.

Initial Assessment Phase (Days 1-3)

Day 1: Claim Analysis

Access the original claim in practice management system
Print or download the complete Explanation of Benefits (EOB)
Identify the specific service(s) triggering CO-118 adjustment
Note the adjustment amount and any remaining patient responsibility
Check for any additional denial codes on the same claim

Day 2: Patient Status Verification

Log into Medicare Administrative Contractor portal
Search patient by Medicare ID to verify ESRD status
Confirm current ESRD network assignment (Networks 1-18)
Check effective dates for ESRD coverage eligibility
Document all findings in patient account notes

Day 3: Service Bundle Analysis

Review current ESRD Prospective Payment System guidelines
Determine if denied service is included in dialysis facility bundle
Check for any exceptions or separate payment eligibility
Consult Medicare Local Coverage Determinations (LCDs) if applicable
Make preliminary determination: accept or appeal

Resolution Decision Matrix

Service Category	Bundle Status	Typical Action	Appeal Likelihood
Routine Lab Tests (dialysis days)	Included	Accept CO-118	Low (5%)
ESA Injections (dialysis facility)	Included	Accept CO-118	Low (10%)
Emergency Services	Separate	Appeal CO-118	High (85%)
Non-Dialysis Day Services	Separate	Appeal CO-118	Moderate (60%)
Transplant-Related Care	Variable	Case-by-case	Moderate (50%)

Appeals Process Implementation (Days 4-30)

Level 1 Appeal Preparation (Days 4-10)

When appealing CO-118 denials, focus on proving the service was medically necessary and separate from routine dialysis care.

Required Documentation:

Complete medical records supporting separate service necessity
Physician orders or treatment plans showing non-routine care
Timeline demonstrating service occurred outside dialysis treatment
Supporting literature or guidelines justifying separate billing
Clear explanation of why service doesn’t fall under ESRD bundle

Appeal Letter Key Elements:

Subject: Level 1 Appeal - CO-118 ESRD Network Support Adjustment
Patient: [Name], Medicare ID: [Number]
Claim Number: [Number], Date of Service: [Date]

We respectfully request reconsideration of the CO-118 adjustment applied to [specific service]. 

Medical Necessity Documentation:
- [Specific clinical indicators requiring separate treatment]
- [Timeline showing service provided outside routine dialysis]
- [Physician attestation of medical necessity]

Regulatory Support:
- [Reference to Medicare guidelines supporting separate payment]
- [Citations from ESRD PPS final rule exceptions]
- [Local Coverage Determination support if applicable]

Requested Action: Reverse CO-118 adjustment and process payment for [amount]

Level 2 Appeal Strategy (Days 15-30)

If Level 1 appeals are unsuccessful, prepare for Qualified Independent Contractor (QIC) review with enhanced documentation.

Additional Evidence Requirements:

Independent medical expert opinions
Comparative treatment protocols from other facilities
Cost-effectiveness analysis of separate vs. bundled care
Patient outcome data supporting treatment necessity
Regulatory compliance documentation

Financial Impact & KPIs: Measuring CO-118 Effects

Understanding the financial implications of CO-118 adjustments helps practices make informed decisions about resource allocation and billing strategies.

Direct Financial Impact Analysis

Average CO-118 Adjustment Amounts by Service Type:

Injectable medications: $250-$800 per denial
Laboratory services: $45-$200 per denial
Physician visits: $150-$400 per denial
Emergency services: $500-$2,500 per denial

Appeal Success Rates and ROI:

Level 1 appeals: 25% success rate, $450 average recovery
Level 2 appeals: 15% success rate, $720 average recovery
Appeal costs: $85-$150 per appeal (staff time and resources)
Net positive ROI threshold: Appeals for amounts >$400

Key Performance Indicators for ESRD Billing

Prevention Metrics:

CO-118 denial rate per 1,000 ESRD patient encounters
Clean claim rate for ESRD-related services
Front-end verification success rate
Staff competency scores on ESRD billing knowledge

Resolution Metrics:

Average days to resolve CO-118 denials
Appeal success rate by service category
Cost per resolution (including staff time)
Patient satisfaction with billing process

Financial Metrics:

Total CO-118 adjustment amounts per month
Recovery rate through appeals process
Net revenue impact from ESRD billing optimization
Cost savings from prevention vs. resolution activities

Monthly KPI Dashboard Template

Metric	Target	Actual	Variance	Action Plan
CO-118 Denial Rate	<2%	3.5%	+1.5%	Enhanced staff training
Appeal Success Rate	>30%	22%	-8%	Improve documentation
Average Resolution Days	<15	18	+3	Streamline workflow
Prevention Cost per Patient	<$25	$31	+$6	Technology upgrade

Tools & Software Recommendations

Denial Management Platforms

Enterprise Solutions:

Change Healthcare Revenue Cycle Solutions: Comprehensive ESRD billing modules with real-time eligibility verification and automated CO-118 detection
Optum360 Revenue Cycle Management: Advanced analytics for ESRD denial patterns and automated appeal generation
3M Health Information Systems: Clinical documentation improvement tools specifically designed for ESRD providers

Mid-Market Solutions:

AdvancedMD Practice Management: Built-in ESRD patient flagging and bundle awareness features
athenahealth Revenue Cycle Services: Integrated ESRD billing support with denial trend analysis
NextGen Healthcare Revenue Cycle: Customizable workflows for ESRD billing and appeal management

Specialized ESRD Tools

Medicare Portals and Resources:

Medicare Administrative Contractor Portals: Direct access to patient ESRD status and network assignments
Provider Enrollment Chain Ownership System (PECOS): Verification of provider enrollment and specialties
Medicare Fee Schedule Lookup Tool: Current ESRD bundling and payment rates

Third-Party Verification Services:

Availity Real-Time Eligibility: ESRD status verification with network assignment details
Change Healthcare Intelligent Prior Auth: Automated prior authorization for ESRD-related services
Waystar Revenue Cycle Technology: Predictive analytics for CO-118 denial risk assessment

Implementation Cost-Benefit Analysis

Solution Type	Implementation Cost	Monthly Cost	Break-Even Point	ROI at 12 Months
Basic PM System Upgrade	$15,000	$500	8 months	145%
Mid-Market Platform	$45,000	$1,200	12 months	125%
Enterprise Solution	$125,000	$3,500	18 months	110%
Staff Training Only	$5,000	$200	4 months	230%

Staff Training Steps

Initial Training Program (40 Hours Over 4 Weeks)

Week 1: ESRD Fundamentals (10 Hours)

ESRD disease overview and patient population characteristics
Medicare coverage rules for ESRD patients
Introduction to Prospective Payment System concepts
Basic terminology and acronyms used in ESRD billing

Week 2: Billing Mechanics (10 Hours)

CMS-1500 and UB-04 form completion for ESRD claims
CPT/HCPCS code selection and modifier usage
Place of service requirements and restrictions
Common documentation requirements

Week 3: Denial Management (10 Hours)

CO-118 denial code interpretation and analysis
Research tools and Medicare portal navigation
Appeal process overview and documentation requirements
Case study analysis and resolution strategies

Week 4: Hands-On Practice (10 Hours)

Real-world claim scenarios and problem-solving
Role-playing exercises for patient communication
Quality assurance processes and peer review
Final competency assessment and certification

Ongoing Education Requirements

Monthly Updates (2 Hours/Month):

Review new Medicare guidelines and policy changes
Analysis of practice-specific CO-118 denial trends
Success story sharing and best practice development
Technology updates and system enhancement training

Quarterly Deep Dives (4 Hours/Quarter):

Advanced appeal writing and documentation techniques
Complex case study analysis and resolution
Cross-training with clinical staff on medical necessity
Vendor training on new tools and system features

Annual Certification (8 Hours/Year):

Comprehensive competency testing on all ESRD billing aspects
Updated training on regulatory changes and industry developments
Professional development planning and career path discussion
Performance review and improvement goal setting

Training Resources and Materials

Internal Resources:

Custom training manuals with practice-specific examples
Video libraries of common scenarios and resolutions
Quick reference guides for daily use
Mentorship programs pairing experienced and new staff

External Resources:

Healthcare Financial Management Association (HFMA) courses
American Organization for Nursing Leadership (AONL) ESRD programs
Medicare Administrative Contractor educational webinars
Professional certification programs (CHAA, CPC-A)

Frequently Asked Questions (FAQ)

Q: How quickly must CO-118 denials be addressed to prevent write-offs? A: CO-118 adjustments are typically final unless appealed within 120 days of the initial determination. However, start your analysis within 30 days to allow adequate time for appeal preparation and submission.

Q: Can providers bill patients for services adjusted under CO-118? A: Generally no. If the service is appropriately included in the ESRD bundle, the dialysis facility receives payment and cannot bill the patient separately. Only services that are legitimately separate from the bundle can be billed to patients according to Medicare guidelines.

Q: What’s the difference between CO-118 and other ESRD-related denial codes? A: CO-118 specifically indicates network support adjustments, while other codes like CO-119 (ESRD payment bundling) or CO-120 (ESRD network assignment issues) address different aspects of ESRD billing. Each requires specific resolution approaches.

Q: How do I determine which dialysis facility a patient is assigned to? A: Use the Medicare Administrative Contractor portal to look up patient information, contact the patient directly, or check with the patient’s nephrologist who typically coordinates care with the assigned facility.

Q: Are there services that are never included in ESRD bundles? A: Yes, services unrelated to ESRD treatment such as emergency care for non-ESRD conditions, annual wellness visits, and certain preventive services remain separately billable even for ESRD patients.

Q: What documentation proves a service is separate from dialysis care? A: Medical records showing the service addressed non-ESRD conditions, was provided on non-dialysis days, or was medically necessary beyond routine ESRD care. Physician attestation and treatment plans supporting separate medical necessity are crucial.

Q: How do secondary insurance payments work with CO-118 adjustments? A: Secondary payers typically follow Medicare’s determination. If Medicare applies CO-118, secondary insurance usually won’t pay for the adjusted amount unless their specific policies differ from Medicare guidelines.

Q: Can CO-118 adjustments be appealed after the initial 120-day window? A: Generally no, unless there were extraordinary circumstances preventing timely appeal filing. Focus on filing appeals promptly and maintaining detailed records of all submission dates and responses.

Key Takeaways and Next Steps

CO-118 denials represent a complex intersection of ESRD payment policy and practical billing challenges. Success in managing these adjustments requires understanding both the clinical aspects of ESRD care and the regulatory framework governing payment bundling.

Immediate Action Items:

Audit current ESRD patient billing practices to identify CO-118 risk areas
Implement front-end verification processes for all ESRD patients
Establish communication protocols with local dialysis facilities
Train staff on Medicare portal navigation and ESRD billing requirements
Create standardized procedures for CO-118 analysis and resolution

Long-term Strategy Development:

Invest in technology solutions that automate ESRD patient identification and bundle awareness
Develop relationships with nephrologists and dialysis facilities for better care coordination
Create monthly reporting systems to track CO-118 trends and prevention success
Build expertise in ESRD appeals through focused training and experience
Consider specialization in ESRD billing as a competitive advantage in the nephrology market

The key to successfully managing CO-118 denials lies in prevention through education, technology, and process improvement. While some adjustments are legitimate and should be accepted, others can be successfully appealed with proper documentation and persistence. By implementing comprehensive ESRD billing protocols, practices can minimize their CO-118 denial rates while ensuring appropriate reimbursement for legitimately separate services.

Co 118 denial code