Medical Billing Guide
Medical Billing Denials: Common Causes and How to Prevent Them
Rejections versus denials, how to read CARC and RARC codes, the most common root causes of denials, and a prevention framework for billing teams.
In this article
Every denied claim costs time to rework — and some are never recovered. Preventing denials starts with understanding exactly why claims fail.
Rejection or denial?
- A rejection happens before adjudication. The claim fails a format or data check at the clearinghouse or payer front end (invalid member ID, missing NPI, invalid code for the date of service). It was never processed, so it can be corrected and resubmitted.
- A denial happens after adjudication. The payer processed the claim and decided not to pay all or part of it. Denials are communicated on the remittance (835/ERA or paper EOB/RA) and usually require a corrected claim, a reconsideration or an appeal.
How do you read a denial?
Remittances explain adjustments using standard code sets maintained by X12:
- Group codes say who is responsible: CO (contractual obligation — provider write-off), PR (patient responsibility), OA (other adjustment), PI (payer-initiated reduction).
- Claim Adjustment Reason Codes (CARCs) explain why the payment was adjusted.
- Remittance Advice Remark Codes (RARCs) add detail to a CARC.
Read the group code, CARC and RARC together — the same CARC can call for very different follow-up depending on the RARC and group code.
What are the most common root causes?
| Root cause area | Examples |
|---|---|
| Patient access | Inactive coverage, wrong payer or plan, coordination-of-benefits gaps |
| Authorization | Missing, expired or mismatched prior authorization |
| Coding | Unsupported or nonspecific codes, NCCI conflicts, missing or incorrect modifiers, deleted codes |
| Medical necessity | Diagnosis does not meet the NCD, LCD or payer policy; missing documentation elements |
| Billing and timeliness | Duplicate claims, timely filing limits missed, incorrect place of service |
| Provider data | Credentialing or enrollment gaps, NPI/taxonomy mismatches |
A denial-prevention framework
Appeals basics
Medicare fee-for-service has five appeal levels, starting with redetermination by the MAC. Medicare Advantage and commercial plans have their own processes and deadlines, which are set by regulation and contract. Always check the deadline on the remittance or plan notice.
Related reading
Source
X12 — Claim Adjustment Reason Codes and Remittance Advice Remark Codes
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Additional references
Medical coding trainer and author with more than 22 years of experience, an AHIMA Approved ICD-10 Trainer, and the managing editor of MedicalCodingUpdates.com.
Educational information only. Verify coding decisions against current official guidelines, code sets and applicable payer policies. Read the full disclaimer.
