What they do and how to use them

Adjustment codes explain why a payer did not pay the full billed amount and how to allocate the remaining balance. Your billing/LIS system uses them to auto-post payments, move balances to the right party, and decide on next actions (write-off, bill patient, appeal, rebill).

Key code sets you’ll see

• Group Codes (CAS segment): Categorize who is responsible
  • CO = Contractual Obligation (write-off; not billable to patient)
  • PR = Patient Responsibility (bill patient or send to secondary)
  • PI = Payer Initiated Reductions (often appealable/correctable)
  • OA = Other Adjustment (informational or non-contractual)
• CARC: Claim Adjustment Reason Codes
  • Numeric codes paired with Group Codes that specify the reason (e.g., 45, 97, 16)
• RARC: Remittance Advice Remark Codes
  • Alphanumeric comments that add detail/context (e.g., Nxxx, MAxxx)
• PLB: Provider-Level Adjustments
  • Off-claim financial adjustments (e.g., interest, takebacks, capitation, refunds)

Where they appear in the 835

• Line- or claim-level CAS segments: Group Code + CARC + amount (and quantity, if applicable)
• RARC remarks at claim/line level for additional explanation
• PLB segment at the end for non-claim-specific adjustments (e.g., offsets, interest)

How systems use them

• Payment posting: Apply payer payment to the line; allocate adjustments by Group Code.
• Balance moves:
  • CO amounts → contractual write-off
  • PR amounts → patient balance or secondary payer
  • PI/OA → typically do not bill patient; may trigger review/appeal or edits
• Allowed amount: Typically equals payer payment plus PR amounts on that line.
• Workflow triggers:
  • Missing info/denials (e.g., CARC 16) → rebill after correction
  • Prior authorization needed (e.g., CARC 197) → appeal/obtain auth
  • Bundled services (e.g., CO-97) → no separate payment; verify billing rules
  • Frequency/duplicate edits (e.g., CO-18) → review DOS and units
• Secondary billing: If PR exists and secondary coverage is on file, generate 837 to secondary; defer patient billing until secondary responds (or when crossover is indicated).

Common examples in laboratory claims

• CO-45: Charge exceeds fee schedule/contracted rate → write off difference
• PR-1/2/3: Deductible/coinsurance/copayment → move to patient or secondary
• CO-97: Payment included in allowance for a related service (bundled)
• PI-204: Service not covered under patient’s current benefit plan → review benefits/appeal
• OA-23: Payment adjusted due to impact of prior payer(s) — COB
• CARC 16 + RARC N264/N265: Missing/invalid information → correct and resubmit

PLB (Provider-Level) adjustments to watch

• Overpayment recovery/offsets (takebacks) applied to current payment
• Interest paid on late claims
• Capitation/withhold/recoupments not tied to a specific claim
  Reconcile PLB totals to bank deposits so your ledger matches the ERA.

Best practices

• Maintain a mapping table: Group Code + CARC (+ RARC) → posting action and next step.
• Never bill patients for CO adjustments; they are contractual write-offs.
• Use RARCs to determine whether a denial is fixable vs. final.
• Validate postings with payer rules (NCCI/MUE, coverage policies) and keep code lists current (AMA/CMS/X12 updates).
• Handle reversals and takebacks: ERAs can include negative payments; ensure your system supports back-out and reapply logic.

Bottom line: Adjustment codes are the blueprint for splitting the unpaid portion into contractual write-offs, patient responsibility, and other categories—and for driving your follow-up workflow from each ERA.

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