Medicare Part B 101 Manual

Medicare Part B 101 Manual

Standard Remittance ANSI Codes and Remittance Advice

Table of Contents

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What Is a Remittance Advice?

A remittance advice is a notice of payments and adjustments sent to providers, billers, and suppliers. After a claim has been received and processed, a Medicare contractor produces the RA, which may serve as a companion to a claim payment(s) or as an explanation when there is no payment. The RA explains the reimbursement decisions including the reasons for payments and adjustments of processed claims.

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What are the Uses for a Remittance Advice?

Providers use the RA to post payments and to review claim adjustments. The RA also contains detailed and specific claim decision information. An adjustment may be made for any number of reasons. These reasons are identified on the RA through standardized code sets which include group codes, claim adjustment reason codes, and remark codes.

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What are the Different Types of Remittance Advice?

A provider may receive an RA from Medicare transmitted in an electronic format, called the electronic remittance advice, or in a paper format, called the standard paper remittance. Although the information featured on the ERA and SPR is similar, the two formats are arranged differently, and the ERA offers some data and administrative efficiencies not available in an SPR.

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What You Should Do with the Remittance Advice Once It is Received

When an electronic remittance advice is received, providers may:

  • post decision and payment information automatically, for individual claims included in an RA to the appropriate beneficiary accounts when a compatible provider accounts receivable software application is being used,
  • identify the reasons for any adjustments (denials or payment reductions),
  • note when an EFT payment is scheduled for deposit in the provider’s bank account and an ERA is generated, or arrange for deposit when the paper check is issued and received, 
  • submit a secondary electronic claim that incorporates Medicare adjustment and payment data from the ERA to other health care plans that cover the beneficiary if the ERA does not indicate that Medicare has issued a COB transaction,
  • submit a paper secondary claim when appropriate to other health care plans to which is attached a printout of the Medicare ERA information for that claim,
  • print for specific payment information, as needed, by using translation software (e.g., PC-Print for institutional providers and MREP software for professional providers and suppliers),  and
  • use it to quickly identify potential problems with the way the original claim was submitted, so as to avoid the same errors with similar claims in the future.

When a SPR is received, providers may:

  • post manually to accounts receivable,
  • use it to correct any errors that may have been encountered during claims processing, and
  • bill secondary health care plans that cover the beneficiary.

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What Is the Purpose of a Remittance Advice?

The purpose of an RA is to provide detailed payment information relative to a health care claim(s) and, if applicable, to describe why the total original charges have not been paid in full. This remittance information is provided as “justification” for the payment, as well as input to the payee’s patient accounting system/accounts receivable and general ledger applications. The codes listed on the RA help the provider identify any additional action that may be necessary. For example, some RA codes may indicate a need to resubmit a claim with corrected information, while others may indicate whether the payment decision can be appealed.

The RA features valid codes and specific values that make up the claim payment. Some of these codes may identify adjustments. An adjustment refers to any change that relates to how a claim is paid differently from the original billing. There are seven general types of adjustments:

  • Denied claim
  • Zero payment
  • Partial payment
  • Reduced payment
  • Penalty applied
  • Additional payment
  • Supplemental payment

Although RAs are furnished in either electronic or paper formats, the HIPAA of 1996 mandates that a standard format be used if transactions are performed electronically. The ASC X12N 835 version 5010A1 is the standard ERA that complies with HIPAA requirements. The HIPAA-compliant fields and codes apply universally to all entities that transmit health care information. In addition, Medicare requires that the same codes be included in both the ERA and the SPR formats.

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What Purpose Do Fields and Codes Serve on a Remittance Advice?

Fields are used to identify areas of a claim; codes are used to categorize details of the claim. A field may indicate specific data about the beneficiary, or specific supplies and/or services rendered. A code represents a standardized reason or condition that relates to the claim or service.

Note: The field names may vary depending on the translator software used by the provider/receiver.

Translator software converts the electronic format of an RA into a user-friendly format on the provider’s computer screen. PC-Print (used by institutional providers) and MREP (used by professional providers and suppliers) are examples of translator software.

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Which Codes Appear on a Remittance Advice?

Although several codes may appear on an RA, all of these codes may not appear at the same time. The codes are classified as medical or nonmedical code sets. Medical code sets are clinical codes used in transactions to identify what procedures, services, and diagnoses pertain to a beneficiary encounter. The medical code sets that have been approved for use by HIPAA are:

  • ICD-10-CM
  • NDCs
  • HCPCS level 1 (also referred to as CPT-4)
  • HCPCS level 2

Under HIPAA, code sets that characterize a general administrative situation, rather than a medical condition or service, are referred to as nonclinical or nonmedical code sets. State abbreviations, ZIP codes, telephone area codes and race and ethnicity codes are examples of general administrative nonmedical code sets. Other nonmedical code sets are more comprehensive. For example, nonmedical codes may describe provider areas of specialization, payment policies, the status of claims and why claims were denied or adjusted. Nonmedical code sets include:

  • Group codes
  • CARCs
  • RARCs
  • POS codes
  • NCPDP
  • Reject/payment codes

Three nonmedical code sets are used more often and are explained as follows.

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Group Codes

Group codes identify the financially responsible party or the general category of payment adjustment. A group code must always be used in conjunction with a CARC.

Group Codes for Use on an RA

Code Payment Adjustment Category Description
CO Contractual Obligation—used when a contractual agreement between Medicare and the provider, or a regulatory requirement, resulted in an adjustment. Generally, these adjustments are considered a write-off for the provider and are not billed to the beneficiary.
CR Correction and Reversal—used for correcting a prior claim. It applies when there is a change to a previously adjudicated claim.
OA Other Adjustment—used when no other Group Code applies to the adjustment.
PR Patient Responsibility—represents an adjustment amount that is billed to the beneficiary or insured. This Group Code is typically used for deductible and coinsurance adjustments.
PI Payer Initiated—used when, in the opinion of the payer, the adjustment is not the responsibility of the beneficiary. This is not by Medicare.


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Claim Adjustment Reason Codes

The CARCs provide financial information about claim decisions. CARCs communicate an adjustment, or why a claim (or service line) was paid differently than it was billed. If there is no adjustment to a claim/service line, then there is no need to use a CARC. These codes can be found in the adjusted claim reason codes field on the ERA and the RC field on the SPR.

Examples of Claim Adjustment Reason Codes

Code Financial Information
1 Deductible amount
2 Coinsurance amount
3 Copayment amount
4 The procedure code is inconsistent with the modifier used or a required modifier is missing
5 The procedure code/bill type is inconsistent with the place of service
6 The procedure/revenue code is inconsistent with the patient’s age


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Remittance Advice Remark Codes

RARCs are used in conjunction with CARCs on an RA to further explain an adjustment or to indicate if and what appeal rights apply. Additionally, there are some RARCs that are used to relay informational messages, even when there is no adjustment. RARCs are maintained by CMS but may be used by any health care payer when appropriate. Any RARC may be reported at the service-line level or the claim level, as applicable, on any ERA or SPR. Visit the X12 website for a listing of RARCs and their description.

Examples of Remittance Advice Remark Codes

Code Informational Message
M1 X-ray not taken within the past 12 months or near enough to the start of treatment
M2 Not paid separately when the patient is an inpatient
M3 Equipment is the same or similar to equipment already being used
M4 This is the last monthly installment payment for this durable medical equipment
N1 You may appeal this decision in writing within the required time limits following receipt of this notice by following the instructions included in your contract or plan benefit documents
N112 This claim is excluded from your electronic remittance advice


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How Often are Claim Adjustment Reason Codes and Remittance Advice Remark Codes Updated?

CARCs and RARCs are updated three times per year in the months of February, June, and September/October. Medicare contractors will alert providers of updated codes through bulletins, Email Updates, and/or notice on their websites. Medicare contractors must use only RARCs and CARCs that are valid when the RA is generated. Providers must be compliant with electronic transactions and code requirements as set by HIPAA and use the latest software provided by either Medicare or their billing software company. Updates to the CARC and RARC sets may include modifications to existing codes, addition of new codes and/or deactivation of existing codes.

Reviewed 10/15/2024