CO-118 is a small, expected cut on dialysis claims. It’s the ESRD network support adjustment. Medicare takes it out of each dialysis payment to fund the regional ESRD networks. ESRD networks are the organizations that oversee quality and patient support for kidney care. The CO group means the facility absorbs it; it’s never billed to the patient. Most of the time, you just post it. The work is in spotting the few claims where it shouldn’t appear, or where the amount looks wrong. (Primary source: X12 Claim Adjustment Reason Codes)
In brief: CARC 118 reads “ESRD network support adjustment.” Medicare reduces each covered dialysis treatment by 50 cents for the networks, per the CMS manual. Post it as a contractual adjustment. Question it only when the amount is off or the claim is one the rule doesn’t cover, such as an AKI claim.
Part of our denial codes library. Written by Manikandan J, CPC, CRCR, who has reconciled dialysis facility remits. Published 21 October 2026. Last updated: 21 October 2026. Code wording is quoted word for word from X12.
X12 wording for CARC 118
| Field | X12 text |
|---|---|
| Code | 118 |
| Description | “ESRD network support adjustment.” |
| Start | 01/01/1995 |
| Last modified | 09/30/2007 |
Source: X12 Claim Adjustment Reason Codes, checked 21 October 2026.
Example scenario (fictional names), part 1
CO-118 Denial Example: What Happened
Mia Turner reconciles remits for Lakeside Kidney Care, an outpatient dialysis facility. One patient wasn’t on long-term dialysis. He had acute kidney injury (N17.9) after surgery and needed short-term treatment. Lakeside billed those sessions as AKI dialysis, G0491, to its Medicare contractor.
The remit paid the treatments but showed CAS*CO*118 on each line, with remark LQ*HE*MA01. Mia had seen CARC 118 on every chronic patient’s claim for years. Something about seeing it here bothered her.
Should the network reduction apply to this patient at all? Keep reading, or jump to how the CO-118 denial was resolved.
How the ESRD network reduction works
The Medicare Claims Processing Manual, Chapter 8, section 110, explains the rule. A 1986 law requires Medicare to cut 50 cents from each dialysis treatment payment and give it to ESRD network work. An ESRD facility is a hospital-based or independent dialysis unit paid under the ESRD prospective payment system.
| Rule from the CMS manual | What it means for posting |
|---|---|
| $.50 per covered treatment at the full ESRD PPS rate | Expect a 50-cent CO-118 per treatment |
| Daily rate of $.21 for continuous home dialysis | Smaller per-day amounts for those claims |
| Applies to all modalities, including training | Training sessions show it too |
| Not applicable to AKI claims | AKI dialysis claims shouldn’t show it |
| Reported with value code 71 | You may see value code 71 in claim data |
Remark codes you’ll see with CARC 118
CARC 118 usually stands on its own. Medicare remits often carry a general appeal alert with it:
| RARC | X12 wording |
|---|---|
| MA01 | “Alert: If you do not agree with what we approved for these services, you may appeal our decision.” |
MA01’s full text continues; see the X12 RARC list.
Checking and posting CO-118
- Confirm the claim type. For example, is it maintenance dialysis, home dialysis, training, or AKI?
- Check the amount. Expect 50 cents per covered treatment, or the daily rate for continuous home dialysis.
- Post it as contractual. Use a dedicated adjustment code so it’s easy to report.
- Flag unexpected lines. AKI claims or odd amounts need a closer look.
- Ask for a reopening or appeal. If the reduction shouldn’t apply, contact the contractor with the manual section.
- Never bill the patient. It’s a program reduction, not cost sharing.
Example scenario (fictional names), part 2
How the CO-118 Denial Was Resolved
Mia opened Chapter 8 of the CMS manual. Section 110 says the network reduction isn’t applicable to AKI claims. MA01 reminded her that the facility could ask for a review. She checked the claim: G0491, N17.9, built as an AKI claim. The cut didn’t belong.
Fix: Mia sent a reopening request with the claim details and a quote from section 110.
Outcome: the contractor reprocessed the claims without CARC 118. Lakeside now runs a monthly report of CO-118 lines on AKI claims.
Names and details are illustrative; no real patient data.
Worked example (illustrative)
A home dialysis program reviews a month of remits for a patient on continuous peritoneal dialysis. Each day shows CO-118 for 21 cents. The biller checks the manual, confirms the daily rate for continuous home modalities and posts the amounts as contractual. Nothing needs to be appealed.
Mistakes to avoid
- Treating CO-118 as a denial. The claim paid; this is a small set reduction.
- Billing the patient. It’s not coinsurance.
- Ignoring it on AKI claims. The manual says it doesn’t apply there.
- Lumping it with other adjustments. A separate code makes errors easy to spot.
Related codes
- CO-253: sequestration reduction, another small Medicare cut.
- CO-45: charge exceeds the fee schedule.
- CO-23: impact of prior payer adjudication.
Key takeaways
CO-118 is Medicare’s 50-cent ESRD network reduction per dialysis treatment, with a daily rate for continuous home dialysis. Post it as contractual and never bill the patient. Watch for it on AKI claims, where the CMS manual says it doesn’t apply, and ask for a reopening when it shows up there.
FAQ
What does CO-118 mean?
It means “ESRD network support adjustment.” Medicare cut a small amount to fund ESRD networks.
How much is the ESRD network reduction?
Per the CMS manual, $.50 per covered treatment at the full ESRD PPS rate, or $.21 a day for continuous home dialysis.
Is CO-118 a denial?
No. The treatment was paid; CO-118 is a small set reduction.
Can I bill the patient for CO-118?
No. It’s a program reduction, not patient cost sharing.
Does CO-118 apply to AKI dialysis?
No. The CMS manual says the network reduction isn’t applicable to AKI claims.
Where is the rule written?
Medicare Claims Processing Manual, Chapter 8, section 110.
Sources
How we checked: each code quote on this page was compared word for word with the X12 CARC and RARC lists on 21 October 2026.
- X12, Claim Adjustment Reason Codes (CARC 118, 23, 45, 253). Accessed 21 Oct 2026.
- X12, Remittance Advice Remark Codes (MA01). Accessed 21 Oct 2026.
- CMS, Medicare Claims Processing Manual, Chapter 8, section 110. Accessed 21 Oct 2026.
Last updated: 21 October 2026 ยท This page is educational and doesn’t replace CMS instructions.
Related denial codes
- CO-117: Transport Only Covered to the Closest Appropriate Facility
- CO-122: Psychiatric Reduction
- CO-128: Newborn Covered in Mother's Allowance
- CO-135: Interim Bills Cannot Be Processed
- CO-78: Non-Covered Days or Room Charge Adjustment
- CO-76: Disproportionate Share (DSH) Adjustment
- CO-75: Direct Medical Education (DGME) Adjustment
- CO-74: Indirect Medical Education (IME) Adjustment