CARC 74 Active

OA-74: Indirect Medical Education Adjustment

TL;DR

The IME adjustment balance is flagged for the secondary payer. Forward the claim with the primary ERA.

Action
Resubmit
Who Pays
Depends
Appeal
No
Patient Impact
Indirect
Disclaimer
This content is for informational purposes only and does not constitute professional billing advice. Always verify information against your payer contracts and current coding guidelines. Consult a certified billing specialist for specific claim issues.

What Does OA-74 Mean?

OA-74 appears in coordination of benefits scenarios where the primary payer's IME adjustment is passed to a secondary payer. This is informational — the secondary payer will evaluate the remaining balance under its own payment methodology.

CARC 74 shows up on remittances for teaching hospitals as part of Medicare's Inpatient Prospective Payment System calculation. The Indirect Medical Education adjustment recognizes that teaching hospitals incur higher costs per case due to the involvement of residents in patient care, additional diagnostic testing, and the overall complexity of cases attracted by academic medical centers.

The IME payment is calculated as a percentage add-on to the DRG payment, driven primarily by the hospital's intern-and-resident-to-bed (IRB) ratio. A higher IRB ratio generates a larger IME add-on. CARC 74 on the ERA represents the contractual adjustment between the hospital's billed charges and the DRG-plus-IME payment amount. Because hospitals bill charges that typically exceed PPS payments, this adjustment will always appear on teaching hospital remittances.

Since CARC 74 is a structural component of the Medicare payment formula, it is not a denial in the traditional sense. It is almost always paired with Group Code CO, designating it as a contractual write-off. However, if the IME adjustment amount seems incorrect, the root cause usually lies in an inaccurate IRB ratio, a miscoded DRG, or outdated resident count data. Teaching hospitals should reconcile expected versus actual IME payments on every remittance to catch calculation errors early.

Common Causes

Cause Frequency
Coordination of benefits IME adjustment In multi-payer situations, the primary payer's IME adjustment passes to the secondary payer under OA Most Common

How to Resolve

Reconcile the IME adjustment against expected payment calculations, verify the input data, and post the contractual write-off or request correction.

  1. Submit to the secondary payer File a secondary claim with the primary ERA showing the OA-74 adjustment. Include all relevant teaching hospital documentation.
  2. Process the secondary ERA Review the secondary payer's adjudication and post the payment or adjustment accordingly.
Do Not Appeal This Code

This adjustment is typically correct as processed. Review the specific circumstances before taking further action.

How to Prevent OA-74

General Prevention

Also Filed As

The same CARC 74 may appear with different Group Codes:

CO-74

Related Denial Codes

OA-13 — Date of Death Precedes Date of Service OA-19 — Workers' Compensation Claim OA-20 — Liability Carrier Responsible OA-21 — No-Fault Carrier Responsible OA-22 — Care Covered by Another Payer (COB)

Sources

  1. https://www.mdclarity.com/denial-code/74
  2. https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps/indirect-medical-education-ime
  3. https://ambci.org/medical-billing-and-coding-certification-blog/guide-to-claim-adjustment-reason-codes-carcs
  4. Codes maintained by X12. Visit x12.org for official definitions.