> ## Documentation Index
> Fetch the complete documentation index at: https://dso.getlemma.com/llms.txt
> Use this file to discover all available pages before exploring further.

# Step 11: Read your first 835 and get paid

> The remittance advice arrives: allowed versus billed, contractual adjustments, patient responsibility, a downgraded composite, the PLB segment, and the EFT hitting the PC account.

An **835**, also called an electronic remittance advice or ERA, explains how the payer adjudicated each claim line. It accounts for the difference between the submitted charge and payment, including contractual adjustments, patient responsibility, and benefit-design reductions that are easy to mistake for denials.

## What Bluebird did

In the Bluebird example, the 835 arrives through the clearinghouse and an EFT for \$\$265.40 reaches the PC operating account. The biller auto-posts the matched lines and reviews an exception for a composite that the plan priced under an alternate-benefit provision.

## What came back

Bluebird billed four lines. Here is what the 835 said, translated out of X12:

|                            | Exam              | Radiographs       | Prophylaxis       | Composite (D2391)  |
| -------------------------- | ----------------- | ----------------- | ----------------- | ------------------ |
| **Billed**                 | \$\$95.00         | \$\$150.00        | \$\$120.00        | \$\$210.00         |
| **Allowed**                | \$\$62.00         | \$\$98.00         | \$\$81.00         | \$\$96.00          |
| **Contractual adjustment** | \$\$33.00 (CO-45) | \$\$52.00 (CO-45) | \$\$39.00 (CO-45) | \$\$114.00 (CO-45) |
| **Deductible**             | \$\$0.00          | \$\$0.00          | \$\$0.00          | \$\$50.00 (PR-1)   |
| **Coinsurance**            | \$\$0.00          | \$\$0.00          | \$\$0.00          | \$\$9.20 (PR-2)    |
| **Paid by payer**          | \$\$62.00         | \$\$98.00         | \$\$81.00         | \$\$36.80          |

The first three lines were paid under the plan's preventive and diagnostic tier. The fourth needs a closer review.

The claim lines total **$277.80 in payer payments**, while the EFT is **$265.40**. The PLB section below explains the \$\$12.40 difference.

## The four numbers that matter

**Billed charge.** The practice's submitted fee. For an in-network claim, the participation agreement often limits payment to a contracted allowance.

**Allowed amount.** The amount recognized under the applicable contract or benefit terms. For a commercial dental PPO, it generally comes from the carrier's negotiated fee schedule rather than a Medicare benchmark. The difference between billed and allowed is the contractual adjustment. See [Underpayments, fee schedules, and payer contracts](/concepts/payments/underpayments-and-contracts).

**Contractual adjustment.** The difference between the submitted charge and the contracted allowance. Under a participating-provider agreement, the practice generally writes off this amount rather than billing it to the patient. It commonly appears with group code **CO** and **CARC 45**, “Charge exceeds fee arrangement.” Confirm the specific contract and remittance.

**Patient responsibility.** Deductible or coinsurance. It arrives with group code **PR** and may be billed to the patient under the applicable terms. Posting a PR amount as a contractual write-off can suppress a valid patient balance.

## The composite line: your first downgrade

Look again at line 4. Bluebird's contracted fee for a one-surface posterior composite is $148, but the allowed amount reads **$96\*\*. That is not a typo and not a denial. The plan applied its **alternate benefit provision** (also called **least expensive alternative treatment, LEAT**): it paid the posterior composite as if an amalgam filling had been placed, at the amalgam allowance.<sup>2</sup>

Use the following checks to identify the downgrade:

* **The reason may not be explicit.** The \$\$114 difference is reported with CO-45 and may resemble an ordinary contractual adjustment. Some payers add a remark code, while others require the biller to compare the allowed amount with the contracted fee and plan terms.
* **Compare the allowed amount with the contracted fee.** Here, \$\$96 matches the amalgam allowance rather than the contracted composite fee. The biller needs the correct fee schedule in the PMS to identify that difference.
* **The difference may be patient responsibility.** In this example, \$\$52 sits between the contracted composite fee and the amalgam allowance. Bill it only if the participation agreement and applicable patient disclosures permit that treatment. Otherwise, posting and billing the amount can be wrong in either direction.
* **Do not treat it as an appeal automatically.** If the plan applied its stated alternate-benefit provision correctly, the work is accurate estimating and posting rather than a clinical appeal. Appeal only when the policy, facts, or adjudication support one.

Three situations on a dental 835 demand three different responses:

| What happened                                               | What it is           | What you do                                                       |
| ----------------------------------------------------------- | -------------------- | ----------------------------------------------------------------- |
| Missing preauth, non-covered service, coding error          | **Genuine denial**   | Correct and resubmit, or [appeal](/guides/billing/file-appeals)   |
| Composite paid at amalgam rate, crown at large-filling rate | **Downgrade (LEAT)** | Bill the patient where contract and consent permit, not an appeal |
| Frequency limit hit, annual maximum exhausted               | **Benefit design**   | Patient responsibility, not an appeal                             |

See [Denials vs downgrades](/concepts/payments/denials-vs-downgrades). This claim also used $277.80 of Mrs. Alvarez's $1,500 annual maximum. Track the remaining benefit when preparing later treatment estimates, including the planned crown.

## The adjustment grammar

Every dollar of difference between billed and paid is explained by a triple:

**Group code + CARC (+ optional RARC) = a complete explanation.**

| Group code | Meaning                   | What you do                                                              |
| ---------- | ------------------------- | ------------------------------------------------------------------------ |
| **CO**     | Contractual obligation    | Write it off. Cannot bill the patient.                                   |
| **PR**     | Patient responsibility    | Bill the patient.                                                        |
| **OA**     | Other adjustment          | Usually informational or a transfer, e.g. to a secondary plan under COB. |
| **PI**     | Payer-initiated reduction | Payer's decision, not contractual. Often appealable.                     |

**CARC** (Claim Adjustment Reason Code) says *why*: CARC 45 for fee-schedule reduction, CARC 1 for deductible, CARC 2 for coinsurance. **RARC** (Remittance Advice Remark Code) adds detail where the CARC alone is ambiguous, including, on some payers, the note that an alternate benefit was applied.

The full working set is in [CARC codes](/reference/edi/carc-codes), [RARC codes](/reference/edi/rarc-codes), and [Group codes](/reference/edi/group-codes).

**Group-code mapping affects the patient balance.** Posting PR as CO can suppress a valid patient balance. Posting CO as PR can bill the patient for an amount the participation agreement assigns to the practice. A permitted downgrade difference may also need separate posting treatment rather than a generic contractual write-off.

## Why the deposit didn't match the remittance

Bluebird's 835 totalled $277.80 in claim payments, but the EFT was $265.40. The \$\$12.40 difference was in the **PLB segment**, provider-level adjustments, which sit outside the claim detail.

PLB carries adjustments that are not assigned to a single claim, such as prior-overpayment recoveries, late-payment interest, and withholds. In Bluebird's case, the payer recovered \$\$12.40 after the biller accidentally resubmitted a claim that had already been accepted.

The reconciliation rule is:

**One 835 does not equal one bank deposit.** A single deposit can cover multiple remittances; a single remittance can be split. The **TRN segment** carries a reassociation trace number that links the 835 to the payment; that is how you match them. Reconcile using TRN, not by hunting for matching dollar amounts.

See [The 835: how payers answer](/concepts/payments/understanding-835s) and [835 file anatomy](/reference/edi/835-anatomy).

## Posting it

<Steps>
  <Step title="Auto-post">
    Your PMS matches the 835 to open claims and posts payments, adjustments, and patient responsibility automatically. A well-configured system auto-posts most lines.
  </Step>

  <Step title="Work the exception queue">
    Everything that didn't match: unmatched claim numbers, takebacks, secondary-plan transfers, anything with an unfamiliar CARC, and every downgrade, because the split between write-off and patient-billable difference needs a human and the fee schedule.
  </Step>

  <Step title="Balance the remittance to the deposit">
    Sum of claim payments, plus or minus PLB, equals the EFT. If it doesn't, stop and find out why before posting. See [Reconcile payments daily](/guides/payments/reconcile-daily-payments).
  </Step>

  <Step title="Route the patient balance">
    Deductible, coinsurance, and permitted downgrade differences move to the patient ledger and into the statement cycle. See [Run patient statements and balances](/guides/billing/manage-patient-statements).
  </Step>

  <Step title="Queue anything actually denied">
    Review every \$\$0-paid line before routing it. True denial CARCs go to the denial queue, while benefit-design reductions follow the applicable posting and patient-billing workflow. See [Work the denial queue](/guides/billing/work-the-denial-queue).
  </Step>
</Steps>

## Where the money landed

The EFT arrived in the **PC operating account** authorized for this enrollment. From there, the monthly cycle follows Bluebird's documented funds flow:

1. The PC pays clinical payroll and its direct expenses.
2. The DSO invoices the PC for the management fee.
3. The PC pays the invoice.
4. The DSO pays everything else.

The management fee is paid against an invoice rather than through an undocumented standing sweep. See [Move money between PC and DSO](/guides/banking/move-money-dso-pc).

## What this step completes

At this point in the tutorial, Bluebird has two entities, an agreement stack, a credentialed dentist, a payer contract, a billing stack, an accepted claim, an adjudicated remittance, and a reconciled deposit.

The next step is an operating routine for daily claim work, weekly recall and receivables review, and the monthly close for both entities.

## Checklist

* [ ] 835 received for your first claim
* [ ] Allowed, adjustment, and patient responsibility understood line by line
* [ ] Downgrade identified from the allowed amount, not just the codes
* [ ] Downgrade difference routed per contract and financial consent, not appealed, not silently written off
* [ ] EFT confirmed in the **PC** operating account
* [ ] Remittance balanced to the deposit, including PLB
* [ ] Payment posted; exception queue worked
* [ ] Patient balance moved into the statement cycle
* [ ] Remaining annual maximum updated on the treatment plan
* [ ] Any genuine denials routed to the denial queue

## Next

<Card title="Your First 90 Days" icon="arrow-right" href="/start/first-90-days/overview">
  Establish the daily, weekly, and monthly operating cadence.
</Card>

## Sources

1. Consultant-reported benchmark ranges: Veritas Dental Resources, [the true cost of dental insurance participation](https://veritasdentalresources.com/post/the-true-cost-of-dental-insurance-participation-a-write-off-reality-check); Dental Billing Assist, [dental billing KPIs](https://dentalbillingassist.com/blog/posts/dental-billing-kpis-benchmarks).
2. ADA, [Least expensive alternative treatment (LEAT) clause](https://www.ada.org/resources/practice/dental-insurance/least-expensive-alternative-treatment-clause); the ADA recommends informing patients before treatment when LEAT may apply.