CARC and RARC Codes: Meaning, Examples, and Next Steps

A medical claim has been processed, but the payment is lower than expected or a service has been denied. 

Was the claim submitted too late? Is the patient responsible for part of the cost? Or was the claim sent to the wrong payer?

CARC and RARC codes help explain claim adjustments and provide information about the payer's processing decision. Understanding them helps billing teams distinguish denials from other adjustments, investigate billing issues, and determine whether a claim needs correction, an appeal, or no further action.

What Are CARC and RARC Codes?

CARC stands for Claim Adjustment Reason Code, while RARC stands for Remittance Advice Remark Code. Both are standardized code sets used to communicate information about claim processing and payment.

The difference is straightforward:

• CARC explains why a claim or service line was adjusted. For example, CARC 18 indicates that the payer identified an exact duplicate claim or service.
• RARC provides additional information about an adjustment or claim processing. For example, RARC M15 indicates that separately billed services or tests have been bundled because they are considered components of the same procedure.

CARCs and RARCs appear on remittance advice, including Electronic Remittance Advice (ERA), which providers receive after payers process claims.

Importantly, a CARC does not always mean a claim was denied. Adjustments can also reflect deductibles, coinsurance, contractual payment differences, and other payment decisions.

What Are Claim Adjustment Group Codes?

CARCs are used with claim adjustment group codes, which identify the category of financial responsibility associated with an adjustment.

The main group codes are:

This is why billing teams commonly encounter combinations such as CO-29, PR-1, or CO-109.

The letters identify the group code, while the number identifies the CARC. Together, they help explain the adjustment reason and financial responsibility.

However, a PR designation does not automatically mean an amount can be collected from the patient. Applicable coverage rules, contracts, and patient protections must also be considered.

How Do CARC and RARC Codes Work Together?

A CARC and RARC may appear together when the payer needs to explain a claim-processing issue in greater detail.

Consider a laboratory that submits a claim for diagnostic testing. The payer cannot process the claim because required information is incomplete or invalid.

The remittance advice may contain the following codes:

This is an illustrative example. Actual code combinations and processing outcomes depend on the payer and claim.

CARC 16 identifies the general problem: information is missing or incorrect. RARC MA130 clarifies that the claim is unprocessable and that the provider must submit a new claim with complete or correct information.

For a laboratory, the next step is to identify exactly what prevented processing.

The billing team may need to compare the original test order, Laboratory Information System (LIS) record, billing-system data, and submitted claim. If required information was present in the laboratory's records but absent from the transmitted claim, the issue may involve data entry or system mapping.

Importantly, MA130 indicates that the unprocessable claim does not carry appeal rights. The appropriate response is to correct the information and submit a new claim according to the payer's instructions, rather than appeal the unprocessable submission.

This example demonstrates why CARCs and RARCs should be interpreted together rather than individually.

The CARC identifies the general adjustment reason, while the RARC can clarify the problem and sometimes indicate the required next step.

How Do the Codes Relate to the Payment Amount?

Codes explain adjustments, but the remittance advice also shows the financial outcome.

Consider this simplified example:

Here, the laboratory billed $150 but received $80 from the payer.

The $50 contractual adjustment represents the difference between the billed charge and the allowed amount. The remaining $20 is identified as patient coinsurance.

The claim was not denied. The codes explain how the payer processed the charge and allocated the amounts.

This distinction matters because a reduced payment, a patient-responsibility amount, and a denial require different responses.

How to Interpret CARC and RARC Codes

When a claim is adjusted, the goal is not just to identify the code's definition. The billing team needs to understand what happened to the claim, whether the adjustment is correct, and what action is justified.

1. Identify the Affected Claim or Service Line

Start by reviewing the remittance advice.

Check the original charge, allowed amount, payment, adjustment amount, and codes associated with the affected service.

A single claim may contain several procedures, and different adjustments may apply to different service lines.

For example, a laboratory claim containing multiple tests might receive payment for most services while one test is denied.

In that situation, the billing team should investigate the affected test rather than assume the entire claim needs correction.

2. Determine What the Codes Indicate

Read the group code, CARC, and any associated RARC together.

Different adjustment reasons point to different investigations.

For example:

• CO-50 indicates that the payer considers the service not medically necessary under its coverage criteria.
• CO-97 indicates that payment for a service is included in the allowance for another service.
• RARC N822 indicates that one or more required procedure modifiers are missing.

A medical necessity denial may require reviewing the diagnosis and clinical documentation. A bundled-service adjustment may require checking coding and payment rules. A missing-modifier remark requires examining the submitted procedure and applicable modifier requirements.

Although these adjustments may all result in reduced or absent payment, their underlying causes can be very different.

3. Check the Claim Against the Payer's Requirements

The code identifies what the payer reported, but it does not necessarily establish why the issue occurred.

For example, if a laboratory test receives a medical necessity denial, several possibilities need to be considered:

• The diagnosis code submitted does not meet the payer's coverage criteria.
• The claim contains an incorrect or incomplete diagnosis code.
• Supporting clinical documentation was not available or was not considered.
• The payer applied a policy incorrectly.

The billing team should compare the submitted claim with the original order, documented clinical information, and applicable payer policy.

For Medicare claims, this may involve checking a National Coverage Determination (NCD) or Local Coverage Determination (LCD).

Any correction must accurately reflect the documented service. Diagnosis codes or other claim details should never be changed solely to obtain payment.

Other adjustments require different checks.

For example, CARC 18 indicates an exact duplicate claim or service. Before attempting another submission, the laboratory should check its claim history to determine whether the same service was already billed and processed.

CARC 119, on the other hand, indicates that a benefit maximum has been reached for the applicable period or occurrence. The billing team should review the patient's coverage and relevant benefit limits rather than treat the issue as a duplicate claim.

These examples show why identifying the precise adjustment reason matters before deciding what to do next.

4. Decide Whether to Correct, Appeal, or Accept the Adjustment

Not every adjustment requires a resubmission. The appropriate response depends on what the billing team finds during its investigation.

• Correct the claim if the original submission contains an error, such as an incorrect procedure code or missing required information. Follow the payer's instructions for submitting the correction.
• Request reconsideration or appeal if the original claim is accurate but the payer's decision appears incorrect. Supporting documentation and applicable coverage policies may be needed.
• Accept the adjustment if it is consistent with the payer's payment rules, coverage policy, or contractual terms.
• Contact the payer for clarification if the remittance advice does not provide enough information to determine the issue.

For example, CARC 109 indicates that a claim was submitted to the wrong payer or contractor. Simply resubmitting it to the same payer would not resolve the problem.

CARC 29, which indicates that the filing time limit has expired, requires a different approach. The billing team should review the submission history, applicable filing deadline, and whether a permitted exception or dispute is available.

In laboratory billing, repeat testing may also require additional review. If the same test was performed more than once for a patient on the same day, the laboratory should determine whether the repeat was medically necessary and separately reportable. Under qualifying circumstances,   may apply. It should not be used for accidental duplicate billing or repeat testing performed only to confirm an initial result.

The goal is to address the reason for the adjustment, not simply resubmit the claim and hope for a different outcome.

5. Look for Repeated Problems

Individual adjustments explain what happened to particular claims. Patterns across multiple claims can reveal broader problems.

For example, a diagnostic laboratory may notice that:

• Certain tests repeatedly receive medical necessity denials.
• Claims from a particular ordering location frequently lack required information.
• The same procedure combinations regularly receive bundling adjustments.
• Duplicate-claim adjustments increase after a billing-system change.

These patterns can help identify where further investigation is needed.

A recurring medical necessity issue may warrant reviewing how diagnosis information is captured during ordering. Repeated missing-information adjustments may point to incomplete requisitions or problems transferring data between the LIS and billing system.

However, the codes themselves do not prove that an ordering or system error occurred. The laboratory must compare adjustment patterns with its actual workflows and payer requirements.

The benefit of reviewing these patterns is that the laboratory can address recurring causes rather than repeatedly handling the same problems after claims are processed.