RARC N425: Statutorily Excluded Service(s)
RARC N425 means the service is statutorily excluded — by law it is not a covered benefit under the program, most often Medicare. It rides with CO-96 or PR-96. There is nothing to appeal on coverage; the fix is confirming the exclusion, billing the correct payer or the patient with proper notice, and using the GY modifier when required.
- Type
- Informational (supplemental)
- Usually paired with
- CO-96, PR-96
- Fixable?
- No on coverage — route to correct payer or patient
- Typical fix
- Confirm exclusion; bill secondary or patient; append GY if Medicare
What does remark code N425 mean?
Official X12 text: "Statutorily excluded service(s)." The service is not covered because the law excludes it from the benefit — not because it lacked documentation or medical necessity. Under traditional Medicare that means things like routine physical exams, most dental, cosmetic surgery, and hearing aids. The exclusion is categorical, so no clinical evidence changes the outcome.
ERA mini-example: 92590 (hearing aid examination and selection) billed $120.00 denies with PR-96 and N425 because hearing aids and related exams are statutorily excluded from traditional Medicare. The balance moves to the patient or to a secondary plan that covers hearing benefits.
Which denial code does N425 come with?
Usually CO-96 or PR-96 (non-covered charge) — CO when contractually a write-off, PR when it lands on the patient. N425 explains the reason for the non-coverage: statute, not a payer policy you could argue. Compare it with N130, which points to a plan-document restriction rather than a legal exclusion. Sort them in the denial code lookup.
How do you handle an N425 denial?
- Confirm the service is truly statutorily excluded for this payer — verify the exclusion, do not assume it from the remark alone.
- Read the group code: PR moves the balance to the patient, CO makes it a write-off.
- Bill a secondary or supplemental plan that may cover the excluded benefit; for Medicare, append GY so the denial routes cleanly to the secondary.
- If the code was applied in error and the service is not excluded, appeal that specific point with the appeal letter generator.
How do you prevent N425 surprises?
Flag statutorily excluded services at scheduling so patients know before the visit that the item is not a covered benefit and understand their financial responsibility. Maintain a payer-specific exclusion list — what traditional Medicare excludes, a Medicare Advantage or commercial plan may cover — so front-desk staff route the claim correctly from the start. For Medicare excluded items you intend to bill for a denial, set the GY modifier at charge entry rather than after the first rejection.
Frequently asked questions
Not on the coverage question. Statutorily excluded means the law itself removes the service from the benefit — routine dental, most cosmetic procedures, hearing aids under traditional Medicare. No documentation makes an excluded service covered. Appeal only if the code was applied in error and the service is not actually excluded. Otherwise route the balance elsewhere.
Usually yes, but the group code decides. Statutory exclusions frequently ride with PR-96, making the balance the patient's. Because these are excluded by law rather than by a medical necessity decision, an ABN is not strictly required for Medicare, but many practices still obtain patient acknowledgment so there is no billing surprise. Confirm the PR versus CO group code before billing the patient.
Append GY to a Medicare claim when you know the item or service is statutorily excluded and you are billing only to generate the formal denial — often so a secondary payer or Medigap will consider it. GY tells Medicare the service is excluded and produces a clean patient-responsibility denial, which is exactly what N425 confirms on the remit.
Sources & further reading
Reviewed by the ImmediCare Solutions RCM team
Certified billers and coders handling claims across 50+ specialties nationwide. This entry is reviewed against current payer policy and CMS rules. Last review: Jul 5, 2026.
Stop losing revenue to problems like this.
A free billing audit shows exactly where your practice is leaking money — no cost, no commitment.
