The Secret Language of Denials: CARCs, RARCs, and Why You Need to Speak Fluent Code
If you read Part 1, you know that a startling 1 in 5 claims is denied on the first try. That’s a lot of lost revenue! The first step to fixing this money leak is learning how to understand why payers are rejecting your claims in the first place.
Here’s where we break out the denial decoder ring. Payers use a specific, standardized language of codes to communicate a claim payment adjustment.
Decoder Ring Time: CARCs vs. RARCs
Whenever you get a denial, you’ll typically receive two different types of codes:
1. Reason Codes (CARCs)
These are officially called:
Claim Adjustment Reason Codes (CARCs).
- The Job: These explain the core reason why a claim or service line was paid differently than it was billed. Think of this as the
main verdict of the claim. - The Code: They start with two letters followed by a number (e.g., CO-45).
2. Remark Codes (RARCs)
These are called:
Remittance Advice Remark Codes (RARCs).
- The Job: These provide additional or supplemental information about the adjustment already described by the Reason Code. Think of this as the
clarification or extra detail.
The Code: They start with a single letter (M or N) followed by a 2-4 digit code.
Meet the Denial Gang (The Codes)
Since these codes are the same across all payers (thanks, HIPAA!), you only need to learn them once.
CARC Cheat Sheet (The Reason)
The two-letter prefix tells you who is ultimately responsible for the money:
- CO = Contractual Obligation: Money owed by the payer/plan (or non-covered by contract).
- PR = Patient Responsibility: Money owed by the patient (like co-pays or deductibles).
- OA = Other Adjustment: Used for certain financial situations that aren’t CO or PR.
- PI = Payer Initiated: An adjustment made by the payer that changes the expected amount.
Common CARC Examples:
-
- CO-45: The charge exceeds the fee schedule or maximum allowable amount.
- PR-3: Patient responsibility, deductible amount.
- CO-50: The service is non-covered because it is not deemed a medical necessity.
- CO-18: Duplicate claim/service.
- CO-29: The time limit for filing has expired.
- OA-102: Interest payments made by the payer for late processing. (Often an addition to the payment).
- PI-253: Sequestration – Reduction in payment due to federal budget reduction laws (often 2% in the US).
RARC Cheat Sheet (The Clarification)
The leading letter often gives a hint about the payer type:
- M: Typically for Medicare-related remarks.
- N: Typically for non-Medicare remarks.
Common RARC Examples:
- N130: Additional documentation required for claim processing.
- M27: Patient is responsible for waived charges since services are not medically necessary.
- N71: Adjustment due to timely filing limit.
N386: Billing provider must be enrolled to receive payment.
The Top Offenders: Where Is Your Cash Getting Stuck?
It can feel like your practice is alone in dealing with denial codes, but guess what? Most practices see the same issues pop up again and again. While your specific top 20 list will vary a bit, the industry-wide trends tell us exactly where the biggest problems lie.
The overall denial pie chart shows that nearly
half of all initial denials come from one place: the very beginning of the patient journey.
The Denial Breakdown (By Category)
Here’s the breakdown of initial denials by category across the industry:
| Denial Category | Percentage of Denials |
| Eligibility | 48% |
| Billing | 19% |
| Coding | 19% |
| Benefit | 7% |
| Authorization | 2% |
| Bundling | 2% |
| Registration | 1% |
That’s right—a whopping 48% of all initial denials are tied to eligibility, which includes things like coverage issues or missing patient information. That means nearly half of your practice’s denial problem is potentially solvable before the patient even sees a provider
The Most Common Denial Reasons (The Full List)
Whether it’s an eligibility snag or a coding hiccup, here are the specific denial reasons that show up most frequently on the EOBs (Remittance Advice) you receive. These denials represent the most common operational breakdowns:
| Denial Reason | Typical CARC Code | What It Means |
| Eligibility/Insurance Coverage Issues | CARC 27, 28, 197 | The patient was not covered on the date of service, coverage was terminated, or the services are not covered under their plan. |
| Duplicate Claims / Duplicate Service | CARC 18 | The payer believes this claim or service was already processed or is an exact repeat of a previous submission. |
| Incorrect or Missing Patient Information | CARC 16, 31 | Incomplete or invalid information (ID, name, date of birth) prevents the payer from processing the claim. |
| Lack of Prior Authorization or Pre-Certification | CARC 15 | A procedure or service required prior approval from the payer, but it was not obtained or not submitted with the claim. |
| Timely Filing Limit Exceeded | CARC 29 | The claim was submitted past the payer’s allowed deadline for filing. |
| Medical Necessity Not Met | CARC 50 | The service or procedure is deemed not clinically necessary based on the diagnosis and documentation. |
| Incorrect or Missing Procedure Codes | CARC 16, 4 | An incorrect CPT or ICD-10 code was used, or a required modifier was missing/invalid. |
| Non-Covered Services / Excluded Services | CARC 96 | The service is explicitly excluded from the patient’s benefit plan. |
| Coordination of Benefits / Other Payer Responsible | CARC 22 | The payer believes another insurance (primary or secondary) should be responsible for the payment. |
| Documentation Issues or Missing Documentation | CARC 16 | Required supporting records (e.g., medical charts, lab results) were not sent with the claim or were incomplete. |
| Provider Not Credentialed | CARC 190 | The billing provider is not credentialed or enrolled with the payer for that service line. |
| Patient Responsibility | CARC 1, 2, 3 | The amount is applied to the patient’s deductible (CARC 3), copay (CARC 2), or coinsurance (CARC 1). |
Learn How to Improve Denials with UnisLink
Ready to tackle your medical billing denial challenges? Download our free denial management whitepaper to gain a deeper understanding of these issues and learn actionable strategies to improve your practice’s financial health.
Download your free copy of “Navigating Denial Management: An Essential Guide for Physicians” to gain actionable insights and proven strategies for building a healthier, more profitable revenue cycle.
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