CARCs and RARCs and CFOs (Oh My!)

Recently we met up with a very talented CFO, thirty years in healthcare management, ten as the facility CFO, and not that it matters but one heck of a golfer. We agreed to maintain anonymity for him but asked if we could share his story to see how prevalent it is in the industry and to inform others who may also be unaware.

So here goes, do you know what a CARC is? This CFO did not. Understandably, he doesn’t manage the claims day-to-day, he isn’t hands on. His role is the larger picture, the forest through the trees, if you will. But knowledge is power and it’s important to understand what CARCs and RARCs are and how they impact your total payment per claim.

Claims Adjustment Reason Codes (RARCs)

These codes appear on your payment remittance by service line and identify why a payment adjustment was made. Sometimes the adjustments are due to contract requirements and other times they provide operational insights.

Contractual adjustments may indicate that the charge was higher than the agreed reimbursement amount. Whereas other adjustments like CO-226 may mean that information was requested of your organization and was not provided, was provided late, or wasn’t sufficiently completed.

When you receive CARCS like CO-226, it gives insight into operational processes that could potentially be improved to decrease denials and improve speed of payment. In addition to CARCs, some service lines will also include RARCs.

Remittance Advice Remark Codes (RARCs)

RARCs are used when the existing CARC requires a bit more detail. Using the above example, CO-226 may come back with RARC M26. M26 is defined as:

The information furnished does not substantiate the need for this level of service. If you have collected any amount from the patient for this level of service/any amount that exceeds the limiting charge for the less extensive service, the law requires you to refund that amount to the patient within 30 days of receiving this notice.

What Types of Insights Can You Gather?

All kinds:

  • Accuracy of patient demographic entry
  • Timeliness of documentation/claims submission
  • Optimal collection of ABNs, prior authorizations, and referrals
  • Eligibility and verification processes
  • Provider setup in the system
  • Deattribution of patients from value-based care programs
  • Late payments from payers

If that last bullet has you scratching your head look at CARC CO-225 this represents Penalties and Interest payments by Payer. If a payer is not meeting your contractual timely payment terms, they are required to submit payment with interest.

So What About that CFO we Mentioned?

We walked him through the CARCs and RARCs process and sent him to a great resource for more info. With that information he was able to identify these top three issues:

  • 5% of claims denied were due to CO-31 “Patient cannot be identified as our insured”
  • 23% of claims denied were due to CO-252 “Attachment or documentation missing”
  • 15% of claims denied were due to CO-199 “Revenue code and procedure code mismatch”

In total he was looking at roughly $155,000 in denials that could’ve been prevented and should definitely be appealed with more information. We waited to write this blog so we could circle back, though he didn’t provide exact numbers he told us that he “had his team provide reeducation to the front desk and billing staff and is seeing significant return on those efforts”. Not sure it gave him any more time to hit the golf course but it certainly did improve the bottom line at his facility.

Just imagine just writing off $155k because deep-diving into the CARCs wasn’t something you did or knew to do. If you already do this great job! We hope the process is quick and easy allowing you to spend the bulk of your time improving processes and collecting payments from payers.

You should be able to evaluate your top CARCs and RARCs in your system easily with a visual aid like a pie chart that allows you to deep-dive into problem areas. If you can’t find this information in mere seconds, then give us a shout, its one of the most popular services we provide.

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