Healthcare providers use a complex system of CARC RARC codes every day. The industry currently employs 1,185 RARCs and 358 CARCs. These standardized codes act as a universal language for claim adjustments and payment processing in medical billing.
CARC (Claim Adjustment Reason Code) explains the main reason for claim adjustments. RARC (Remittance Advice Remark Code) provides additional details about rejected or adjusted claims. Electronic transactions in healthcare require these codes. They are vital to streamline the billing process and ensure clear communication between providers and payers.
Let's explore everything healthcare providers should know about these billing codes, their differences, and how they work together in the claims process.
Claim Adjustment Reason Codes (CARCs) are the foundations of medical claim processing. These codes provide standardized explanations about claim adjustments or denials. Healthcare providers and insurance payers use them to communicate effectively during claims processing.
CARC stands for Claim Adjustment Reason Code. These codes tell you why a claim wasn't paid as expected. CARCs show adjustments to claim payments because of contractual obligations, patient responsibility, or duplicate billing. The American National Standards Institute (ANSI) Accredited Standards Committee X12 maintains about 358 CARC codes. HIPAA regulations have made these codes mandatory to use in electronic healthcare transactions.
Insurance providers include CARCs on Electronic Remittance Advice (ERA) and Explanation of Benefits (EOB) documents. Each CARC has two parts: a group code with two letters and a numeric value. These codes help you identify claims that need manual posting, require rework and resubmission, or should go directly to patients instead of insurance payers.
Group codes show the simplest reason behind claim adjustments with two alphabetical characters:
Each CARC's numeric component gives more specific details beyond these group codes. CO-45 means "Charge exceeds fee schedule/maximum allowable or contracted/legislated fee arrangement". On top of that, CO-97 indicates "The benefit for this service is included in the payment/allowance for another service/procedure".
CARCs are a great way to get clarity about claim adjustments in medical billing. They guide providers on what steps to take next when claims don't process as predicted.
Remittance Advice Remark Codes (RARCs) play a supporting role in claims adjudication by providing details that CARCs can't convey alone. Medicare created these codes as a proprietary list at first. They later became an industry standard under HIPAA regulations, and most insurance providers employ them now.
RARCs come in two distinct categories based on how they work in the claims process:
Supplemental RARCs: These codes are a great way to get more explanation for claim adjustments that CARCs have already identified. They show exactly what information is missing or what providers need to do. To name just one example, code M31 points to a "missing radiology report" while M20 shows "missing/incomplete/invalid HCPCS."
Informational RARCs: You'll see these codes less often, and they start with the word "Alert" (often in bold, red-lettered font). Unlike supplemental codes, these RARCs never link to specific adjustments or CARCs. Code M17 tells providers that "payment was approved as you did not know, and could not reasonably have been expected to know, that this would not normally have been covered."
Every adjusted claim has CARCs, but not all claims have RARCs. This happens because CARCs tell you the main reason for adjustments, and RARCs add extra details or processing information.
Providers should look at the CARC first to understand why a claim was denied, then check any related RARC for specific guidance on fixing the issue. These codes work together to create a standard way for payers and providers to communicate.
The Centers for Medicare & Medicaid Services (CMS) keeps updating the RARC list. Many new RARC codes have been added to support the No Surprises Act. These codes show how cost-sharing calculations work (N862, N867-N870) and identify claims under specific provisions (N864-N866).
Healthcare providers can speed up their payment processes and fix claims faster by understanding both CARC and RARC codes properly.
Medical billers need to understand how CARC and RARC codes are different. This knowledge helps them interpret claim adjustments and fix payment problems faster.
CARC codes are the main way to communicate in the claims process. They show up on all adjusted claims where the payment is different from the billed amount. RARC codes appear only when more explanation is needed beyond the CARC.
CARC codes tell the basic reason for a payment adjustment. They work as a universal explanation for all payers. HIPAA requires all payers, including Medicare, to use these codes as part of standard electronic transactions.
RARC codes serve more specific purposes. Supplemental RARCs give details about missing or wrong information in a claim. Informational RARCs (starting with "Alert:") share broader processing details not connected to specific adjustments.
CARC and RARC codes team up to give complete information about claim rejections. The CARC shows why the adjustment happened. The RARC explains what specific information caused problems.
To cite an instance, see what happens with CARC 16 (claim lacks information). The matching RARC MA36 might point out that "the patient's name was incorrect." These paired codes make complex denials easier to understand.
Insurance payers match these codes carefully. This helps them tell providers exactly what happened with a claim and what steps to take next. Yes, it is better to look at both code types together for the best denial management results.
Every adjusted claim has at least one CARC, but RARCs don't always show up. This happens because CARCs give basic explanations that work everywhere. RARCs add extra details only when needed.
Simple claim adjustments like routine contract changes don't need more explanation than the CARC. The CARC message is often clear enough by itself, and adding a RARC would just repeat information.
Notwithstanding that, complex denials usually have both types of codes. This ensures providers get all the information they need for fixes or appeals. That's why you'll always see CARCs on remittance advice, but RARCs only show up sometimes.
Healthcare providers just need to deal with hundreds of CARC and RARC codes. Some codes show up more often than others in claim adjustments and denials.
CO-18 shows that a claim was submitted twice and has already been processed. This creates unnecessary payment delays. CO-22 comes up when benefits need coordination because another payer might be responsible for the care costs. CO-26 means "expenses incurred prior to coverage" - the services happened before the patient's insurance became active. CO-50 tells us the payer doesn't think the services were medically necessary based on their criteria. CO-96 stands for non-covered charges, which shows why providers should know insurance coverage limits well.
M51 shows up when a procedure code is missing, incomplete, or invalid. Providers should check and send it again with the right coding. N290 points out missing or invalid provider credentials that need verification. N345 means someone used the wrong claim form or format, so proper documentation must be submitted again. N522 flags duplicate claims, so providers should double-check their billing records.
The No Surprises Act brought several new RARC codes on March 1, 2022. N864-N866 identifies claims that fall under the Act's rules for emergency services, non-participating provider services, and air ambulance services. Codes N862, N867-N870 explain cost-sharing calculations based on state laws or payment models. N871 and N877 show how the original payments were figured out. N863, N872-N875 explain the final payment decisions. The Act also added N878 and N879 about notice and consent rules for balance billing.
Healthcare providers need to become skilled at using CARC and RARC codes to run their medical billing smoothly. These standardized codes build the foundation that helps providers and insurance payers communicate clearly during claims processing.
CARCs point out why claims get adjusted or denied. RARCs add useful details to support this system, but they don't show up on every claim. Both codes work together as the quickest way to spot and fix billing problems.
The No Surprises Act brought new codes that show how this system keeps up with healthcare rules. Medical billing teams should track these updates and know the codes they use most often.
Claims process faster when staff can read CARC and RARC codes correctly. Healthcare providers who grasp these codes can spot issues fast and fix them right away. This knowledge helps reduce payment delays and becomes more valuable as healthcare billing gets more complex.
Q1. What are CARC and RARC codes in healthcare billing? CARC (Claim Adjustment Reason Codes) and RARC (Remittance Advice Remark Codes) are standardized codes used in healthcare billing to communicate reasons for claim adjustments and provide additional information about claim processing.
Q2. How do CARC and RARC codes differ in their usage? CARCs are used to indicate the primary reason for claim adjustments and appear on all adjusted claims. RARCs provide supplementary information and are not always present, only appearing when additional explanation is necessary.
Q3. What are some common CARC codes and their meanings? Common CARCs include CO-18 (duplicate claim), CO-22 (coordination of benefits needed), CO-26 (expenses incurred before coverage), CO-50 (services deemed medically unnecessary), and CO-96 (non-covered charges).
Q4. How have RARC codes been updated for the No Surprises Act? New RARC codes have been introduced to support the No Surprises Act, including codes that identify claims subject to the Act's provisions and explain how cost-sharing and payments were calculated.
Q5. Why is understanding CARC and RARC codes important for healthcare providers? Understanding these codes helps providers quickly identify issues with claims, take appropriate corrective actions, and reduce payment delays, which is crucial as healthcare billing requirements become increasingly complex.
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