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N432 Remark Code: Recovery Audit Adjustment Alert

N432 is an alert that the adjustment on this claim is based on a Recovery Audit. A recovery auditor reviewed the paid claim, identified an improper payment, and the payer adjusted the claim, typically recouping an overpayment.

Quick facts

Code
N432 (RARC N432)
Status
Active In use since November 5, 2007; last modified July 1, 2015.
Code set
Remittance Advice Remark Codes (RARC)
Group codes
  • CO (Contractual Obligation): An overpayment identified by the audit is a provider liability. It is generally not shifted to the patient.
  • OA (Other Adjustment): The reversal of the original payment may appear as an other adjustment when the claim is reprocessed.
Official description
Alert: Adjustment based on a Recovery Audit.
X12 Remittance Advice Remark Codes, retrieved September 25, 2026
Last verified
against the official X12 list.

What N432 means

N432 flags that a claim adjustment came from a Recovery Audit. In Medicare, Recovery Audit Contractors (RACs) review paid claims for improper payments, and similar audit programs exist in Medicaid and some commercial plans. When the audit finds an overpayment, and sometimes an underpayment, the payer adjusts the claim and adds N432 so you know why.

The paired CARC gives the actual finding, such as a medical necessity problem or a coding error.

What to do

  1. Locate the audit notice. Recovery audits usually come with a letter explaining the finding and the amount. The remittance alone will not tell you the reasoning.
  2. Reconcile the recoupment against the original payment, and note whether it was offset from other payments.
  3. Review the finding against the medical record. Many audit findings turn on documentation that was missing or unclear when the auditor requested it.
  4. Appeal within the deadline if you disagree, using the process described in the notice.
  5. Look for patterns. One finding may point to a coding or documentation issue affecting other claims.

Audits commonly target documentation, so respond fully and on time to any records request. For reading the codes that come with these adjustments, see how CARC and RARC codes work.

Codes that may appear with N432

  • CO-50 (These are non-covered services because this is not deemed a 'medical necessity' by the payer.): The audit found the service not medically necessary.
  • CO-216 (Based on the findings of a review organization or the payer's findings.): The adjustment is based on the findings of a review organization.
  • N421 (Claim payment was the result of a payer's retroactive adjustment due to a review organization decision.): A retroactive adjustment after a review organization decision.
  • N10 (Adjustment based on the findings of a review organization/professional consult/manual adjudication/medical advisor/dental advisor/peer review.): The adjustment is based on review organization or medical advisor findings.

N432 FAQ

Do I need to do anything when I see N432?

The remark itself is informational, but the adjustment usually means money is being recovered. Review the audit findings and decide whether to appeal.

Can I appeal a Recovery Audit adjustment?

Yes. Recovery audit findings follow the program's normal appeal process, and deadlines apply. Check the demand letter or notice for the timeline.

Can the patient be billed for a recouped amount?

Generally not. An overpayment identified in a Recovery Audit is usually the provider's liability, although program rules can differ when the patient was properly notified in advance.