Denial code CO-97 appears when a payer determines that the service you billed is already included in the payment for another service on the same claim. In billing terminology, the denied service is “bundled” into the other service. The payer paid the primary service and considers the bundled service to be a component of that payment, not a separately billable item.
Bundling logic comes primarily from the National Correct Coding Initiative (NCCI), which CMS maintains and updates quarterly. Most commercial payers follow NCCI edits as their baseline, though some apply additional proprietary bundling rules. Understanding which service pairs are bundled, when you can legitimately unbundle them, and how to document distinct services is essential for managing CO-97 denials.
Understanding Bundling and CO-97
CARC code CO-97 reads: “The benefit for this service is included in the payment/allowance for another service/procedure that has already been adjudicated.” This means the payer processed another code on your claim (or a recent claim) and considers the CO-97 denied code to be part of that service.
The concept makes clinical sense in many cases. When a surgeon performs a knee arthroscopy (29881), the pre-operative exam, local anesthesia, and wound closure are components of the surgical package. Billing them separately would be double-dipping because the arthroscopy payment already accounts for those components. NCCI edits formalize these bundling relationships across thousands of code pairs.
However, not all CO-97 denials are correct. Some represent legitimate distinct services that happened to share a date of service or claim. A nerve block performed at a different anatomical site than an epidural injection is a distinct service, even though the code pair triggers an NCCI edit. When the clinical scenario supports it, you can unbundle with the appropriate modifier and documentation.
NCCI Column 1/Column 2 Edits
NCCI edits organize code pairs into Column 1 (the comprehensive or primary code) and Column 2 (the component or bundled code). When both codes appear on the same claim for the same patient and same date of service, the Column 2 code is bundled into the Column 1 code payment. The Column 2 code receives the CO-97 denial.
Each code pair has a modifier indicator that determines whether unbundling is allowed. Indicator 0 means the pair can never be unbundled, even with a modifier. These represent services that are always components of the primary service. Indicator 1 means unbundling is permitted with modifier 59 or X modifiers when the clinical documentation supports distinct services. CMS publishes the complete NCCI edit tables on their website, updated quarterly.
Beyond Column 1/Column 2 edits, NCCI also maintains Medically Unlikely Edits (MUEs) that set maximum units per code per day per provider. Exceeding the MUE triggers a denial that may come back as CO-97 or CO-151. MUEs are based on clinical probability: it is medically unlikely to perform more than a certain number of a specific procedure on the same patient in a single day.
When to Unbundle (and When Not To)
Unbundling is appropriate when two services were performed as genuinely distinct procedures. The four scenarios that support unbundling correspond to the four X modifiers:
XE (separate encounter): The two services occurred during different encounters on the same day. For example, a morning office visit and an afternoon procedure that required a separate trip.
XS (separate structure): The two services were performed on different anatomical sites or organ systems. A nerve block on the left knee and an injection on the right shoulder are separate structures.
XP (separate practitioner): Two different providers performed the services on the same patient on the same day. Each provider bills their own service with XP.
XU (unusual non-overlapping service): The services are distinct but do not fit XE, XS, or XP criteria. This is the least common modifier and should be used only when the others do not apply.
Modifier 59 is the legacy modifier that predates the X modifiers. CMS prefers the X modifiers because they are more specific, but modifier 59 is still accepted by most payers. When you can use an X modifier, use it instead of 59.
Never unbundle just to get paid. If the services were truly components of a single procedure, they should remain bundled. Appending modifier 59 to bypass an edit without clinical justification is considered unbundling fraud. The Office of Inspector General (OIG) and Medicare Administrative Contractors actively review modifier 59 usage patterns and target outlier providers for audit.
Resolving CO-97 Denials
Start by identifying the code pair. The remittance advice shows which line was denied with CO-97 and which line was paid. Look up the pair in the NCCI edit tables to determine the modifier indicator.
If the modifier indicator is 0, the pair cannot be unbundled. Accept the denial. The payment for the Column 1 code already includes compensation for the Column 2 service.
If the modifier indicator is 1, review the clinical documentation. Were the services performed at different anatomical sites? During different encounters? By different practitioners? If yes, resubmit with the appropriate X modifier and a note explaining the distinct nature of the services.
If the bundling edit is not in the NCCI tables but is a payer-specific proprietary edit, you have stronger grounds for appeal. Payer-specific edits are not always clinically justified and can sometimes be overturned by demonstrating that the services were separate and necessary. Include clinical documentation and a reference to the NCCI tables showing that CMS does not bundle the pair.
Common Bundling Traps
E/M services on the same date as procedures are the most frequently bundled pair. When a patient comes in for a scheduled injection and the physician also performs a separately identifiable E/M service, modifier 25 on the E/M code tells the payer the evaluation was distinct from the procedure. Without modifier 25, the E/M is bundled into the procedure payment. However, do not append modifier 25 to every E/M just because a procedure was performed. The E/M must be genuinely separate and documented as such.
Imaging guidance codes (76942 for ultrasound, 77002 for fluoroscopy) are frequently bundled into the procedure they guide. Some procedures include imaging guidance in their CPT description (and payment). Check the CPT code descriptor: if it says “with imaging guidance” or “with fluoroscopic guidance,” the imaging is bundled and should not be billed separately.
Lab panels versus individual component tests create bundling issues. If you perform all the tests in a panel (e.g., all components of 80053 Comprehensive Metabolic Panel), bill the panel code, not the individual tests. Billing individual tests when a panel code exists results in CO-97 denials for the component codes and may also be flagged as unbundling.
Compliance Considerations
The OIG consistently identifies unbundling as a top fraud and abuse risk area. Annual OIG work plans regularly include reviews of modifier 59 usage, evaluation and management coding with procedures, and specific code pair unbundling patterns. Practices that show outlier patterns in unbundling relative to their specialty peers receive audit inquiries.
Protect your practice by training coders on NCCI edits, requiring clinical documentation review before appending modifier 59 or X modifiers, and running internal audits of your modifier 59 usage. Compare your modifier 59 usage rate to specialty benchmarks. If your rate significantly exceeds the benchmark, investigate whether the modifier usage is clinically justified or represents a coding pattern that needs correction.
When you find that unbundling was done incorrectly and payments were received, consider voluntary self-disclosure to the payer. Returning overpayments proactively demonstrates good faith and reduces audit risk. The 60-day rule requires providers to return identified overpayments within 60 days of identification or face False Claims Act exposure.