How to Interpret an Electronic Remittance Advice (ERA) in Medical Billing

Key Takeaways

• An electronic remittance advice (ERA) is more than a payment notice; it’s the payer’s formal decision on a claim and the roadmap for what to do next.

• Every ERA results in one of three outcomes: paid, partially paid, or denied/rejected, and each outcome requires a different action.

• Rejections and denials are not the same. Rejections require correction and resubmission, while denials require a decision to appeal or write off.

• Understanding where information appears in an ERA (claim summary, service lines, adjustments, patient responsibility) helps teams review claims faster and more accurately.

• CARCs explain why a payment changed, while RARCs clarify what action is required next, both are essential for correct follow-up.

• Manual ERA interpretation becomes a bottleneck at scale, especially across multiple payers with different formats and coding conventions.

• Using automation to read ERAs, post payments, and analyze denial trends helps teams reduce rework, speed up cash flow, and prevent repeat denials.

Submitting a claim is only half the job. The next phase begins with receiving the payer's response, a significant step in the medical billing process.

That response usually arrives as an electronic remittance advice (ERA). On the surface, an ERA looks like a payment notice. In reality, it’s a decision document. It tells you: 

• what the payer approved
• what they reduced, what they denied or rejected
• what you’re expected to do next

However, the challenge is that ERAs aren’t that simple. An ERA can be difficult to interpret as different payers use different formats, codes, and conventions. Partial payments aren’t always obvious. Denials and rejections are easy to confuse. Miss one detail, and you risk delayed reimbursement or a missed appeal window. 

Reworking a single denied or incorrectly processed claim can cost between $25 and $181 in staff time and administrative effort, especially when teams have to manually interpret payer codes, track down details, and decide on next steps.

This guide breaks down how to interpret an ERA step by step: what each section means, how to spot issues quickly, and how to decide your next move with confidence.

What Is an Electronic Remittance Advice?

An electronic remittance advice is a digital explanation sent by a payer to the healthcare provider’s billing entity after the payer processes a medical claim. It shows how the payer adjudicated the claim and how much they paid or didn’t pay.

In medical billing terms, the ERA answers four critical questions:

• Was the claim processed successfully?
• How much was paid for each service?
• What adjustments or reductions were applied?
• What action, if any, is required next?

Understanding these elements helps billing teams quickly interpret payer decisions and know what to do next.

What Happens When You Receive an ERA?

When an ERA arrives, the first step is to understand the outcome of the claim.

Every ERA results in one of three scenarios:

• The claim is paid in full
• The claim is paid partially
• The claim is denied or rejected

This distinction matters because each outcome triggers a different workflow:

1. A fully paid claim usually moves straight to payment posting and reconciliation. 
2. A partially paid claim requires closer review to understand reductions, adjustments, or patient responsibility. 
3. Denied and rejected claims require action, either correction or escalation, often within strict timelines.

ERAs provide all the information needed to determine the outcome, but that information is spread across claim-level details, service lines, adjustment codes, and remarks. Reading an ERA top to bottom without a clear process often leads to missed issues or delayed responses.

That’s why the goal when reviewing an ERA is to: 

• Quickly determine what happened
• Why it happened
• What is the next course of action

To understand why ERAs require different follow-up actions, it helps to see where a claim breaks down in the processing workflow.

Rejected vs Denied Claims: How ERAs Guide Your Next Action

Rejected and denied claims are often grouped together, but they signal very different situations. ERAs make that distinction clear if you know what to look for.

When a Claim Is Rejected

A rejected claim was never fully adjudicated. The payer couldn’t process it due to missing, incorrect, or invalid information.

Common rejection reasons include:

• Missing or incorrect patient demographics
• Invalid provider or payer identifiers
• Eligibility issues
• Formatting or submission errors

In an ERA, rejections are typically identified early, often at the claim level, with codes or remarks indicating that processing could not proceed.

The next step is corrective, not argumentative. You fix the issue, update the claim, and resubmit it. There’s no appeal process for a rejected claim because no coverage decision was made.

When a Claim Is Denied

A denied claim was processed and reviewed, but the payer determined that payment would not be made for some or all services.

Denials usually relate to:

• Medical necessity
• Coverage limitations
• Policy exclusions
• Authorization issues

In the ERA, denials appear at the service-line level with adjustment reason codes and remarks explaining why payment was reduced or denied.

At this stage, you have two options:

1. You can accept the denial and move the balance to patient responsibility where appropriate
2. You can initiate a formal appeal. 

The ERA provides the documentation trail needed to make that decision, including reason codes and references.

Recommended Reading: Common Claim Denial Codes and What They Each Mean

Key Sections of an ERA You Need to Understand

To interpret an ERA efficiently, you need to know where to look for specific answers. While formats vary by payer, most ERAs, follow a predictable structure.

Each section serves a distinct role in helping you understand claim outcomes.

1. Claim-Level Summary

This section provides a high-level view of how the claim was processed. It typically includes:

• Claim identifiers and dates of service
• Total amount billed
• Total amount allowed
• Total amount paid

The claim summary helps you quickly assess whether the claim was fully paid or requires deeper review. It does not explain why a payment changed.

2. Service Line Details

Service lines break the claim into individual billed procedures. For each line, you’ll see:

• Procedure codes
• Charges submitted
• Amounts allowed and paid

This is where partial payments and unpaid services become visible. Even when a claim appears mostly paid at the summary level, service lines often reveal reductions or denials that require follow-up.

3. Adjustment Amounts

Adjustments explain the financial difference between billed and allowed amounts. These amounts show:

• Contractual write-offs
• Non-covered portions
• Reductions applied by the payer

At this stage, you know what changed financially, but not yet why.

4. Patient Responsibility

This section identifies what portion of the balance can be billed to the patient, such as deductibles or coinsurance.

Confirming patient responsibility prevents billing errors and ensures denied amounts aren’t incorrectly passed on.

Understanding ERA Codes: CARCs, RARCs, and Denial Indicators

Once you know where to find payment changes, ERA codes explain why they occurred. Codes provide the reasoning behind adjustments, denials, and reductions.

Claim Adjustment Reason Codes (CARCs)

CARCs describe the payer’s reason for adjusting or denying a charge. They can answer questions like:

• Why was this service not paid in full?
• Why was payment reduced or denied?

For example, CARC 50 indicates that a service was denied because it was not considered medically necessary under the payer’s policy. Whereas, CARC 16 means the required information is missing or invalid. 

CARCs are standardized, which allows teams to compare denial reasons across payers.

Remittance Advice Remark Codes (RARCs)

RARCs add detail to CARCs.RARCs add context to CARCs. They clarify what the payer needs or why a specific action was taken. They clarify:

• What additional information is required
• Whether an appeal is allowed
• What corrective action should be taken

For example, RARC N115 indicates that additional documentation is required to support the claim. 

If CARCs explain the decision, RARCs explain the next step.

Payer-Specific Denial Indicators

While CARCs explain why an adjustment occurred and RARCs add context, payers also include group codes that indicate financial responsibility.

Group codes help billing teams quickly understand whether the unpaid amount should be written off, billed to the patient, or reviewed for appeal. For example, contractual obligation (CO) codes typically indicate adjustments based on payer agreements, while patient responsibility (PR) codes signal balances that may be transferred to the patient.

Because each payer may present these elements differently, interpreting ERAs requires looking at adjustment reasons, remarks, and responsibility indicators together rather than in isolation.

Here is the list of common denial code prefixes and what they actually mean:

Recommended Reading: CO-45 or OA-275 denial examples

How to Read an ERA Step-by-Step

Below is the step-by-step process of reading an ERA:

Step 1: Confirm Whether the Claim Is Actionable

Start by checking whether the payment outcome aligns with expectations.

If the claim is paid as expected, it can move directly to posting. If it’s underpaid, partially paid, or unpaid, the claim becomes actionable and requires deeper review.

This first check helps teams avoid spending time on claims that don’t need follow-up.

Step 2: Identify Which Services Require Attention

Instead of reviewing every service line equally, focus only on the ones that weren’t paid in full.

Look for: 

• Which services were reduced or unpaid?
• Are the unpaid services isolated or recurring across the claim?

This narrows the scope of review and prevents unnecessary analysis of fully paid services.

Step 3: Examine Adjustments and Codes

Once a problematic service is identified, determine what kind of issue you’re dealing with. Look at the associated adjustment and remark codes to understand whether the issue is:

• Administrative (missing data, authorization, formatting)
• Clinical (medical necessity, coverage limitations)
• Contractual (bundling or rate adjustments)

This distinction determines whether the next step is correction, appeal, or acceptance.

Step 4: Confirm Patient Responsibility

Based on the issue type, take one of three actions:

• Correct and resubmit
• Initiate an appeal
• Accept the decision and close the claim

At this stage, confirming patient responsibility helps ensure denied or reduced amounts aren’t billed incorrectly.

Are ERAs and EOBs the Same?

Electronic remittance advice (ERA) and explanation of benefits (EOB) documents both describe how a claim was processed, but they serve different audiences and purposes.

An ERA is sent electronically to healthcare providers or billing teams. It contains detailed payment information, adjustment codes, and denial explanations used for posting payments, reconciling accounts, and managing follow-ups.

On the other hand, an EOB is typically sent to patients. It provides a simplified summary of services billed, what the insurance paid, and what the patient may owe.

While both documents relate to the same claim, ERAs are operational tools used by billing teams, whereas EOBs are informational summaries designed for patients.

The Operational Challenge of Managing ERAs Across Multiple Payers

At a small scale, ERAs are manageable. At volume, they become a bottleneck.

Hospitals and large multi-provider medical organizations, such as multi-specialty physician groups, receive ERAs and EOBs from dozens of payers, often in different formats and on different schedules. 

The challenge isn’t a lack of information. It’s fragmentation.

Billing teams have to move between payer portals, billing systems, and spreadsheets to understand what happened on each claim. Denial reasons may be coded differently by each payer. Partial payments can be buried among fully paid services. Identifying patterns across hundreds or thousands of ERAs becomes nearly impossible with manual review alone.

As a result, teams often focus on resolving individual claims rather than addressing the root causes of recurring denials. This slows cash flow, increases rework, and makes denial prevention reactive rather than proactive.

How CombineHealth Can Help You Deal with ERAs

Interpreting ERAs doesn’t have to be a manual, claim-by-claim exercise. CombineHealth supports billing and denial teams at two critical points: execution and insight.

Using Mark to Read ERAs and Post Payments Accurately

After a claim is submitted, Mark, CombineHealth’s  AI Medical Billing Solution, continues working in the background.

When payers respond, Mark: 

1. reads ERAs and EOBs directly
2. extracts payment details
3. posts them accurately within the billing workflow. 

He also reconciles paid amounts against billed and allowed amounts and flags discrepancies such as underpayments or incomplete payments for review.

This reduces the need for manual data entry and speeds up payment posting, especially when teams are handling high volumes of payer responses.

Using Taylor to Turn ERA and Denial Data into Insights

While Mark focuses on execution, Taylor, CombineHealth’s AI Revenue Cycle Analyst, focuses on visibility.

Taylor aggregates ERA and denial data across payers and normalizes it for analysis. Payer-specific denial codes are mapped to standardized CARC codes, making it easier to compare denial reasons across claims and payers.

Through dashboards, Taylor highlights patterns such as frequent denial categories, payer-specific issues, and process bottlenecks. This helps teams move beyond fixing individual claims and start addressing the underlying issues that lead to repeat denials.

Together, Mark and Taylor help teams process ERAs faster and use ERA data more effectively, without changing existing payer relationships or workflows.

Take the Next Step Toward Faster, Clearer ERA Management

ERAs contain everything you need to understand payer decisions, but interpreting them manually doesn’t scale.

CombineHealth helps billing and denial teams move faster by automatically reading ERAs, posting payments accurately, and turning denial data into clear, actionable insights.

If your team is spending too much time decoding payer responses and chasing follow-ups, it may be time to rethink how ERAs are handled across your revenue cycle.

Explore how CombineHealth simplifies ERA interpretation and denial management, without disrupting your existing workflows. 

Book a demo today!

FAQs

1. What is an electronic remittance advice in medical billing?

An electronic remittance advice is a digital document sent by a payer that explains how a medical claim was processed, including payments, adjustments, and denials.

2. How can you tell if a claim is denied or rejected from an ERA?

Rejections appear when a claim fails validation and wasn’t adjudicated. Denials appear after adjudication and are tied to coverage, policy, or medical necessity decisions.

3. Why are some claims only partially paid on an ERA?

Partial payments usually result from contractual adjustments, bundling rules, or non-covered portions of a service. Service-line details and adjustment codes explain why.

4. Can ERA data help prevent future denials?

Yes. Analyzing reasons for denial across ERAs helps identify recurring issues by payer, procedure, or documentation gaps, making prevention possible.

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