Texas Subscriber
Answer: The problem might be in the code section you're under. Code 761.7 (Fetus or newborn affected by maternal complication of pregnancy; malpresentation before labor) is part of the section "Certain Conditions Originating in the Perinatal Period." The codes for the mother's bill should always be from the pregnancy section of ICD-9, not the fetal section. Because you're coding for a complication that led to a c-section, try a code from the "Complications in Pregnancy, Childbirth and the Puerperium" section instead. Your best option is 652.31 (Malposition and malpresentation of fetus; transverse or oblique presentation; delivered, with or without mention of antepartum condition).
In terms of the Medicaid denial error, Texas Medicaid guidelines state that 00873 means "The diagnosis and/or procedure code submitted does not correspond to client's age/sex." Double-check the procedure details and resubmit with 652.31.