When a payer pays less than you billed, the EOR explains the gap with Claim Adjustment Reason Codes (CARCs), delivered in the CAS segment of the 835 remittance. Each adjustment carries a group code — most often CO (Contractual Obligation, the payer's responsibility, you can't bill the patient) or PR (Patient Responsibility) — plus a numeric reason. In work-comp the patient never owes the bill, so PR codes on a work-comp EOR are themselves a red flag.
The codes you'll see most
| Code | What it says | How to treat it |
|---|---|---|
CO-45 | Charge exceeds the fee schedule / maximum allowable amount. | Legitimate only if the allowed amount actually equals the fee-schedule figure. Re-compute the MLFS/OMFS allowance and compare — if "allowed" is below the schedule, dispute. |
PR-242 | Services not provided by a network/PPO provider — a PPO discount. | On a medical-legal bill, dispute. PPO contracts can't discount the MLFS rate (§9789.30(d)). |
CO-97 | Payment is included in / bundled with another service already adjudicated. | Verify the bundling edit is correct. If the lines are separately payable, dispute with documentation. |
CO-50 | Not deemed a medical necessity by the payer. | Often disputable. For med-legal evaluations ordered to resolve a dispute, "necessity" is established by the referral — point to it. |
CO-16 | Claim/service lacks information or has a submission/billing error. | Usually a fixable data problem. Identify the missing element, correct, and resubmit — or cite the 277CA acceptance if the data was in fact present. |
Group code first, then the number
Read the group code before the reason. CO means the payer is eating the difference contractually — fine if the math is right, suspicious if it isn't. PR shifts cost to the patient, which in work-comp is almost never valid. OA (Other Adjustment) and PI (Payer Initiated) show up occasionally and warrant a closer look. The group tells you who the payer says owes the difference; the reason tells you why.
The pattern that pays: the moment you see a network/PPO reduction code (commonly PR-242, sometimes dressed up as a "PPO" or "network savings" line) on a medical-legal bill, treat it as a near-automatic Second Review. It's the single most common — and most winnable — improper reduction in California work-comp.
Accept, fix, or dispute
Every adjustment code resolves to one of three actions:
- Accept — the reduction matches the fee schedule and the rules (a legitimate CO-45 down to the correct allowance).
- Fix and resubmit — a data/documentation problem you can correct (many CO-16s).
- Dispute — an improper reduction (PPO discounts, unjustified necessity denials, wrong fee-schedule rate) that warrants a Second Review and, if denied, IBR.
Don't let "contractual" lull you
The biggest trap is assuming a CO adjustment is final because it's labeled "contractual obligation." In work-comp, the fee schedule — not a private network contract — sets the floor for med-legal reimbursement. A code that looks like a routine contractual write-off can be an illegal reduction wearing a respectable label. Check the number against the schedule every time, and the adjustment codes stop being noise and start being a map to your unpaid revenue.
This guide is general information for California workers'-comp and med-legal billers, not legal advice. Statutes, fee schedules, and forms change — confirm against the current DWC regulations for your dates of service.