Denial code · group CO
CO-253: A federal budget sequestration cut reduced the payer's payment on this claim
Short answer
Denial code CO-253 is not a denial at all. It is the adjustment on a Medicare remittance that shows the payment cut required by federal sequestration, taken after the allowed amount, deductible and coinsurance are worked out. Nothing needs to be appealed or corrected. Post it as a contractual adjustment, keep it out of the patient balance, and use it to check that the payment math is right.
Look up other codes in the denial code library.
Last reviewed by the Remitwright billing team. Editorial policy
Group CO means contractual obligation: the balance is written off, not billed to the patient. The number is the reason; the two-letter group says who carries the balance.
Common causes
A federal sequestration order applies to Medicare payments
CMS Transmittal 2739 explains that a sequestration order issued on March 1, 2013 led to a 2 percent reduction in Medicare fee-for-service payments for services or discharges on or after April 1, 2013. Every Medicare fee-for-service payment since then has carried the cut, except during the periods when Congress suspended or reduced it.
CARC 253 replaced the code Medicare used first
Medicare first reported the reduction under CARC 223, a general code for adjustments required by law. The same transmittal replaced it with CARC 253, effective June 3, 2013, so the cut now has its own code on the 835.
The rate changed with later laws
A CGS notice from March 2022 explains that the Protecting Medicare and American Farmers from Sequester Cuts Act kept the adjustment at zero through March 31, 2022, set it at 1 percent from April 1 to June 30, 2022, and returned it to 2 percent from July 1, 2022. Old claims reprocessed today can show a different amount for that reason.
Other payers that pass the cut through
A Medicare Advantage plan or another payer may also report CARC 253 on its own remittance. Whether it may reduce your payment that way depends on your contract with it, not on the Medicare rule.
How to fix it and resubmit
- 1
Post it as its own contractual adjustment
Map CARC 253 to a dedicated adjustment code in the practice management system. That keeps sequestration visible in reporting and separate from contractual write-offs under CO-45.
- 2
Check the arithmetic
CGS states the reduction is calculated after the approved amount is set and the deductible and coinsurance are applied. Take Medicare's share of the allowed amount and confirm the CO-253 amount matches the rate in force for that date of service.
- 3
Keep it out of the patient's balance
The group code is CO. The patient's coinsurance is figured before the reduction, so the cut never changes what the patient owes and never belongs on a statement.
- 4
Question it only on non-Medicare remittances
If a commercial or Medicare Advantage plan takes a CO-253 reduction, find the clause in your contract that allows it. Where no clause exists, raise it with provider relations as an underpayment.
How to prevent it
- CARC 253 mapped to a posting rule so it never lands in the denial work queue or the denial rate
- Expected-payment tables for Medicare fee-for-service that net out the sequestration amount, so variance reports flag only real underpayments
- A contract review for each Medicare Advantage plan that notes whether it passes sequestration through
A small variance on a chiropractic payment
A chiropractic office's variance report flags a Medicare payment for a spinal adjustment as short. The allowed amount is 50.00 dollars and the patient's Part B deductible is already met, so the patient owes 20 percent coinsurance, 10.00 dollars, and Medicare's share before sequestration is 40.00 dollars. The 835 shows 39.20 dollars paid and a CO-253 adjustment of 0.80, which is 2 percent of 40.00 at the rate that resumed on July 1, 2022. The posting team posts the 0.80 to its sequestration adjustment code, closes the variance, and updates the expected-payment table so the next one does not flag.
Official text: the X12 claim adjustment reason code list. The meaning above is our paraphrase for billers; the list is the authority.
FAQ
Questions about CO-253
Is CO-253 a denial?
Can I bill the patient for the CO-253 amount?
Is the rate still 2 percent?
Why does an old claim show a different CO-253 amount?
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