What Are CARC and RARC Codes? A Simple Guide for Healthcare Billing

Complete guide to CARC and RARC codes in medical billing. Learn the difference, get 50+ code examples, and discover how to fix claim denials.

PT Clinic Denial Rate & Financial Impact Calculator

Calculate your denial rate, see how it benchmarks, and understand the financial implications.

Denial Rate Benchmark

Your Denial Rate: --% --

Financial Impact Analysis

*Disclaimer: This calculator provides estimates based on your inputs and pre-set formulas. It may not cover every unique scenario. Consult with a financial advisor for specific business decisions.

Topics Covered in this page
Hero Image for What Are CARC RARC Codes? A Simple Guide for Healthcare Billing

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.

Let's explore everything healthcare providers should know about these billing codes, their differences, and how they work together in the claims process.

What is a CARC? Understanding the Basics

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.

What does CARC stand for?

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.

How CARC codes appear on remittance advice

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.

Common group codes and what they mean

Group codes show the simplest reason behind claim adjustments with two alphabetical characters:

Common CARC Code Prefixes and Their Meanings
Code Meaning Description
CO Contractual Obligation Indicates adjustments based on provider–payer contract terms.
PR Patient Responsibility Shows portions of the claim that are the patient’s financial obligation.
OA Other Adjustment Used for adjustments that don’t fit other categories.
PI Payer Initiated Reduction Identifies reductions initiated by the insurance payer.
CR Corrections and Reversals Used for correcting previous claim adjustments.

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.

What is a RARC? A Closer Look

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.

Types of RARC: Supplemental vs Informational

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."

How RARCs support CARCs in claim processing?

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.

CARC vs RARC: Key Differences Explained

Medical billers need to understand how CARC and RARC codes are different. This knowledge helps them interpret claim adjustments and fix payment problems faster.

At the time each code is used

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.

How do they work together in claim denials?

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.

Why RARCs are not always present

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.

Common CARC and RARC Codes You Should Know

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.

Top 5 CARC codes and what they mean

CARC Code Meaning
CO-18 Duplicate claim/service. This claim has already been processed, often causing payment delays.
CO-22 Coordination of benefits. Another payer may be responsible for the cost of this care.
CO-26 Expenses incurred prior to coverage. The services were provided before insurance became active.
CO-50 Non-medically necessary services. The payer does not find the services justified based on their criteria.
CO-96 Non-covered charges. Indicates services fall outside the patient’s insurance coverage limits.

Top 4 RARC codes and how to respond

RARC Code Description Recommended Action
M51 Missing, incomplete, or invalid procedure code. Review the coding and resubmit with the correct procedure code.
N290 Missing or invalid provider credentials. Verify your NPI, taxonomy, or license details and resubmit.
N345 Incorrect claim form or submission format. Use the correct claim form and follow payer formatting guidelines.
N522 Duplicate claim submitted. Review billing history and remove any duplicate submissions.

New RARC codes under the No Surprises Act

RARC Codes Introduced by the No Surprises Act (as of March 1, 2022)
Code(s) What They Indicate
N864 – N866 Claims subject to No Surprises Act protections for emergency services, out-of-network providers at in-network facilities, or air ambulance services.
N862, N867 – N870 Cost-sharing calculation methods based on applicable state laws, qualified payment amounts (QPA), or other payer-specific rules.
N871, N877 How the initial allowed payment or reimbursement was calculated by the health plan.
N863, N872 – N875 Final payment determination and justification after cost-sharing and QPA considerations.
N878, N879 Notice and consent processes for balance billing — confirms whether patient consent was properly obtained.

Conclusion

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.

FAQs

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.

Share on Socials:
Summarize this Blog using Gen AI:
Use AI to quickly summarize with your preferred assistant.

Why settle for long hours of paperwork and bad UI when Spry exists?

Modernize your systems today for a more efficient clinic, better cash flow and happier staff.
Schedule a free demo today