What Is Adjudication?
Adjudication is the payer-side process of reviewing and determining how a claim will be paid: applying eligibility, benefits, coverage rules, contracted rates, and edits to determine the allowed amount, paid amount, patient responsibility, and any denials or adjustments.
- Claim-status transactions — the 276 inquiry and its 277 response — report progress as X12 claim status category codes rather than free text, and the A-series is where tracking logic most often goes wrong.
- A1 says only that the claim was received, which is not the same as being accepted for adjudication; A2 is the code that says the claim has been taken into the payer's adjudication system.
- A3, A6 and A7 report a rejection before adjudication, so there is no determination to appeal — correct the data and resubmit.
- The P-series (P0 through P5) means the claim is pending inside adjudication, and the F-series means adjudication has finished, F1 for a paid claim or line and F2 for a denied one.
Adjudication
Also known as: Claim Adjudication; Claims Processing
Adjudication is the payer-side process of reviewing and determining how a claim will be paid: applying eligibility, benefits, coverage rules, contracted rates, and edits to determine the allowed amount, paid amount, patient responsibility, and any denials or adjustments.
Definition
After receiving a claim via 837 EDI, the payer's adjudication system runs the claim through automated rules: eligibility verification (was the patient covered on the date of service), benefit determination (does the plan cover this service), prior-authorization verification, NCCI/MUE edits, medical-necessity policy edits (LCD, NCD, commercial medical policy), coordination of benefits with other coverage, application of deductibles/coinsurance/copays, and pricing against the contracted fee schedule. Claims either pay (in full or partial), pend for manual review, or deny. The result is communicated via the 835 ERA to the practice and an EOB to the patient. Adjudication sits later in the sequence than acceptance, and the two are routinely confused: a clearinghouse first accepts or rejects the file on format and identifier data, the payer then accepts the claim into its adjudication system, and only after that is a determination made. A claim rejected before it reaches adjudication has no determination behind it and no appeal rights — it is corrected and resubmitted, not appealed.
Example
Synthetic example. The plan, the contracted rate and the copay below are invented to carry the arithmetic; they are not a real claim and not any payer's real rate. A claim for CPT 99214 with diagnosis M54.50 (low back pain) reaches a commercial PPO: eligibility confirms the patient was covered on the date of service, the visit is a covered benefit, NCCI edits pass, the contracted rate is $135, a $30 office-visit copay applies, and the plan pays $135 − $30 = $105 with $30 patient responsibility — reported on the 835 ERA to the practice and on an EOB to the member.
Common Misconceptions
Adjudication and 'processing' are often conflated, but adjudication specifically refers to the determination phase. A claim can be 'received' but not yet 'adjudicated' if it is queued for manual review or pended for additional information.
Practical Application
Claim-status transactions — the 276 inquiry and its 277 response — report progress as X12 claim status category codes rather than free text, and the A-series is where tracking logic most often goes wrong. A1 says only that the claim was received, which is not the same as being accepted for adjudication; A2 is the code that says the claim has been taken into the payer's adjudication system. A3, A6 and A7 report a rejection before adjudication, so there is no determination to appeal — correct the data and resubmit. The P-series (P0 through P5) means the claim is pending inside adjudication, and the F-series means adjudication has finished, F1 for a paid claim or line and F2 for a denied one. Read the current list before building status logic on any of these codes: they are maintained through X12 and published at x12.org, checked 17 September 2026. Tracking these transitions in near real time is what shortens the gap between a determination and the appeal or rebill that answers it.
Related Terms
Clean Claim
A clean claim is a properly completed claim that requires no additional information from the provider or a third party and no special handling, so the payer can accept it into adjudication without manual intervention. Clean means accepted for processing — not paid.
Read definitionEOB (Explanation of Benefits)
An Explanation of Benefits is a payer-issued document sent to the member (and sometimes the provider) after claim adjudication that itemizes the services billed, allowed amount, plan payment, deductible/coinsurance/copay applied, and patient responsibility.
Read definitionERA (Electronic Remittance Advice / 835)
The ERA (X12 835 transaction) is the HIPAA-standard electronic file payers send to providers detailing claim adjudication results — payments, adjustments, denials with CARC/RARC codes — typically paired with EFT funds transfer.
Read definitionCARC
A Claim Adjustment Reason Code is a standardized code maintained by the X12 External Code List committee that explains why a claim line was adjusted (paid less than billed, denied, or transferred to patient responsibility) on a payer's 835 ERA.
Read definitionRARC
A Remittance Advice Remark Code is a code carried on the 835 ERA that either adds explanation to an adjustment already described by a CARC or conveys information about remittance processing. X12 publishes the list as external code list 411 and names CMS as its maintainer.
Read definitionWhere This Applies on MedPrecision
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