Explanation of Benefits (EOB)
An EOB is a statement from a payer to a provider or patient detailing how a claim was processed — including the amount billed, contractual adjustment, payer payment, and patient responsibility — the foundational document for revenue cycle reconciliation.
What is an EOB?
The EOB (Explanation of Benefits) is the document payers send to providers — and in a separate version, to patients — explaining how a submitted claim was adjudicated. The provider-facing EOB contains: billed amount (the chargemaster gross charge), allowed amount (the contractually agreed reimbursement rate), payer payment (the portion paid by the insurer after patient liability is subtracted), patient responsibility (deductible, copay, and coinsurance), and reason codes explaining any payment reductions. Two standardized code sets govern denial explanations: Claim Adjustment Reason Codes (CARCs) and Remittance Advice Remark Codes (RASCs). The most common CARC codes include CO-45 (contractual obligation — the routine contractual adjustment), CO-97 (payment included in another service's allowance — bundling), PR-1 (patient deductible amount), and PR-2 (patient coinsurance amount). Denial-specific CARCs include CO-50 (medical necessity denial), CO-4 (service not covered under the patient's plan), and PR-119 (benefit maximum reached). The electronic equivalent of the paper EOB is the ERA (Electronic Remittance Advice), transmitted as an HIPAA X12 835 transaction. ERA enables automated payment posting into practice management systems, eliminating the manual data entry required by paper EOBs.
Why It Matters for Healthcare Analytics
EOB analysis — specifically CARC code pattern analysis across payers — transforms individual claim adjudications into actionable intelligence about systematic billing problems. When CO-50 medical necessity denials concentrate on a specific provider or diagnosis code, or when CO-97 bundling denials spike with a particular payer, the EOB data reveals the root cause.
How Vizier Analyzes EOBs
Upload your ERA/835 remittance files, then ask "What are our top CARC codes by dollar amount and which payers are denying most frequently for medical necessity?" — Vizier parses denial reason codes across all claims, ranks by financial impact, and identifies the provider and procedure patterns driving systematic underpayment or denial.