Contractual Adjustment

A contractual adjustment is the difference between your billed charge and the payer's allowed amount that you agree to write off under your contract — normal, unless the allowed amount itself is below your contracted rate.

A contractual adjustment is the portion of your billed charge you write off because your contract with the payer says you'll accept the allowed amount as payment in full. It shows up on the remit as a CO-45 (charge exceeds fee schedule) and is a normal, expected part of every in-network claim: you bill above the contracted rate, the payer allows the contracted rate, and the difference is the contractual adjustment. The trap is that a contractual adjustment looks routine by design, which is exactly why underpayments hide inside it. The write-off is only legitimate if the allowed amount actually equals what your contract promises. If the payer priced the claim to an outdated fee schedule, a mis-loaded rate, or the wrong locality, the 'contractual adjustment' is larger than it should be — and the extra is recoverable money that got written off as normal. The adjustment itself isn't appealable; the below-contract allowed amount behind it is. Catching this requires comparing the allowed amount on every line against your loaded fee schedule, because the remit gives you no other signal that the write-off was too big. Practices that post contractual adjustments without checking the allowed amount against contract leak revenue on paid claims, not just denied ones.

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