Monday, August 13, 2012

Denial Group Codes - PR, CO, CR and OA, RARC explanation

Group codes identify the financially responsible party or the general category of payment adjustment. A group code must always be used in conjunction with a CARC.

Group codes are codes that will always be shown with a reason code to indicate when a provider may or may not bill a beneficiary for the non-paid balance of the services furnished.

Payment Adjustment Category Description

• PR (Patient Responsibility).

• CO (Contractual Obligation).

• OA (Other Adjustment).

• CR (Correction or Reversal to a prior decision).

Group Code PR

All denials or reductions from the billed amount with group code PR are the financial responsibility of the beneficiary or his supplemental insurer (if it covers that service).

Due to the frequency of their use, separate columns have been set aside for reporting of deductible and coinsurance, both of which are also the patient’s responsibility.

PR amounts, including deductible and coinsurance, are totaled in the Patient Responsibility field at the end of each claim.

Charges that have not been paid by Medicare and/or are not included in a PR group are:

• Late filing penalty (reason code B4),

• Excess charges on an assigned claim (reason code 42),

• Excess charges attributable to rebundled services (reason code B15),

• Charges denied as a result of the failure to submit necessary information by a provider who accepts assignment,

• Services that are not reasonable and necessary for care (reason code 50 or 57) for which there are no indemnification agreements are the liability of the provider.

Providers may be subject to penalties if they bill a patient for charges not identified with the PR group code.

Group Code OA

Group code OA is used when neither PR nor CO applies, such as with the reason code message that indicates the bill is being paid in full.

Group Code CR

Group code CR - Correction to or reversal of a prior decision is used when there is a change to the decision on a previously adjudicated claim, perhaps as the result of a subsequent reopening.

This group applies whenever there is a change to a previously adjudicated claim. Separate reason code entries must be used in the NSF for the CR group entry and any other groups that apply to the readjudicated claim. At least one reason code is always used with a group code in the NSF. We always enter the reason code(s) and that amount from the initial remittance advice for the service being corrected with the CR, and include any additional reason code that may apply to the subsequent adjustment. If the change does not involve a prior denial/reduction reason code reason code 93 is used

Reminder: Group code CR explains the reason for change and is always used in conjunction with PR, CO or OA to show revised information.


Group Code CO

Group code CO- Contractual obligations is always used to identify excess amounts for which the law prohibits Medicare payment and absolves the beneficiary of any financial responsibility, such as:

• Amounts for services not considered being reasonable and necessary.

• Participation agreement violations or Limiting charge violations.

• Assignment amount violations,

• Excess charges by a managed care plan provider,

• Late filing penalties,

• Gramm-Rudman reductions,

• Medical necessity denials/reductions.

The patient may not be billed for these amounts.

Medicare Group Codes

A group code is a code identifying the general category of payment adjustment. A group code must always be used in conjunction with a claim adjustment reason code to show liability for amounts not covered by Medicare for a claim or service. MACs do not have discretion to omit appropriate codes and messages. MACs must use appropriate group, claim adjustment reason, and remittance advice remark codes to communicate clearly why an amount is not covered by Medicare and who is financially responsible for that amount. Valid Group Codes for use on Medicare remittance advice:

• CO - Contractual Obligations. This group code shall be used when a contractual agreement between the payer and payee, or a regulatory requirement, resulted in an adjustment. Generally, these adjustments are considered a write off for the provider and are not billed to the patient.

• OA - Other Adjustments. This group code shall be used when no other group code applies to the adjustment.

• PR - Patient Responsibility. This group code shall be used when the adjustment represent an amount that may be billed to the patient or insured. This group would typically be used for deductible and copay adjustments.

Claim Adjustment Reason Codes

Claim Adjustment Reason Codes (CARCs) are used on the Medicare electronic and paper remittance advice, and Coordination of Benefit (COB) claim transaction. The Claim Adjustment Status and Reason Code Maintenance Committee maintains this code set. A new code may not be added, and the indicated wording may not be modified without the approval of this committee. These codes were developed for use by all U.S. health  payers. As a result, they are generic, and there are a number of codes that do not  apply to Medicare. This code set is updated three times a year. MACs shall use only most current valid codes in ERA, SPR, and COB claim transactions. Any reference to  procedures or services mentioned in the reason codes apply equally to products, drugs, supplies or equipment. References to prescriptions also include certificates of  medical necessity (CMNs).

These reason codes explain the reasons for any financial adjustments, such as denials, reductions or increases in payment. These codes may be used at the service or claim level, as appropriate. Current ASC X12 835 structures only allow one reason code to explain any one specific adjustment amount.

There are basic criteria that the Claim Adjustment Status and Reason Code Maintenance Committee considers when evaluating requests for new claim adjustment reason codes:

• Can the information be conveyed by the use or modification of an existing reason code?

• Is the information available elsewhere in the ASC X12 835?

• Will the addition of the new reason code make any significant difference in the action taken by the provider who receives the message? The list of Claim Adjustment Reason Codes can be found at:

The updated list is published three times a year after the committee meets before the ASC X12 trimester meeting in the months of January/February, June, and September/October. MACs must make sure that they are using the latest approved claim adjustment reason codes in ERA, SPR and COB transaction by implementing necessary code changes as instructed in the Recurring Code Update Change Requests (CRs) or any other CMS instruction and/or downloading the list from the WPC website after each update. The Shared System Maintainers shall make sure that a deactivated code (either reason or remark) is not allowed to be used in any original business message, but is allowed and processed when reported in derivative business messages. Code deactivation may be implemented prior to the stop date posted at the WPC web site to follow Medicare release schedule. SSMs shall implement deactivation on the earlier date if the implementation date in the recurring code update CR is different than the stop date posted at the WPC Web site.

The MACs are responsible for entering claim adjustment reason code updates to their shared system and entry of parameters for shared system use to determine how and when particular codes are to be reported in remittance advice and coordination of benefits transactions. In most cases, reason and remark codes reported in remittance advice transactions are mapped to alternate codes used by a shared system. These shared system codes may exceed the number of the reason and remark codes approved for reporting in a remittance advice transaction. A particular ASC X12 835 reason or remark code might be mapped to one or more shared system codes, or vice versa, making it difficult for a  MAC to determine each of the internal codes that may be impacted by remark or  reason code modification, retirement, or addition.

Shared systems must provide a crosswalk between the reason and remark codes to the shared system internal codes so that a MAC can easily locate and update each internal code that may be impacted by a remittance advice reason/remark code change to eliminate the need for lengthy and error prone manual MAC searches to identify each affected internal code. Shared systems must also make sure that 5-position remark codes can be accommodated at both the claim and service level for ASC X12 835 version 4010 onwards.

The effective date of programming for use of new or modified reason/remark codes applicable to Medicare is the earlier of the date specified in the CMS manual transmittal or CMS Recurring Code Update change request or the Medicare Claims Processing Manual transmittal that implemented a policy change that led to the issuance of the new or modified code. MACs must notify providers of the new and/or modified codes and their meanings in a provider bulletin or other instructional release prior to issuance of remittance advice transactions that include these changes. Some CARCs are so generic that the reason for adjustment cannot be communicated clearly without at least one remark code. These CARCs have a note added to the text for identification. A/B MACs and DME MACs must use at least one appropriate remark code when using one of these CARCs.

Remittance Advice Remark Codes

Remittance Advice Remark Codes (RARCs) are used in a remittance advice to further explain an adjustment or relay informational messages that cannot be expressed with a claim adjustment reason code. Remark codes are maintained by CMS, but may be used by any health plan when they apply. MACs must report appropriate remark code(s) that apply. There is another type of remark codes that does not add supplemental explanation for a specific adjustment but provides general adjudication information. These “Informational” remark codes start with the word “Alert” and can be reported without Group and Claim Adjustment Reason Code. An example of an “Informational” RARC would be:

MA01: Alert: If you do not agree with what we approved for these services, you may appeal our decision. To make sure that we are fair to you, we require another individual that did not process your initial claim to conduct the appeal. However, in order to be eligible for an appeal, you must write to us within 120 days of the date you received this notice, unless you have a good reason for being late. Remark codes at the service line level must be reported in the ASC X12 835 LQ segment.

Remark codes that apply to an entire claim must be reported in either an ASC X12 835 MIA (inpatient) or MOA (non-inpatient) segment, as applicable. Although the IG allows up to 5 remark codes to be reported in the MOA/MIA segment and up to 99 remark codes in the LQ segment, system limitation may restrict how many codes MACs can actually report.

The remark code list is updated three times a year, and the list is posted at the WPC website and gets updated at the same time when the reason code list is updated. Both code lists are updated on or around March 1, July 1, and November 1. MACs must use the latest approved remark codes as included in the Recurring Code Update CR or any other CMS instruction or downloading the list from the WPC Website after each update. MAC and shared system changes must be made, as necessary, as part of a routine release to reflect changes such as retirement of previously used codes or newly created codes that may impact Medicare.

Group codes definition from BCBS

What are group codes and how does BCBSF use them? Group codes are used to identify specific types of adjustments. There are five group codes that can be used with the 835 ERA according to the Washington Publishing Website:

• CO (Contractual Obligations) is used when a contractual agreement between the payer and payee or a regulatory requirement requires an adjustment. Generally, these adjustments are considered a write-off for the provider.

• CR (Corrections and Reversals) is used for correcting a prior claim when there is a change to a previously adjudicated claim.

• OA (Other Adjustments) is used when no other group code applies to the adjustment.

• PI (Payer Initiated Reductions) is used by payers when it is believed the adjustment is not the responsibility of the patient but there is no supporting contract between the provider and payer.

• PR (Patient Responsibility) is used for deductible and copay adjustments when the adjustments represent an amount that should be billed to the patient or insured. What does code OA 23 followed by an adjustment amount mean?

This code is used to standardize the way all payers report coordination of benefits (COB) information. Whenever COB applies, this code combination is used to represent the prior payer’s impact fee or sum of all adjustments and payments affecting the amount BCBSF will pay.

What codes display on the 835 ERA?

Claim Adjustment Reason Codes (CARCs) and Remittance Advice Remark Codes (RARCs) display on the 835 ERA. They identify standard reasons why payment may be different than the submitted charge.

CARCs and RARCs are mandated by HIPAA-AS and the code definitions cannot be changed by BCBSF or any payer. CARC definitions tend to be generic while RARC definitions provide more information related to adjudication of the claim. HIPAA-AS requires that for every five CARCs displayed on the 835 ERA at least one RARC must be returned as well to provide clearer information when claim payments are denied or reduced.

What recent updates have been made to CARCs and RARCs?

In November, an additional 98 BCBSF proprietary codes will be mapped to more appropriate CARCs and RARCs to ensure accurate and clear messaging is received on the 835 ERA. This updates makes a total of 300 proprietary codes mapped to more descriptive codes. In addition, codes for capitated claims on both the 835 ERA and paper remittances will change. For example, if applicable, you may see code CO*24 (Payment for charges denied/reduced. Charges are covered under a capitation agreement) when payment is different than the submitted charge. Why are CARC definitions so generic compared to BCBSF proprietary codes displayed on the

paper remittance advice? HIPAA-AS mandates usage of CARCs and RARCs on the 835 ERA to standardize code definitions industry-wide; therefore, the definitions are generic compared to BCBSF and other payers’ proprietary codes.

Requests for Additional Codes

The CMS has a national responsibility for maintenance of the remittance advice remark codes and the Claim Adjustment Status Code Maintenance Committee maintains the claim adjustment reason codes. Requests for new or modification or deactivation of RARCs and CARCs should be sent to a mail box set up by CMS:


The MACs should send their requests to this mail box for any change in CARC, RARC or any code combination. Requests for codes must include the suggested wording for the new or revised message, and an explanation of how the message will be used and why it is needed or a justification for the request.

To provide a summary of changes introduced in the previous 4 months, a code update instruction in the form of a CR is issued. These CRs will establish the deadline for Medicare shared system and MAC changes to complete the reason and/or remark code updates that had not already been implemented as part of a previous Medicare policy change instruction.

 ASC X12 Version 4010A1

ASC X12 version 4010A1 was the standard before implementation of the current standard version 5010A1. There could be situations where a claim/service that has been paid and reported using version 4010A1 may need to be corrected. Under this situation, the same codes originally used are used in reversal, and any adjustment for the corrected claim/service would report the new/modified codes, if applicable.

80 – The Council for Affordable Quality Healthcare (CAQH) Committee on Operating Rules for Information Exchange (CORE) Mandated Operating Rules

Section 1104 of the Patient Protection and Affordable Care Act (ACA) establishes the development and implementations of “requirements for administrative transactions that will improve the utility of the existing HIPAA transactions and reduce administrative costs.” A/B MACs/ CEDI/ and DME MACs are required to conform to the following CAQH Core Operating Rules impacting the transmittals of X12 835 transactions.
A complete list of ACA mandated operating rules are available at

Health Care Claim Payment/Advice (835) Infrastructure Rule

This operating rule regulates the transmission of batch 835 transactions including the exchange of security identifiers and communications-level acknowledgments and errors. This rule does not address the content of 835 communications beyond those required by the HIPAA mandated ASC X12 format. This rule designates a standard form of communication to ensure trading partner support by all A/B MACs, DME MACs, and CEDI contractors. A complete list of requirements and technical direction for the Connectivity Rule are available at:

 Version X12/5010X221 Companion Guide

CAQH CORE mandated operating rules require the usage of a companion guide for the ASC X12 835 standard transaction. This companion guide is to correspond with the already existing V5010 ASC X12 Implementation Guide.A companion guide template is available at: 

No comments:

Post a Comment

Popular Posts