CO 197 denial code for physical therapists

CO-197 denial code is a claims adjustment reason code (CARC) that is included in an insurance denial. This CARC supplies the provider with a reason for the denial, presumably to fix the problem and obtain approval and payment upon resubmission.

Summary

• CO 197 denial codes occur when prior authorization is missing—a common billing error that can delay payment and disrupt care. These denials often happen when services are provided without verifying insurance requirements or including the proper authorization number. Enrolling in an insurance billing course for therapists can help providers enhance their knowledge.

• Preventing CO 197 denials starts with verifying patient benefits and confirming which CPT or HCPCS codes require pre-authorization before care begins. Clear communication, documentation, and waiting for insurer approval are essential steps.

• If denied, providers can resubmit claims or appeal by correcting errors and including detailed medical necessity documentation. Reading the denial letter carefully and contacting the insurer is crucial to a successful resolution.

• EHR and billing software like TheraPlatform can streamline this process by automating claim submissions, live claim validation, and tracking payments—helping therapists reduce errors, save time, and get reimbursed faster.

One common CARC is the CO 197 denial code or precertification/authorization/notification/pre-treatment absent

When billing insurance, the goal is to have all your claims approved and paid out quickly but doing so can feel like a game or mystery to many providers. No one likes to draw the denial card as it delays payment and interferes with future patient care. It’s impossible to be the winner with too many claim denials.

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Under their licenses, healthcare providers can administer any medically indicated treatment that is within their scope of practice and for which the patient consents.

Who pays for that treatment, however, is a much more complicated question, one that involves the intricacies of insurance companies and other healthcare entities.

Many insurance companies and payers require that providers receive authorization or approval before they provide a certain treatment or service. This is called a pre-authorization, prior authorization or precertification.

The CO 197 denial claim can pose a real problem if you have already provided the service for which pre-authorization is required and learning how to avoid these denials is an important part of improving billing practices and securing payment for services. To learn more about this CARC and how to avoid this denial, continue reading.

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What is the purpose of prior authorization and precertification?

Prior authorization or precertification is obtaining approval from a payer or insurance company before administering a treatment or providing a service. Many sectors of healthcare deal with prior authorizations including medicine, surgery, pharmacy and rehabilitation.

The prior authorization process allows insurance companies and payers to certify that a specific treatment or service is medically necessary.

Insurance companies employ healthcare workers as clinical reviewers or prior authorization specialists. These employees are responsible for reviewing a prior authorization request and either approving or denying the request.

As you might imagine, the pre-authorization process places a significant burden on the requesting healthcare provider to adequately communicate the medical necessity of their planned treatment or intervention.

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Reasons you might receive a CO 197 denial

There are a few reasons why a provider might receive a CO 197 denial code for a claim:

• Failure to obtain prior authorization from the insurance company before providing the service

• Providing a service after the prior authorization has expired or outside of the pre-approved timeframe

• Failure to include the authorization number in the claim

Attempting to bill for services not covered by the client’s insurance plan can result in a CO 204 denial.

Preventing CO 1970 denial codes

The easiest way to deal with the CO 197 denial code is to avoid them in the first place. From the time a patient schedules their initial examination to the point of receiving payment for physical therapy services, several potential pitfalls should be avoided to minimize CO 197 denial code.

Confirm patient benefits and requirements for prior authorization

When confirming a patient’s benefits, it is important to ask about requirements for prior authorization. Have a list of the most common CPT and HCPCS codes that you may submit on a claim and verify whether any of these codes require prior authorization.

Obtain prior authorization

Ensure you and your therapists know which services require prior authorization and secure the prior authorization before therapists begin treatment.

A prior authorization request should include the following:

• Information about the patient’s condition including why your services are medically necessary

• The proposed service or procedure

• Supporting documentation which may include your initial evaluation or progress notes and test results or a letter or medical necessity

If the prior authorization is denied, consider submitting an appeal with additional documentation or by correcting any errors found on the original request.

Note, if you receive a non-affirmative prior authorization decision this means that there was a preliminary finding that the claim for service does not meet the insurance provider’s coverage, coding or payment requirements. If this is the case, do not proceed with care. Instead, you can resubmit the request for prior authorization with more supporting information or documentation in hopes of receiving prior approval.

Wait for the insurance company response

It is important to wait for the insurance company’s decision before administering any services that require pre-authorization. Sometimes prior authorization is required before the therapist can perform an initial evaluation, before they can perform any follow-up visits or only for a certain procedure.

Communicate with the patient about the requirement for prior authorization so they understand the purpose of any delays in care.

Document and record the authorization

You will receive the decision on prior authorization in writing. Keep a record of authorization details in the chart including approval status, approval dates and any reference numbers.

Communicate with payers

Regular communication with payers to check that all requirements for claim approvals are being met is important. It is also important to recheck for prior authorization requirements when the patient’s insurance renews.

Implement systems to manage authorizations

Streamlining the process for prior authorization and claims management is always a good plan. Take the time to educate billing and administrative teams on the authorization process and therapists on the importance of good supportive documentation.

Dealing with the CO 197 denial code

If you have received a CO 197 denial, it is important to take prompt action to correct the claim and resubmit. First, read the denial letter carefully. This letter will inform you of the specific reason your claim was denied. If you did indeed secure prior authorization for the service before submitting the claim, resubmit the claim including the unique tracking number listed on the prior authorization approval letter.

In some cases, an appeal can be submitted with extra documentation in an attempt to prove to the insurance company that your services were medically necessary. In any case, if you receive a CO 197 denial and plan to resubmit the claim for payment or appeal the denial, make sure to contact the payer or insurance company to ensure the new claim or appeal is being processed.

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Pulling it all together

The process of avoiding claim denials begins after the patient calls to schedule their first visit and continues until they are discharged and all claims are paid. Ensuring staff are well-educated in the process is one of the most important steps that can be taken to minimize denials as is proactive management of benefit confirmations, documentation and claims submission.

Finally, collaboration between billers, administrative employees and therapists helps improve the accuracy and timeliness of claims submission and ensures that patients can receive the care they need while clinics and therapists are being reimbursed for their time.

How EHR and practice management software can save you time with insurance billing for therapists

EHRs with integrated billing software and clearing houses, such as TheraPlatform, offer therapists significant advantages in creating an efficient insurance billing process. The key is minimizing the amount of time dedicated to developing, sending, and tracking medical claims through features such as automation and batching.

What are automation and batching?

• Automation refers to setting up software to perform tasks with limited human interaction.

• Batching or performing administrative tasks in blocks of time at once allows you to perform a task from a single entry point with less clicking.

Which billing and medical claim tasks can be automated and batched through billing software?

• Invoices: Create multiple invoices for multiple clients with a click or two of a button or set up auto-invoice creation, and the software will automatically create invoices for you at the preferred time. You can even have the system automatically send invoices to your clients.

• Credit card processing: Charge multiple clients with a click of a button or set up auto credit card billing, and the billing software will automatically charge the card (easier than swiping!)

• Email payment reminders: Never manually send another reminder email for payment again, or skip this altogether by enabling auto credit card charges.

• Automated claim creation and submission: Batch multiple claims with one button click or turn auto claim creation and submission on.

• Live claim validation: The system reviews each claim to catch any human errors before submission, saving you time and reducing rejected claims.

• Automated payment posting: Streamline posting procedures for paid medical claims with ERA. When insurance offers ERA, all their payments will post automatically on TheraPlatform's EHR.

• Tracking: Track payment and profits, including aging invoices, overdue invoices, transactions, billed services, service providers.

Utilizing billing software integrated with an EHR and practice management software can make storing and sharing billing and insurance easy and save providers time when it comes to insurance billing for therapists.

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Resources

TheraPlatform is an all-in-one EHR, practice management, and teletherapy software built for therapists to help them save time on admin tasks. It offers a 30-day risk-free trial with no credit card required and supports different industries and sizes of practices, including physical therapists in group and solo practices.

More resources

• Therapy resources and worksheets
• Therapy private practice courses
• Ultimate teletherapy ebook
• The Ultimate Insurance Billing Guide for Therapists
• The Ultimate Guide to Starting a Private Therapy Practice
• Mental health credentialing
• Insurance billing 101
• Practice management tools
• Behavioral Health tools

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References

Claim adjustment reason codes. (2025, January 10). X12. https://x12.org/codes/claim-adjustment-reason-codes

Preauthorization - glossary. (n.d.). https://HealthCare.gov, https://www.healthcare.gov/glossary/preauthorization