What is a claim adjustment reason code?

A Claim Adjustment Reason Code (CARC) is a standardized three-character code used by payers to explain why a medical claim was paid differently than billed. Maintained by ANSI X12 and mandated by HIPAA for all electronic transactions, CARCs appear on the ERA 835 and EOB paired with group codes that assign financial responsibility.

What does group code CO mean on a remittance?

CO stands for Contractual Obligation. It indicates that the adjustment is the provider’s contractual write-off under their payer agreement. CO-adjusted amounts cannot be billed to the patient. Post these as contractual adjustments and verify the allowed amount matches your contract.

What does group code PR mean?

PR stands for Patient Responsibility. It indicates that the adjusted amount is the patient’s financial obligation—typically deductible (PR-1), coinsurance (PR-2), or copay (PR-3). Post PR amounts to the patient’s balance and bill accordingly.

What is the difference between CARC and RARC codes?

CARCs explain the general reason for a claim adjustment (e.g., fee schedule reduction, missing data, duplicate claim). RARCs provide supplemental detail about what specifically caused the adjustment. Both are mandated by HIPAA for electronic remittances. Read them as a pair for the most actionable information.

How do I know if a claim adjustment is appealable?

Review the group code and CARC together. CO adjustments matching your contract (CO-45, CO-97) are generally not appealable. PI adjustments, OA adjustments with error indicators, and CO adjustments paired with RARCs showing missing information (CO-16, CO-4) are often recoverable through correction and resubmission or formal appeal.

What is CO-45 in medical billing?

CO-45 means the billed charge exceeds the payer’s fee schedule, maximum allowable, or contracted rate. It is the most common CARC in medical billing. The difference between your billed charge and the allowed amount is posted as a contractual write-off. If the allowed amount doesn’t match your contract, flag it for fee schedule review.

Claim Adjustment in Medical Billing: CARC Codes, Group Codes, and How to Resolve Payment Discrepancies

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