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N697 Remark Code: Reversal for Incentive Adjustment

N697 is an alert that the payer reversed a claim because of a retroactive adjustment under a contract incentive program. Incentive amounts tied to performance or participation were recalculated, so the original claim payment is reprocessed.

Quick facts

Code
N697 (RARC N697)
Status
Active In use since November 1, 2013; last modified March 14, 2014.
Code set
Remittance Advice Remark Codes (RARC)
Group codes
  • CO (Contractual Obligation): The original payment, including any incentive component, is backed out, and the reprocessed claim reflects the adjusted incentive terms.
Official description
Alert: This reversal is due to a payer's retroactive contract incentive program adjustment.
X12 Remittance Advice Remark Codes, retrieved September 25, 2026
Last verified
against the official X12 list.

What N697 means

Some payer contracts pay more, or less, depending on results. A practice may earn a higher rate for meeting quality measures, keeping costs under a target, or joining a particular program. When the payer calculates those results after the fact, it may go back to claims already paid, reverse them, and reprocess them with the adjusted incentive. N697 is the flag on those reversals.

The companion remark N422 marks the new payment that follows. Together they show the net effect of the incentive change on each claim.

What to do

  1. Pair each N697 reversal with its reprocessed claim, usually marked N422, and post the net difference.
  2. Get the payer’s incentive statement for the measurement period, which should explain how the adjustment was calculated.
  3. Compare it to your contract terms, including measures, targets, and the claims or period affected.
  4. Total the impact across all adjusted claims instead of reviewing them one by one.
  5. Dispute through the contract’s process if the data or the calculation is wrong.

Because these adjustments can affect many claims at once, it helps to record incentive reversals separately from ordinary denials and payment corrections.

Codes that may appear with N697

  • CO-144 (Incentive adjustment, e.g. preferred product/service.): An incentive adjustment, such as for a preferred product or service.
  • CO-245 (Provider performance program withhold.): A provider performance program withhold.
  • N422 (Claim payment was the result of a payer's retroactive adjustment due to a payer's contract incentive program.): Marks the claim payment that results from the retroactive incentive adjustment.
  • N689 (Alert: This reversal is due to a retroactive rate change.): A reversal because of a retroactive rate change, rather than an incentive program.
  • CO-161 (Provider performance bonus): A provider performance bonus.

N697 FAQ

What is a contract incentive program?

It's a term in your payer contract that raises or lowers payment based on things like quality measures, cost targets, or participation requirements. The details are in your agreement.

Why was the adjustment retroactive?

Incentive results are often calculated after a measurement period ends, and then applied to claims from that period. The contract should describe the timing.

Can I dispute the incentive calculation?

Usually through the process in your contract. Ask the payer for the calculation and the data it used.