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.
- Most payer claim-status APIs (276/277 transactions) report adjudication status with codes like A1 (acknowledged), A2 (accepted by clearinghouse), F1 (finalized — payment), F2 (finalized — denial), or P (pending).
- Real-time tracking of adjudication status enables faster appeals and rebill cycles.
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 and an EOB to the patient.
Example
A claim for CPT 99214 with diagnosis M54.50 (low back pain) submitted to Aetna PPO: eligibility confirms active coverage, the visit is a covered benefit, NCCI passes, the contracted rate is $135, the patient's $30 copay applies, and Aetna pays $105 with $30 patient responsibility — communicated via 835 ERA and an EOB sent 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
Most payer claim-status APIs (276/277 transactions) report adjudication status with codes like A1 (acknowledged), A2 (accepted by clearinghouse), F1 (finalized — payment), F2 (finalized — denial), or P (pending). Real-time tracking of adjudication status enables faster appeals and rebill cycles.
Related Terms
Clean Claim
A clean claim is a properly completed claim that requires no additional information from the provider, contains no errors or defects, and can be processed by the payer without manual intervention or follow-up.
Read definition arrow_forwardEOB (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 definition arrow_forwardERA (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 definition arrow_forwardCARC
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 definition arrow_forwardRARC
A Remittance Advice Remark Code is a supplemental code used on the 835 ERA to provide additional information about an adjustment, often clarifying or specifying the reason behind a CARC; RARCs are maintained by CMS and the Remittance Advice Code Committee.
Read definition arrow_forwardWhere This Applies on MedPrecision
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