After Medicare processes a claim, it issues a Remittance Advice (RA) in either a Standard Paper Remittance (SPR) or Electronic Remittance Advice (ERA) format. An RA provides finalized claim details and includes explanatory claim processing message codes. Medicare uses three code sets at the claim or service line level on an RA: Claim Adjustment Group Codes, Claim Adjustment Reason Codes (CARC) and Remittance Advice Remark Codes (RARC). Medicare also uses Provider Level Balance (PLB) Reason Codes to explain any adjustment at the provider level.

Claim Adjustment Group Codes - Used with a CARC to assign financial responsibility for amounts not covered by Medicare for a claim or service line balance.

• CO (Contractual Obligations) - Indicates that a contractual agreement between the payer and payee, or another requirement, resulted in an adjustment. Providers are financially responsible for CO adjustment and may not bill them to the patient.
• OA (Other Adjustments) - Identifies adjustments when no other group code applies.
• PR (Patient Responsibility) - Indicates an amount that may be billed to the patient or insured. Providers typically see this code for deductible or copayment amounts.

Claim Adjustment Reason Codes (CARCs) - Medicare uses this standardized national code set on remittance advice to explain financial adjustments, such as denials, payment reductions or payment increases. Medicare applies CARCs at the claim or service line level to communicate why payment differs from the billed amount. X12 updates the official CARC list three times each year (on or around March 1, July 1, and November 1) and publishes it on their website: X12 - Claim Adjustment Reason Code (CARCs)

Remittance Advice Remark Codes (RARCs) - Medicare uses this standardized national code set at the claim or service line level to provide additional information about an adjustment already identified by a CARC. X12 updates the official RARC list is updated three times a year (on or around March 1, July 1, and November 1) and publishes it on their website: X12 - Remittance Advice Remark Codes (RARCs)

RARC Alerts - Provide general adjudication information and do not offer additional explanation for a specific adjustment. For example: MA01: Alert: If you do not agree with what we approved for these services, you may appeal our decision.

Provider Level Balance (PLB) or Provider Level Adjustment Reason Codes - explain adjustments that usually do not relate to any specific claim or service line in the remittance advice. Examples include:

1. Medicare increases payment to include interest owed because it did not pay a clean claim timely.
2. Medicare deducts payment to recover a prior overpayment.
3. Medicare increases payment under a provider incentive program.

Fiscal Intermediary Standard System (FISS) Direct Data Entry (DDE) Reason Codes - FISS reason codes are assigned to Part A institutional claims to identify events that occurred during processing. Some reason codes simply provide information about the claim, such as it is a finalized claim. Other reason codes identify conditions, edits, errors, rejections, or other informational statuses that occur during processing.

Providers should understand the relationship among the UB04 data fields; the reason code is applied to the first data element that triggers a processing logic failure among related fields. However, that data element may not be the only field in error. Providers should review all related fields and correct the appropriate data.

FISS Reason Code Guidance - View common claim submission error codes, a description of issue and potential solutions

Qualified Medicare Beneficiary (QMB) Program - View QMB program information and related remit advice remark codes

Resources

• CMS Internet Only Manual (IOM), Publication 100-04, Medicare Claims Processing Manual, Chapter 22, Section 60
• CMS Health Care Payment Remittance Advice