Payments

What is Contractual adjustment?

The difference between your billed charge and the payer’s contracted allowed amount, which a participating provider must write off.

Also known as
contractual write-off · CO adjustment · allowed amount adjustment

Definition

When you contract with a payer you agree to accept its allowed amount as payment in full. The gap between your charge and that allowed amount is the contractual adjustment — reported as a CO-group adjustment on the remittance, most often CO-45.

It is not a loss and not a denial, and under nearly every participating agreement it cannot be billed to the patient. What makes it worth watching is that a genuine underpayment looks exactly like a routine contractual adjustment unless the allowed amount is checked against the contract.

Why it matters

Contractual adjustments are usually the largest single line in a remittance. Auto-posting them without validation is how underpayments stay hidden.

Denial codes to know

CO-45 · Charge exceeds fee schedule / maximum allowableCO-59 · Processed under multiple or concurrent procedure rules

Related terms

Underpayment (payment variance)Net collection rateCARC (Claim Adjustment Reason Code)

See this in your own numbers

PayerVista turns the remittance files your payers already send into a live view of claims, denials, payer performance, and outstanding AR — in minutes, with no implementation project.

Start free trialExplore the live demo — no signup →