7.4 Claim Adjudication, EOB/ERA, & Posting

The Clean Claim

A clean claim is complete, accurate, and free of errors or omissions, so the payer can adjudicate it without requesting additional information. Clean claims pay faster and avoid rework. Medicare's prompt-pay rule pays clean electronic claims no sooner than 14 days and no later than 30 days (paper clean claims have a 29-day floor); many state prompt-pay laws set commercial deadlines around 30–45 days with interest after that. This is why first-pass clean-claim rate is a core billing KPI; a strong target is 95%+.

Adjudication Phases

Adjudication is the payer's evaluation of a submitted claim, generally moving through:

1. Front-end edits — automated checks for valid format, required fields, NPIs, and code validity. Failures return as a rejection (the claim never enters the payer system).
2. Coverage and eligibility — confirms the policy was active and the service is a covered benefit.
3. Medical review — medical necessity, authorization, NCCI bundling edits, frequency limits; automated or manual.
4. Adjudication decision — pay in full, pay reduced, or deny; the payer computes the allowed amount, the paid amount, and patient responsibility.
5. Payment — the payer issues payment plus a remittance explaining the decision.

Understanding the difference between a rejection (fix and resubmit) and a denial (adjudicated decision that must be corrected, appealed, or written off) is foundational.

ERA vs EOB

The decision is communicated two ways:

The ERA and EOB convey the same payment decision; the ERA is the electronic, auto-postable version sent to the provider. Electronic funds transfer (EFT, the HIPAA 835/CCD+) deposits the payment, and the ERA explains it line by line.

CARC, RARC, and Group Codes

Every adjustment on a remittance is explained with standardized codes:

• CARC — Claim Adjustment Reason Code — explains why the paid amount differs from billed (e.g., CO-45 charge exceeds the fee schedule).
• RARC — Remittance Advice Remark Code — adds supplemental detail to a CARC, usually beginning with M or N (e.g., N130 = consult the plan benefit documents).
• Group code — assigns financial responsibility for each adjusted amount.

Worked example: Billed $200, allowed $120. The ERA shows paid $96, CO-45 $80 (over fee schedule, write off), and PR-2 $24 (coinsurance to the patient). The $80 may never be billed to the patient because it is a contractual obligation.

Posting Payments and Adjustments

Payment posting records the remittance to each claim line in accounts receivable (A/R):

• Post the payment to reduce the balance.
• Post CO adjustments as contractual write-offs.
• Move PR balances to patient responsibility for statementing or to the secondary payer.
• Reconcile the deposit/EFT total against the ERA total so posted dollars equal received dollars (a zero-balance reconciliation).

Accurate posting is critical: a CO amount mistakenly billed to a patient is a contract violation (and can breach the participating-provider agreement), while a PR balance written off as CO is lost revenue and may understate net collections.

Auto-Posting and Exceptions

ERAs auto-post the routine lines; the biller works exception queues — denials, partial payments, take-backs, and unmatched payments. A reversal/recoupment (CARC indicated by negative amounts or claim adjustment group OA-23/PR-22 patterns) means the payer is clawing back a prior overpayment, often because another payer was primary. Coordination of benefits also drives crossover claims: Medicare automatically forwards the adjudicated claim and ERA to a Medigap or secondary payer (the COBA crossover), so the biller should not double-submit the secondary.

Common Posting Traps

1. Posting a payer's allowed amount as the payment (overstates revenue).
2. Writing off a denial as CO when it should be appealed.
3. Failing to move PR to the secondary payer before billing the patient.

How the Allowed Amount Drives Everything

The single most important number on a remittance is the allowed amount — the maximum the payer's contract recognizes for a service. From it the system derives the contractual adjustment (billed minus allowed, group code CO, written off), the plan payment, and the patient responsibility (deductible, coinsurance, copay, group code PR). For a participating provider, the patient can be billed only up to the allowed amount; the over-allowed portion is a contractual write-off that may never be balance-billed.

Reading the allowed amount correctly is what lets a biller verify that the payer paid per contract and catch underpayments worth appealing.

Secondary and Coordination-of-Benefits Posting

When a secondary payer exists, the biller submits the primary's adjudication (the EOB/ERA data) on the secondary claim so the secondary coordinates benefits. The secondary may pay the remaining PR, pay nothing (if its allowed amount is lower), or apply its own deductible. Only after both payers have adjudicated should any true patient balance be statemented. For Medicare beneficiaries with a Medigap or supplemental plan, the COBA crossover forwards the claim automatically — re-submitting it manually creates duplicate claims and confusing take-backs.

Disciplined, contract-aware posting keeps A/R accurate and protects the practice from both lost revenue and balance-billing compliance violations.