If you've ever opened a remittance advice and stared at a string of two-digit numbers wondering why your claim was paid short — or not paid at all — you've encountered CARC and RARC codes. Understanding them is the foundation of effective denial management.
This guide explains what they are, where they come from, how to find them on your ERA/835 file, and how to take action on each one.
What Is a CARC Code?
CARC stands for Claim Adjustment Reason Code. It's a standardized numeric code that tells you why a payer reduced, denied, or adjusted payment on a claim. CARCs are maintained by the Washington Publishing Company (WPC) under X12 standards and are used by virtually every commercial and government payer in the United States.
Every CARC code has a specific meaning. For example:
- CARC 1 — The amount was applied to the patient's deductible
- CARC 16 — Claim or service lacks required information or lacks required information (commonly NPI issues or missing fields)
- CARC 96 — Non-covered charge(s)
- CARC 197 — Precertification/authorization/notification absent
CARCs are grouped into three severity categories:
- Hard Denials — The claim was denied and won't be paid without corrective action (e.g., filing an appeal or resubmitting with corrections)
- Soft Denials — The claim was reduced but may be recoverable (e.g., patient responsibility codes like deductible)
- Informational — No payment adjustment, just a notification (e.g., "This is the primary payer's determination")
What Is a RARC Code?
RARC stands for Remittance Advice Remark Code. Where a CARC tells you why an adjustment happened, a RARC adds more detail about that adjustment — often specifying what documentation is missing, what rule was applied, or what the next step should be.
RARCs are also maintained by WPC and appear alongside CARCs on your ERA. Common examples:
- RARC N257 — "This should be billed with the appropriate code." Often appears with CARC 4 (late filing) when the date of service is outside the timely filing window.
- RARC MA04 — "Secondary payment cannot be considered without the identity of or payment information from the primary payer."
Think of CARC + RARC together as the full diagnostic sentence: CARC is the diagnosis, RARC is the clinical note.
Where Do CARC and RARC Codes Live?
They appear in your Electronic Remittance Advice (ERA), also called an 835 transaction set. Here's what to look for:
On a paper EOB or printed ERA: Look for columns labeled "Reason Code," "Adjustment Reason," or "Remark Code" in the service line adjustments section. They're often grouped as:
- CO (Contractual Obligation) — payer-contracted write-off
- PR (Patient Responsibility) — patient owes this amount
- OA (Other Adjustment) — catch-all
- PI (Payer Initiated) — payer-specific reduction
In your practice management system: Most PM systems parse the 835 and display CARCs in the denial/adjustment column of the payment posting screen. Look for a field labeled "Adjustment Code" or "Denial Code."
In the raw 835 file:
The CAS (Claim Adjustment Segment) contains the Group Code, CARC, and adjustment amount. A typical CAS looks like:
CAS*CO*45*120.00*~
This means: Contractual Obligation (CO), CARC 45, $120.00 written off.
How to Read a Denial: An Example
Suppose you receive a Medicare remittance with this data:
- Claim for: Office visit, CPT 99213
- Billed: $180.00
- Paid: $0.00
- Adjustment: CO-97, $180.00
- Remark: N95
Breaking that down:
- CARC 97: "The benefit for this service is included in the payment/allowance for another service/procedure that has already been adjudicated."
- RARC N95: "This provider type/specialty may not bill this service."
Translation: Medicare bundled this code into another service billed on the same claim and doesn't pay it separately. Action: review the NCCI edits for that CPT combination, potentially unbundle if appropriate.
The Five Most Common CARC Categories
Understanding category patterns saves time. Here's what you'll see most often:
1. Patient Responsibility (PR codes) CARC 1, 2, 3 — Deductible, coinsurance, copay. These aren't truly denials — they're patient balance transfers. Bill the patient, not the payer.
2. Filing and Information Issues CARC 16, 29, 31 — Missing data, timely filing, or authorization. Resubmit with corrections. Set internal workflows to prevent recurrence.
3. Bundling and Coverage Rules CARC 97, 4, 22 — Bundled services, coordination of benefits, or covered by another payer. Requires clinical or coding review.
4. Medical Necessity CARC 50, 167 — Service not medically necessary per payer criteria. These require clinical documentation, peer-to-peer reviews, or formal appeals.
5. Non-Covered Services CARC 96, 49 — Service is excluded from the patient's benefit plan. Check the patient's EOB and consider whether the service was elective.
Building a Denial Management Workflow
Knowing the codes is step one. Turning them into a consistent process is what drives revenue recovery.
Step 1: Sort by CARC category daily. Treat hard denials as fires — work them within 48 hours. Soft denials can be batched weekly.
Step 2: Match CARCs to action types. Every CARC has a defined resolution path: correct and resubmit, appeal with documentation, write off, or transfer to patient. Map your top 10 CARCs to their action type and train your team to recognize them on sight.
Step 3: Track denial rate by CARC. If CARC 29 (timely filing) keeps appearing, that's a workflow problem, not a billing problem. Fix the upstream process.
Step 4: Know your timelines. Every payer has a different deadline for appeals and corrected claims. Missing a window means a permanent write-off. Document deadlines by payer and track them in your PM system.
Step 5: Use automation where possible. Repetitive CARC patterns (like patient demographic corrections for CARC 16) can often be auto-corrected and resubmitted without human review. Tools like Arceum identify these patterns and route claims accordingly.
The Bottom Line
CARC and RARC codes are your denial report card. They're standardized, actionable, and — once you know them — remarkably specific about what went wrong and what to do next.
The first step is building a reference habit: when you see a new CARC, look it up, understand the resolution path, and add it to your workflow. The Arceum code library covers all 350+ CARC codes with plain-English explanations and step-by-step action plans for each one.
Stop guessing. Start recovering.