In the billing cycle, what does the term "claims adjustment reason codes" (CARCs) refer to?

Claims adjustment reason codes (CARCs) are specific codes that provide detailed explanations for why a claim has been denied, partially paid, or adjusted. These codes are essential for helping healthcare providers understand the reasons behind adjustments or rejections of their claims, allowing them to take appropriate follow-up actions.

Understanding CARCs is crucial in the billing cycle because they help in clarifying the status of claims and the rationale behind payers’ decisions. Each code corresponds to a standardized set of reasons, which can range from issues like incorrect billing practices, lack of coverage, or insufficient documentation.

In contrast, codes indicating payment amounts refer to different metrics and are not specifically for detailing the reasons related to claim adjustments. Similarly, service documentation codes and patient demographic codes serve entirely different purposes, focusing on clinical records and patient information rather than claims adjustments. Thus, the significance of CARCs lies in their role in communicating the specifics of claim outcomes, making it clear that the explanation for denied claims is the accurate definition of these codes.