What is CARC (Claim Adjustment Reason Code)?
The standardised code in an 835 that explains why a payer adjusted or denied part of a claim.
Definition
A CARC is the code that answers "why wasn’t this paid in full?". It appears in the CAS segments of an 835, always paired with a group code that assigns financial responsibility: CO (contractual obligation — the provider absorbs it), PR (patient responsibility — the patient owes it), OA (other adjustment), and PI (payer initiated reduction).
The group code changes what the same reason code means to your bottom line. CO-45 is a contractual write-off you cannot bill anyone for; PR-1 is a deductible you can and should bill the patient for. Denial reporting that ignores group codes will happily lump write-offs together with collectable balances.
The code list is maintained and updated periodically by X12, the standards body that publishes the underlying EDI transactions. Codes are added, deactivated, and redefined, so any local mapping of codes to descriptions is a snapshot with a shelf life.
Why it matters
CARCs are the raw material of denial management. Grouping claims by CARC is what turns "we have a lot of denials" into "38% of our denied dollars are prior authorization, and they are concentrated in two payers".
Denial codes to know
Related terms
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