Claim denial codes, explained
Group code, reason code, remark code: read all three before you rebill.
Every denial on a remittance carries a group code (CO, PR, OA or PI), a reason code (CARC) and often a remark code (RARC). Read together, they tell you who owes the balance, why the claim was cut, and whether to correct, reopen or appeal it.
- Group codes
- CO, PR, OA and PI
- Reason codes
- CARC, detailed by a RARC
- Medicare appeal
- 120 days from the notice
- Medicare filing limit
- 12 months from service
How to read a denial on an 835 or EOB
Each adjustment on a remittance is a group code, a reason code and an amount, written together as CO-197 or PR-1. The group code says who carries the amount. The claim adjustment reason code (CARC) says why the claim or line was paid differently than it was billed. A remittance advice remark code (RARC) often adds the detail you need to fix it.
On the electronic remittance advice (ERA), the X12 835, adjustments sit in the claim adjustment (CAS) segment, either for the whole claim or for each service line. Remark codes for a line go in the LQ segment, and remark codes for the whole claim in the MOA segment (MIA for inpatient claims), as the Medicare Claims Processing Manual, Chapter 22 sets out. Medicare’s standard paper remittance prints the same codes with their text, and the patient gets a Medicare Summary Notice instead.
A paper explanation of benefits (EOB) from a commercial plan reads the same way: find the adjustment amount on each line, then the codes or messages beside it. Read the whole line before you act. The same reason code can be a write-off under CO and a patient balance under PR, and a denial on one service line says nothing about the other lines on the claim.
If ERAs post in bulk with only the totals, denials hide inside them. Our payment posting team posts each adjustment with its codes, so no denial is buried in a deposit total.
Group codes: CO, PR, OA, PI and CR
The group code assigns responsibility for the amount. X12 keeps four group codes in use, and Medicare’s remittances use three of them.
- CO: Contractual ObligationA contract or a regulation caused the adjustment. Medicare’s manual calls these amounts generally a write-off for the provider, not billed to the patient.
- PR: Patient ResponsibilityAn amount that may be billed to the patient, typically the deductible, coinsurance or copay. Medicare patients may be billed only under PR.
- OA: Other AdjustmentUsed when no other group fits. X12 limits some reason codes to OA, such as 23, the effect of a prior payer’s payment on a secondary claim.
- PI: Payor Initiated ReductionA reduction the payer made on its own initiative; the reason code says why. Medicare does not use PI.
- CR: Corrections and ReversalRetired. X12 says it is not to be used with version 5010 and up, the version every Medicare ERA uses today.
CARC and RARC codes: how they combine
The CARC is the reason. Only one reason code can explain any one adjustment amount, so a line reduced for two reasons shows two adjustments, each with its own reason code and amount.
The RARC is the detail. X12 describes two kinds: supplemental remark codes that explain an adjustment a CARC already describes, and informational ones that start with "Alert:" and pass on processing news, such as appeal rights, without being tied to an adjustment. Some CARCs require a remark code. CO-16, for missing information or billing errors, must come with at least one remark code that is not an Alert, and that remark code tells you what to fix.
Payers do not pair the codes at random. Federally mandated CAQH CORE operating rules require standard CARC and RARC combinations on the 835. Both code lists change three times a year, around March 1, July 1 and November 1, and retired codes stop being valid, so check each code against the current list.
Corrected claim, reopening or appeal: which fix to use
Start with one question: was the claim wrong, or was the payer’s decision wrong? An error of your own, such as a wrong modifier, a transposed code or a missing field, is fixed by correcting the claim. A decision you disagree with on a claim that was right, such as a medical necessity denial, goes to an appeal with the records that support payment.
Medicare sets the routes in its rules. Clerical errors, which CMS defines to include transposed procedure or diagnosis codes, inaccurate data entry, a wrong modifier or date of service, and claims wrongly denied as duplicates, must be handled as reopenings, not appeals, under Chapter 34 of the Medicare Claims Processing Manual. A reopening cannot add services that were never billed, and asking for one does not stop the appeal clock.
- Returned as unprocessable (remark code MA130, often with CO-16): there are no appeal rights, so correct the claim and send it as a new claim.
- Processed, with a clerical error by you or the contractor: request a reopening, by phone or in writing for Part B, or send an adjusted claim for Part A.
- Processed as billed, and you disagree with the decision: request a redetermination, the first level of appeal, in writing.
- Medicare Advantage, Medicaid and commercial plans: send a replacement claim, frequency code 7 with the payer’s original claim number under the NUCC instructions for item 22 of the CMS-1500, or follow the appeal steps in the plan’s provider manual.
The denial deadlines that matter
For Medicare, several clocks run at once. A redetermination must be requested within 120 days of receiving the initial determination, and receipt is presumed to be 5 days after the notice date, according to the CMS appeals booklet. The second level, reconsideration, must be requested within 180 days of receiving the redetermination notice. A reopening can be requested within 1 year of the initial determination for any reason, or within 4 years with good cause.
The claim itself must be filed within 1 calendar year of the date of service under 42 CFR 424.44. The exceptions are narrow, such as an error by Medicare or its contractor or Medicare entitlement granted retroactively, so a claim you resend after it was returned as unprocessable still has to arrive within that year.
Medicare Advantage, Medicaid and commercial plans set their own filing and appeal windows in the provider manual and your contract, and some are far shorter than Medicare’s. Our denial management team puts every denial on a calendar the day it posts, with that payer’s deadline beside it.
Denial codes, one page each
What each code means, why it happens and how to clear it.
CO-16
Missing or invalid claim information. The remark code names the field; fix it and resubmit.CO-97
Bundled into another service already paid. Check the edit and the notes before adding a modifier.CO-45
Your charge exceeds the allowed amount. Usually a write-off; a problem when the allowed is below contract.CO-22
Another payer may be primary under coordination of benefits, so that payer has to be billed first.CO-197
The plan required precertification, authorization or notification and found none for this service.
A claim adjustment reason code (CARC) explains why a claim or service line was paid differently than it was billed, and each adjustment amount has exactly one. A remittance advice remark code (RARC) adds detail to that reason, such as which field was missing, or passes on general information marked "Alert:". Read them as a pair: the CARC gives the kind of problem, and the RARC usually tells you what to change.
CO stands for Contractual Obligation. A contract or a regulation caused the adjustment, so the amount falls to the practice rather than the patient, and for Medicare, CMS says these amounts are generally written off and not billed to the patient. A CO denial is not always final, though: CO-16 and CO-22, for example, can be paid once the claim is corrected or sent to the right payer.
Only when the remittance puts the amount on the patient. For Medicare patients, CMS says you may bill the beneficiary only when an adjustment carries group code PR, such as the deductible or coinsurance. Amounts under CO stay with the practice. For other payers, your network contract sets the rule, so check its hold-harmless terms before you send a patient a bill for a denied service.
For Medicare, 120 days from receiving the initial determination to request a redetermination, with receipt presumed 5 days after the notice date. Clerical errors on Medicare claims go through a reopening instead, which can be requested within 1 year of the initial determination. Medicare Advantage, Medicaid and commercial plans set their own windows in the provider manual and contract, and some are much shorter.
Many start before the claim is built. Coordination of benefits denials (CO-22) and coverage denials trace back to an eligibility and benefits check before the visit. Missing approvals (CO-197) trace back to a prior authorization that was never requested or does not match the claim. Missing information (CO-16) and bundling (CO-97) start at coding and charge entry.
The CARC and RARC lists are updated three times a year, around March 1, July 1 and November 1. Codes are added, reworded and retired. CARC 15, for a missing or invalid authorization number, stopped in 2018, for example, and codes 284 and 296 now cover an authorization number that does not apply to the billed service or to the provider. Check every code against the current X12 list.
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