Recording Claim Adjustment Reasons for Denials or Payment Reductions

In order to successfully file secondary insurance, your Credit entries for the primary insurer, whether payments, adjustments, or denials, must include Claim Adjustment Reason codes to document how the primary processed the claims. Even when the primary payer made a payment, it will often be reduced by amounts referred to as “claim adjustments.” The specifics of these adjustments are critical to the secondary payer, so as you enter the primary payer’s payment, adjustment, or denial, it is essential that you also record the the Claim Adjustment Reasons (CARs) that appear on the primary payer’s Explanation of Benefits (EOB).

NOTE that there is no reason to enter Claim Adjustment Reasons unless you are submitting secondary claims for this patient and service.
  1. Start by entering a credit as you normally would. Highlight the charge you are paying and click Apply Credit to open the Credit Split window. Notice the second tab, Claim Adjustment Reasons.
  2. Before saving the Credit Split, be sure to select the Claim Adjustment Reasons tab and complete it using the information in the primary payer’s EOB, as explained in the steps below.
  3. The next step is to decide what the total amount of the adjustments is and what dollar amount is accounted for by each of the individual CARs. Here is a simple rule to use to determine what the total amount of the CARs will be:

    Service Fee  –  Primary Insurance Payment = Total CARs

    Example One: Your fee for a service is $150.00; the primary insurance company paid $80.00. If you subtract $150.00 – $80.00 you are left with $70.00. All of the Claim Adjustments (CARs) for the primary payer should total $70.00.

    What is accounted for in the CARs? The CARs are the reasons given by the payer for not paying your entire fee. You must enter the primary payer’s reasons and the specific adjustments or transfers so that the primary payer’s CARs can be included in the secondary claim. You will indicate if there was an adjustment made by the primary insurance for contractual reasons, if there was a patient responsibility for the service, if there was a disallowed amount, or any other reason the primary payer indicates.

    To continue the example from above: The fee for the service is $150.00 and primary insurance paid $80.00. The primary insurance contractually allows only $110.00 for the service provided so they made an adjustment of $40.00. The patient had a copay of $10.00 on this service and coinsurance of $20.

    Using the formula above,


    $150.00 – $80.00 = $70.00 ($40.00 + $10.00 + $20.00)

    So we are now ready to enter the information in Claim Adjustment Reasons. After selecting the Claim Adjustment Reasons tab, click the New button on the toolbar or press <CTRL>-<N>.

  4. On your EOB, you will see that each adjustment has a Group Code and a Reason Code. To enter the $40 adjustment, select the Group Code “CO” for “Contractual Obligations” from the drop list. In the first Reason panel select code “45” (“Charges exceed your contracted/legislated fee arrangement. This change to be effective 6/1/07: Charge exceeds fee schedule”). Under Amount, enter “$40” and under Total Unit Paid, enter “1”. In this example, there are no additional reason codes for Group CO, so save the screen and open another by clicking the Save and New button in the toolbar at the top of the window.

  5. In this example, our EOB also lists a patient copay of $10.00 and  patient coinsurance of $20. You will enter “PR” as the Group Code for “Patient Responsibility.” In the first Reason panel, use code “3” (Copay amount) and “$10.00”. The Total Unit Paid will be 1. In the second Reason panel, enter code “2” (Coinsurance Amount), “$20.00” and Total Unit Paid, as usual, is “1”.
  6. Save and close, taking you back to the Claim Adjustment Reasons list. There you will see:
    Group Code Total Amount Total Unit Paid
    PR $30.00 2
    CO $40.00 1

    The claim now balances. you have accounted for the full amount of the fee ($150) with your payment of $80 and your claim adjustments of $30 and $40.

Example Two: The fee for the service is $150.00 but the primary insurance did not pay anything because it went towards the patient’s deductible. $150.00 – $0.00 = $150 (Fee – Primary Payment = CARs), so your CARs must  account for the full $150.00. The EOB indicates the same maximum allowable for the service as in Example One, $110.00. The EOB indicates nothing about copay. So you will enter a $40.00 fee adjustment (Group CO, Reason Code 45) and the remaining $110 as Group PR, Reason Code 1 (Patient Responsibility). The total CARS will equal $150.00. Your Claim Adjustments screen will show:

Group Code Total Amount Total Unit Paid
PR $110.00 1
CO $40.00 1