RARC M27: Provider Liable for Waived Patient Charges
The payer found the services lacked medical necessity or were custodial care, making the provider financially responsible for all waived charges — the patient cannot be billed unless a valid ABN was in place.
What Does RARC M27 Mean?
When M27 appears on a remittance, it signals that the payer has applied the limitation of liability provision to the claim. In practical terms, the payer concluded that the billed services did not meet medical necessity criteria or fell into the category of custodial care, and because the patient was not given adequate advance notice, the financial responsibility stays with the provider. This includes not only the base payment but also any coinsurance amounts that would normally be the patient's obligation.
This remark code is closely tied to the Advance Beneficiary Notice (ABN) process. If the provider did not obtain a properly executed ABN before delivering the service, the limitation of liability rules generally prevent the provider from billing the patient. The logic is straightforward: the patient had no way to make an informed financial decision without being warned that the service might not be covered. In some situations, even a signed ABN may not shift liability if it was not specific enough about the service in question or was presented after the fact.
Billing teams typically see M27 paired with CARC codes like 50 (medical necessity) or 96 (non-covered charge). When it appears, it is worth reviewing not just the current claim but also your ABN workflow for the service category involved, since repeated M27 denials on similar services often point to a systemic gap in the notice process rather than a one-off oversight.
What to Do
Start by confirming whether an ABN was obtained for the denied service. If a valid, service-specific ABN was signed by the patient before the service was rendered, you may have grounds to shift liability and bill the patient — resubmit with appropriate modifiers (such as GA) and attach the ABN documentation. If no ABN exists, the provider will generally need to absorb the cost for this claim.
For future prevention, identify the service categories that are triggering M27 and build ABN workflows around them. Many practices find it helpful to flag services that frequently fail medical necessity screening — such as certain therapy visits beyond a cap or routine tests on specific diagnoses — so that front-desk or scheduling staff can initiate the ABN conversation before the appointment. Documenting medical necessity thoroughly in the clinical record can also reduce the frequency of these denials on appeal.
Common Scenarios
- A physical therapy clinic bills Medicare for sessions exceeding the therapy cap without obtaining an ABN, and the claim returns with M27 because the services were deemed not medically necessary beyond the allowed threshold.
- A home health agency submits claims for custodial-level care that Medicare classifies as non-skilled, and without a prior ABN on file, the provider cannot bill the patient for the denied charges.
- A physician orders a screening lab test that Medicare does not cover for the patient's diagnosis, and the claim is denied with M27 because the office did not present an ABN before the blood draw.
Commonly Paired With
No common pairings documented yet.