How to Read an ERA in Medical Billing: Payments, Denial Codes & Adjustments Explained

An ERA or electronic remittance advice, is the digital statement your payer sends back to explain how it handled your claim: what it paid, what it adjusted and what it denied. Learning how to read an ERA in medical billing means matching every claim line to its payment, its adjustment codes and its denial reasons. Do it well and you spot underpayments the same day. Skip it and money leaks out of your practice quietly, week after week.

What is an ERA in medical billing?

An ERA is the electronic version of the old paper EOB (explanation of benefits). Payers send it as an 835 file and your billing software or clearinghouse turns that file into a report you can read. Each ERA lists the claims a payer processed in one batch, the money attached to each one and short codes that explain any gap between what you billed and what you got paid.

For a busy ABA or therapy practice, ERAs pile up fast. Miss the codes tied to your ABA billing CPT codes and small errors turn into big revenue gaps.

ERA vs EOB: what is the difference?

An ERA and an EOB carry the same information, but they are built for different readers. The EOB is a paper or PDF summary meant for a person. The ERA is a coded file meant for software, so payments post automatically.

•     An EOB is read by a human. An ERA is read by your billing system.

•     An ERA posts payments in bulk. An EOB is checked one claim at a time.

How to read an ERA line by line

Reading an ERA comes down to seven fields. Once you know them, any remittance makes sense in under a minute.

1.   Patient and claim ID: who the payment is for and which claim it matches.

2.   Billed amount: what you charged.

3.   Allowed amount: what the payer's contract says the service is worth.

4.   Paid amount: what the payer actually sent.

5.   Adjustment codes (CARC): why the paid amount is lower than billed.

6.   Remark codes (RARC): extra detail on those adjustments.

7.   Patient responsibility: copay, coinsurance, or deductible the family owes.

If your paid amount looks low every month, a partner that runs full ABA therapy billing services can catch the pattern before it drains a quarter of revenue.

What do ERA denial codes and adjustment codes mean?

Every reduction or denial on an ERA has a code. The two you will see most are CARC (claim adjustment reason codes) and RARC (remittance advice remark codes). CARC tells you the reason for the adjustment. RARC adds the fine print.

Here are the codes that show up most in therapy and ABA billing:

Code	Type	What it means
CO-45	CARC	Charge is above the contracted rate. Write off the difference, do not bill the patient.
CO-97	CARC	Service was already paid inside another code. A bundling issue.
CO-16	CARC	Claim is missing information. Fix it and resubmit.
PR-1	CARC	Deductible. Bill the patient.
PR-2	CARC	Coinsurance. Bill the patient.
CO-197	CARC	No prior authorization on file.
N130	RARC	Check the plan's coverage rules for this service.

State Medicaid plans add their own twist. A Georgia Medicaid ERA, for example, often carries extra RARCs that commercial payers never use, so the same denial can read differently depending on who sent it. When a reason is unclear, our breakdown of why ABA claims get denied walks through the top offenders.

How to handle denials and adjustments on your ERA

A denial code is not a dead end. It is a to-do list. Work your ERAs in this order:

•     Post the payments first, so your books match the bank.

•     Flag every CO and PR code that reduced payment.

•     Fix and resubmit anything marked CO-16 or CO-197 inside the timely filing window.

•     Send true patient balances (PR-1, PR-2) to families quickly.

•     Track repeat denials by payer. A pattern usually means a fixable front-end error.

Denials that sit untouched turn into aged receivables. Keeping a tight grip on accounts receivable in medical billing is the difference between a 30-day and a 90-day payment cycle.

Where ERAs quietly cost practices money

•     Auto-posting payments without ever reviewing the adjustment codes.

•     Treating every CO-45 as a write-off when some are real underpayments.

•     Missing resubmission deadlines on CO-16 claims.

•     Letting patient-responsibility balances age past 60 days.

Faqs

What is the difference between an ERA and an 835 file?

An 835 is the raw electronic file the payer transmits. The ERA is the readable report your billing software builds from that 835. Same data, two forms: the 835 is the code and the ERA is the version you actually read and post payments from.

What are CARC and RARC codes on an ERA?

CARC codes (claim adjustment reason codes) explain why a payment was reduced or denied. RARC codes (remittance advice remark codes) add supporting detail. You almost always read them together, since one adjustment can carry a single CARC and one or more RARCs.

Can you get an ERA for a denied claim?

Yes. Payers send an ERA even when a claim is fully denied. The paid amount shows as zero and the adjustment codes explain the reason. That denied ERA is your roadmap for fixing the claim and resubmitting it correctly.

Turn every ERA into faster payments

Reading an ERA is a habit, not a talent. Learn the seven fields, memorize the handful of codes you see most and work denials the day they land. That is how a practice keeps cash flowing instead of chasing it. If ERAs are stacking up faster than your team can post them, professional denial management services can clear the backlog and protect the revenue you already earned.