What is a CARC?
A Claim Adjustment Reason Code explains why a payer paid a claim line differently from what was billed. Paired with a group code (CO, PR, OA or PI), it accounts for every dollar not paid.
Adjustments on a remittance
| Code | Meaning | Who owns it |
|---|---|---|
| CO-45 | Charge exceeds the contracted fee schedule | Provider, write off |
| PR-1 | Deductible | Patient |
| PR-2 | Coinsurance | Patient |
| PR-3 | Copay | Patient |
| CO-97 | Bundled into another service already paid | Provider, unless appealed |
| CO-197 | Authorization absent | Provider, unless fixed or appealed |
| OA-23 | Impact of a prior payer's adjudication | Shown on secondary claims |
| CO-253 | Sequestration, the 2% Medicare reduction | Provider, write off |
- The group code says who is responsible: CO the provider by contract, PR the patient, OA neither, PI a payer-initiated reduction.
- The same reason code can mean a write-off or a denial worth fighting. CO-45 is routine; CO-197 is money to recover.
Every line on an ERA or EOB balances: billed equals paid plus adjustments. CARCs label each adjustment so both sides know why.
Group codes come first
- CO, contractual obligation: the provider absorbs it under its contract and can’t bill the patient.
- PR, patient responsibility: deductible, coinsurance, copay or non-covered services the patient agreed to pay. See patient responsibility.
- OA, other adjustments: neither side, such as the effect of a prior payer’s payment.
- PI, payer initiated: a reduction the payer believes the patient shouldn’t pay, without a contract behind it.
Denials hide among adjustments
Most adjustments are routine. CO-45, the difference between billed and allowed, appears on almost every line. A denial is an adjustment too, and on a long remittance it looks just like the routine ones. Telling them apart, and reading the remark codes that come with them, is the first step of any denial process.
Who maintains them
CARCs are a national code set used in every 835. Codes are added, changed and retired several times a year, so the list a billing system uses has to be kept current.
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