CARC 256: Service Not Payable Per Managed Care Contract

What it means

The payer is denying the claim because the specific service billed is excluded from payment under the terms of the patient's managed care contract or plan agreement. This isn't necessarily about coding errors — it's a contractual exclusion or limitation tied to the specific plan the patient is enrolled in.

Common causes

Service is explicitly excluded under the terms of the managed care contract
Provider is rendering a service outside the scope of their network agreement
Patient's specific plan variant has carve-outs not covered by the standard contract terms
Service requires a different billing arrangement (e.g., capitation vs. fee-for-service) than what was submitted
Contract terms changed and the claim was processed under outdated payment logic
Service falls under a separate risk pool or delegated entity not reflected in this claim submission

How to fix it

Pull the actual managed care contract or provider agreement and review the specific service exclusion language
Check the patient's plan ID and benefit summary to confirm the exact plan variant and its covered services list
Contact provider relations or the network management team at the payer to clarify why this specific CPT/HCPCS code is excluded
Verify whether the service should have been billed to a delegated entity (e.g., a capitated IPA or medical group) rather than the payer directly
If this is a new or unusual denial pattern, escalate internally to your managed care contracting team to confirm the contract terms are being applied correctly
Determine if the patient can be billed directly based on contract and state regulations, or if this is a provider write-off situation

Appeal / resubmit

Request a copy of the specific contract clause or fee schedule exclusion the payer is citing, since this denial is contract-based rather than a coding or medical necessity issue. If you believe the service is actually covered, submit an appeal with contract language, prior authorization approvals, or evidence of your network status attached. Involve your organization's managed care or contracting department early, as these denials often require negotiation at the contract level rather than a standard claims appeal.

Related codes

Frequently asked

Does this mean the service wasn't medically necessary?

No. This denial is about contract terms, not medical necessity. The payer is saying this particular service isn't reimbursable under the specific managed care agreement in place.

Can I bill the patient for this denial?

It depends on your contract terms and applicable state/federal regulations. Many managed care contracts prohibit balance billing patients for contractually excluded services, so review your agreement carefully before billing the patient.

Why would a covered service suddenly show this denial?

Contract terms, fee schedules, and carve-outs can change periodically or vary by plan product. It's worth confirming with the payer whether something shifted in the contract or plan configuration.

More free billing tools: all denial codes · denial lookup · Medicare fee calculator

This content is informational only and does not constitute billing or legal advice. Always verify current payer policies and contract terms before taking action.