A claim adjustment reason code (CARC) is a code from the list X12 maintains that explains why a health care claim or service line was paid differently than it was billed. On a remittance it is paired with a group code (CO, PR, OA or PI) that assigns responsibility for the amount, and often with a remittance advice remark code (RARC) that adds detail.
Why it matters when licensing company data
CMS explains that for any line or claim level adjustment, three sets of codes may be used: the group code, the CARC and the RARC. CO assigns responsibility to the provider and PR to the patient, and Medicare beneficiaries may be billed only when the group code is PR. Billing staff often call these "denial codes", although many CARCs describe routine adjustments such as contractual write-downs and deductibles.
X12 updates the list several times a year and publishes usage notes for each code; some codes, such as 16 and 96, must be sent with at least one remark code. A practice's history of CARCs, joined to the fixes and appeals that followed, records how payers decided its claims.
Example
A practice receives a remittance showing CO-197 on a knee MRI: the payer found no prior authorization on file. The biller checks the authorization log, finds the request was approved for a different imaging centre, and asks the payer to correct the site. The denial log records the code, the root cause and the result, and the front desk adds a site-of-care check to scheduling.
Source
X12: Claim Adjustment Reason Codes. Definition reviewed November 9, 2026 by Origin Data Partners.