Claim Denial Reason Codes (CARC)
Claim Adjustment Reason Codes (CARCs) are standardized two-digit codes used by payers to explain why a claim line was denied, adjusted, or paid less than billed. CARCs accompany Remittance Advice Remark Codes (RARCs) on every 835 ERA.
Definition.
When a payer denies or reduces payment on a claim, the 835 Electronic Remittance Advice carries the explanation as CARC (the reason) plus RARC (additional context). Working denials by reason code is fundamental to denial management; treating each denial as a one-off is fundamentally inefficient at scale.
Key points.
Top CARC denials by frequency
Most-frequent CARCs across most practices: CO-50 (medical necessity), CO-197 (prior auth required), CO-29 (timely filing), CO-204 (not covered by plan), CO-16 (claim/service lacks information), CO-18 (duplicate claim).
How to work denials by reason code
Group denials by CARC across all payers. Look for systemic patterns. A timely-filing denial across three MCOs is a process problem, not three payer problems. Reason-code-first denial work surfaces systemic issues.
Cost of denials
MGMA benchmarks pre-submission rework at approximately $5 per claim, post-submission denial work at $25-$118 per claim depending on appeal complexity. The economic case for denial prevention is clear at any volume above 10,000 claims per month.
Where AI denial prediction helps
AI scores claims pre-submission for denial risk by reason code, surfacing the top contributing factors and recommended fixes. Mature AI denial prediction drops denial rates 35-70 percent depending on starting baseline.