CARC 97 / CO-97: Bundled Services and Included Payments

Claim Adjustment Reason Code (CARC) 97 indicates that the benefit for a billed service is included in the payment or allowance for another service or procedure that has already been adjudicated. Medical billers may encounter this adjustment when reviewing an Electronic Remittance Advice (ERA) after a payer determines that a service is not eligible for an additional separate payment.

CARC 97 commonly appears with the CO (Contractual Obligation) adjustment group as CO-97. However, the reason code alone does not identify every detail of the payer's payment policy or establish whether the original claim was coded incorrectly.

In this guide, we'll explain what CARC 97 means, how bundled service adjustments appear in an X12 835 version 5010 transaction, how CO-97 differs from other adjustments, and how medical billers and EDI professionals can investigate these payment decisions.

What Does Bundling Mean in Medical Billing?

In medical billing, bundling generally refers to a payment arrangement or coding rule under which payment for one service includes the benefit or reimbursement for another service.

A payer may determine that certain services are included within a more comprehensive procedure, a particular reimbursement arrangement or another previously adjudicated service.

When services are bundled, a provider may receive payment for one service without receiving an additional separate payment for another billed service.

Bundling rules vary by payer, reimbursement methodology, service and applicable policy. A service that is separately payable under one arrangement may be included in another payment under different circumstances.

It is important to distinguish the actual performance of a service from whether the payer allows separate reimbursement for that service.

What Does CARC 97 Mean in Medical Billing?

X12 defines CARC 97 as an adjustment where the benefit for the service is included in the payment or allowance for another service or procedure that has already been adjudicated.

The adjustment communicates the payer's payment determination. It does not independently identify the other service or explain the complete reimbursement policy.

To investigate the adjustment, providers may need to review:

• The billed procedure codes, modifiers and service dates
• The services that were paid or previously adjudicated
• The payer's relevant reimbursement or coding policy
• Any accompanying Remittance Advice Remark Codes (RARCs)
• Available payer correspondence or explanation of benefits
• Any reported healthcare policy reference information

A CARC 97 adjustment does not automatically establish that an inappropriate combination of codes was submitted. The applicable policy and documented services must be evaluated before reaching that conclusion.

What Is the Difference Between CARC 97 and CO-97?

CARC 97 identifies the reason for the adjustment. CO-97 combines that reason with the CO (Contractual Obligation) group code.

The actual group code should always be reviewed. The same CARC may appear with different adjustment groups when permitted and appropriate.

Important: A correctly reported CO adjustment generally represents an amount that is not the patient's responsibility because of an applicable contractual obligation or regulatory requirement. Providers should not transfer a CO-97 adjustment to the patient simply because the payer did not separately reimburse the service.

Common Situations to Investigate With CARC 97

Several circumstances may be associated with bundled or included-service adjustments. The following examples describe possible investigation areas rather than universal payer rules.

Not every nonpayment involving multiple procedures is reported using CARC 97. Other adjustment reasons may apply depending on the payer's determination.

CARC 97 vs. Other Related Adjustment Codes

Several X12 adjustment codes address payment or coding circumstances that can resemble bundling. They should not be treated as interchangeable.

For example, CARC 97 specifically communicates that the benefit is included in another adjudicated service, while CARC 234 communicates that a procedure is not paid separately. CARC 236 addresses a particular procedure-code compatibility issue.

Medical billers should review the actual adjustment reported rather than assigning a general bundling explanation to every unpaid procedure.

Where Is CARC 97 Reported in the X12 835?

In an X12 835 version 5010 transaction, CARC 97 is reported in a CAS (Claim Adjustment) segment alongside the adjustment group and amount.

The CAS segment may appear at the claim level in Loop 2100 or at the service level in Loop 2110.

For the first adjustment in a CAS segment, CAS01 identifies the group, CAS02 identifies CARC 97 and CAS03 identifies the adjustment amount.

Additional reasons may appear in subsequent adjustment positions of the same CAS segment when they share the same group code.

The official X12 CARC 97 definition also directs readers to the Healthcare Policy Identification REF segment in Loop 2110, if present. This uses REF01 = 0K with a payer-reported policy identifier in REF02. The segment is not exclusive to CARC 97 and is not reported with every adjustment.

Example 1: Reading a CO-97 Adjustment

Consider a hypothetical service billed at $100. The payer reports that the benefit is included in another service that has already been adjudicated and applies a full CO-97 adjustment.

Hypothetical educational excerpt, not a complete 835 transaction. The procedure code and amounts are illustrative and do not establish that this procedure is bundled under any particular payer policy.

Understanding the Example

The amounts reconcile:

$100 submitted charge - $100 CO-97 adjustment = $0 payer payment

The excerpt does not identify the other service whose adjudication includes the benefit. Additional claim details or payer information may be needed to establish that relationship.

Example 2: A Claim With a Paid Service and a CO-97 Adjustment

In this hypothetical claim, one service receives payment while another is fully adjusted under CO-97. The example demonstrates how different services can have different outcomes on the same ERA.

Hypothetical educational excerpt showing two adjudicated services. The procedure codes and amounts are fictional examples; the excerpt does not establish that these specific procedures are bundled under an actual payer policy.

How the Amounts Balance

$300 submitted charges - $30 CO-45 - $150 CO-97 = $120 payer payment

The claim includes a paid service and a separately billed service that received no additional payment. The CO-97 adjustment applies to the second service, not automatically to every service on the claim.

The presence of another paid service on the claim does not, by itself, prove that it is the service referenced by CARC 97. Providers should verify the underlying payment relationship with the payer's adjudication information.

How RARCs and Policy Information Can Help

CARC 97 identifies the included-payment reason, but additional information may be needed to understand which policy or service relationship produced the adjustment.

A payer may report service-level RARCs through an LQ segment using qualifier HE. These remarks can supplement the CARC but do not independently change the reported financial amounts.

For example, RARC N525 indicates that services are not covered when performed within the global period of another service. When reported with CARC 97, this remark provides additional context about the payer's included-payment determination. However, the remark does not independently identify the related service or establish that the payer applied the correct payment policy. Providers should review the relevant claim history and applicable payer requirements when investigating the adjustment.

The Healthcare Policy Identification REF segment in Loop 2110 may also be relevant when present. A reported policy identifier can help direct further research, but its meaning should not be assumed without payer documentation.

Not every CO-97 adjustment includes an accompanying policy identifier or a particular RARC. Providers should review all available remittance details, payer correspondence and applicable reimbursement policies.

Bundled Service Adjustment vs. Coding Error

A bundled service adjustment does not automatically mean the provider reported an incorrect procedure code or that the service was not performed.

For example, the submitted codes may correctly describe the services provided, while the payer's applicable reimbursement policy does not allow separate payment for all of them.

Alternatively, a coding error, an incorrect modifier or an incorrectly applied payer edit may require investigation.

Providers should evaluate the documented services, submitted claim information and applicable policy before deciding whether a corrected claim or review request is appropriate.

Important: Procedure codes and modifiers should never be changed solely to bypass a payment edit. Any correction must accurately represent the services documented and satisfy the applicable coding requirements.

Medicare NCCI Edits and CARC 97

Medicare's National Correct Coding Initiative (NCCI) includes Procedure-to-Procedure (PTP) edits designed to prevent inappropriate payment for certain combinations of services.

These edits may affect whether separately reported procedures are payable together. However, CARC 97 should not automatically be interpreted as proof that a specific NCCI edit caused the adjustment.

Depending on the edit and the documented circumstances, an appropriate modifier may be relevant. A modifier should be reported only when the coding requirements and actual clinical documentation support it.

Providers should consult applicable CMS NCCI instructions, Medicare contractor guidance and the relevant edit information before drawing conclusions about a Medicare bundling adjustment.

How to Investigate a CARC 97 Adjustment

Step 1: Review the Complete Remittance

Identify the affected service, the adjustment group, CARC 97 amount, any accompanying RARCs and the services that received payment.

Determine whether the adjustment applies to a single service or a larger portion of the claim.

Step 2: Review Related Services and Claims

Examine other billed services and relevant previously adjudicated claims when available.

Do not assume the other service is necessarily shown in the same claim excerpt.

Step 3: Identify the Applicable Payment Policy

Review the payer's reimbursement policy, applicable coding edits, benefit rules or contractual payment provisions for the service and date of service.

Confirm the actual reason for the included-payment determination rather than relying solely on a general description of bundling.

Step 4: Review Procedure Codes and Documentation

Compare the submitted codes, modifiers, units and service dates against the medical record.

Determine whether the original claim information accurately represents the services performed.

Step 5: Determine the Appropriate Resolution Process

If the claim contains an actual coding error, verify whether the payer permits a corrected claim.

If the provider disputes the bundling determination, review the payer's reconsideration, provider dispute or appeal procedures, as applicable.

Do not assume that a corrected claim is the appropriate response when the disagreement concerns the payer's underlying payment policy.

Step 6: Track the Outcome

Retain relevant claim information, medical documentation, payer correspondence and review decisions.

Review any subsequent remittance to determine whether the original adjustment was upheld, revised or reversed.

Corrected Claim vs. Bundling Appeal

Repeated submission of unchanged claims generally does not resolve a bundling determination and may create duplicate-claim processing problems.

A corrected claim also does not necessarily preserve an appeal deadline. Providers should verify the applicable payer instructions.

Medicare, Medicaid and Commercial Payer Considerations

Bundling and separate-payment rules vary across healthcare programs and reimbursement arrangements. A standardized CARC does not establish that every payer applies the same payment policies.

Original Medicare

Original Medicare may apply national coding requirements, NCCI edits and other Medicare payment methodologies when determining whether services are separately payable.

Providers should review the applicable Medicare contractor guidance, coding rules and payment requirements for the date of service.

Not every CO-97 adjustment is necessarily the result of an NCCI edit.

Medicare Advantage

Medicare Advantage payment arrangements and provider billing requirements may differ from Original Medicare fee-for-service arrangements, subject to applicable program requirements.

Providers should verify the relevant plan policy, provider agreement and available dispute or review process rather than assuming that Original Medicare reimbursement procedures apply unchanged.

Medicaid

State Medicaid fee-for-service programs and Medicaid managed care plans may use different coding edits and payment methodologies, subject to applicable requirements.

Providers should review the relevant state or managed care plan guidance for the reported service and date of service.

Commercial Payers

Commercial health plans may apply reimbursement policies and contractual payment arrangements that affect separate payment for services.

Providers should verify the relevant payer policy, documentation requirements and available review options before challenging an adjustment.

Clearinghouses and Billing Applications

Clearinghouses and billing systems can help identify CARC 97 adjustments and display related service-level payment details.

However, successful electronic claim acceptance does not determine whether services will be separately reimbursed during adjudication.

For EDI professionals, retaining the group code, CARC, RARCs and associated service and payment information helps preserve the context needed for follow-up.

How to Help Prevent Avoidable Bundling Adjustments

Some bundled payment adjustments correctly reflect the applicable payment arrangement and cannot be prevented through claim changes. However, accurate coding and policy review can reduce avoidable billing errors.

Recommended practices include:

• Review coding and reimbursement requirements for frequently billed service combinations
• Verify that procedure codes accurately represent documented services
• Use modifiers only when supported by applicable coding rules and documentation
• Review payer-specific payment policy changes and effective dates
• Investigate recurring CO-97 adjustments by payer and procedure
• Retain supporting records for permitted reconsideration or appeal procedures

Not every CO-97 adjustment represents a recoverable payment. The objective is to identify incorrect claims or adjudications without attempting to bypass legitimate reimbursement rules.

Official CARC 97 Definition

X12 maintains the official Claim Adjustment Reason Code list, including CARC 97.

For the current definition and usage guidance, refer to X12 Claim Adjustment Reason Codes.

CARC 97 should be interpreted with the actual adjustment group, any accompanying RARCs, applicable policy references and the complete payment information.

Frequently Asked Questions About CARC 97

Key Takeaway

CARC 97 indicates that the benefit for a service is included in the payment or allowance for another service or procedure that has already been adjudicated. When reported with the CO group, it appears as CO-97.

In an X12 835 version 5010 transaction, CARC 97 is reported through a CAS segment at the claim level in Loop 2100 or at the service level in Loop 2110.

CO-97 does not automatically prove a coding error or identify the other service whose payment includes the benefit.

Medical billers should review the actual payment information, related services, applicable reimbursement policy and available correction or review procedures before taking action.

Most importantly, an included-payment adjustment should not be treated as an automatic patient-billable balance or as an instruction to change procedure codes or modifiers.

Related Eclaims Articles and Resources

• What Are Claim Adjustment Reason Codes (CARCs)?
• How to Read an X12 835 ERA: Claim Payments, Adjustments & Denials
• What Are Claim Adjustment Group Codes (CO, PR, OA & PI)?
• CARC 50 / CO-50: Medical Necessity Denials in Medical Billing
• CARC 197 / CO-197: Prior Authorization Denials in Medical Billing
• 277CA Claim Status Lookup

Disclaimer: This article provides general educational information about CARC 97, bundled service adjustments and electronic healthcare remittance transactions. It does not replace official X12 implementation guides, payer payment policies, clinical coding guidance, provider agreements or applicable laws and regulations. Bundling rules, payment arrangements, review procedures and patient liability requirements vary by payer and may change. Verify the rules applicable to the specific service, payer and date of service.