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N120 Remark Code: Home Health Partial Episode Payment

N120 means the home health agency's payment was subject to a partial episode payment (PEP) adjustment under the home health prospective payment system. The patient transferred to another agency, or was discharged and readmitted, during the payment period, so the payment was prorated.

Code: N120 (RARC N120)
Status: Active In use since August 9, 2002; last modified June 30, 2003.
Code set: Remittance Advice Remark Codes (RARC)
Group codes: CO (Contractual Obligation): The reduction from the full payment is a contractual adjustment the agency absorbs, not a patient balance.
Official description: Payment is subject to home health prospective payment system partial episode payment adjustment. Patient was transferred/discharged/readmitted during payment episode.
X12 Remittance Advice Remark Codes, retrieved September 25, 2026
Last verified: September 24, 2026 against the official X12 list.

What N120 means

Home health agencies are paid a set amount per payment period under a prospective system. If the patient leaves the agency partway through and starts with another agency, or is discharged and then readmitted to home health within the same period, the original agency does not receive the full amount. It gets a partial episode payment instead. N120 tells the agency its claim was priced that way.

This is a pricing explanation on an institutional home health claim, not a denial. Originally the system used 60-day episodes; Medicare now uses 30-day periods, and the partial payment concept continues.

Common causes

The patient chose to transfer to a different home health agency.
The patient was discharged and readmitted to home health within the same period, for example after an unexpected return home.
Dates on the final claim, or the patient status code, indicated a transfer.
Another agency’s claim with an admission date inside your period was processed first.

What to do

Review the patient status and dates on your final claim to confirm they reflect what happened.
Check with the patient or the other agency if you did not know about a transfer.
If your claim had the wrong status or dates, submit an adjustment following your contractor’s instructions for home health claims.
If the transfer really happened, post the prorated payment; there is no additional amount due.

How to prevent it

Ask patients at intake whether they have received home health care from another agency in recent weeks, and check the payer’s eligibility response for open periods. Accurate discharge status codes keep payments from being prorated in error.

Codes that may appear with N120

CO-45 (Charge exceeds fee schedule/maximum allowable or contracted/legislated fee arrangement.): The payment is below the full rate; N120 explains that a partial episode adjustment set the amount.
CO-186 (Level of care change adjustment.): A level of care change adjustment, which some payers use for changes during a payment period.

N88 (Alert: This payment is being made conditionally.): Tells outside providers a home health episode is on file, which may lead to recoupment of their payment.
N638 (Reimbursement has been made according to the home health fee schedule.): States that reimbursement follows the home health fee schedule.
N320 (Missing/incomplete/invalid Home Health Certification Period.): Flags a missing or invalid home health certification period.

N120 FAQ

How is the partial payment calculated?

Under Medicare's approach, the full payment is prorated based on the number of days from the start of the period to the last billable visit before the transfer or discharge. Check the current home health rules for details.

Can I appeal a PEP adjustment?

If the transfer or readmission did not occur, or the dates are wrong, yes. Otherwise the adjustment follows payment rules.

Does every discharge trigger N120?

No. A discharge with the goals met and no return to home health within the period usually does not. The adjustment applies to transfers and readmissions within the period.

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