CARC and RARC: What Claim Adjustment Codes Are

Claim Adjustment Reason Codes (CARC) and Remittance Advice Remark Codes (RARC)#

When a payer adjudicates a healthcare claim, it rarely pays the full billed amount without explanation. Two standardized public code sets explain every adjustment on the electronic remittance advice (the 835 ERA) and on paper Explanation of Benefits (EOB) documents.

Claim Adjustment Reason Codes (CARC) explain *why* a claim or service line was paid differently than billed — why an amount was reduced, denied, or shifted to patient responsibility. CARCs are maintained as a national standard code set under HIPAA and are published by X12 and mirrored by the Washington Publishing Company (WPC). Each CARC is a number (for example, 16, 45, 97, 197) paired with a Group Code.

Group Codes prefix the CARC and assign financial responsibility:

• CO — Contractual Obligation: the amount is the provider's responsibility because of the contract with the payer (cannot be billed to the patient). Example: CO-45.
• PR — Patient Responsibility: the amount can be billed to the patient (deductible, coinsurance, copay). Example: PR-1, PR-2, PR-3.
• OA — Other Adjustment: used when neither CO nor PR applies.
• PI — Payer Initiated Reduction: the payer believes the adjustment is not the patient's responsibility but there is no contract provision.

Remittance Advice Remark Codes (RARC) provide *additional detail* that supplements a CARC. They start with N (a general remark, e.g., N130) or M (a remark that originally related to a specific message). Many denials require both a CARC (the reason) and one or more RARCs (the specifics needed to act on the denial).

In short: the CARC tells you the category of the problem, the Group Code tells you who owes the money, and the RARC tells you the actionable detail. Accurate denial management in revenue cycle management depends on reading all three together.