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N723 Remark Code: Liability Set-Aside Must Pay

N723 means the patient has a Liability Set-Aside (LSA) from a settled liability claim, such as a personal injury lawsuit, and must use those funds to pay for this related service. The payer that sent N723 will not pay it.

Code: N723 (RARC N723)
Status: Active In use since March 1, 2014.
Code set: Remittance Advice Remark Codes (RARC)
Group codes: PR (Patient Responsibility): The patient is responsible, with the liability set-aside as the intended source of payment.
Official description: Patient must use Liability set-aside (LSA) funds to pay for the medical service or item.
X12 Remittance Advice Remark Codes, retrieved September 25, 2026
Last verified: September 24, 2026 against the official X12 list.

What N723 means

Liability settlements, for example from car accidents with an at-fault driver, slip-and-fall cases, or product liability claims, sometimes reserve money for the injured person’s future medical costs. That reserve is a Liability Set-Aside. N723 tells you the payer has a set-aside on record for this patient and considers the billed service related to the settled injury.

The payer shifts the amount to the patient, usually with CARC 201 and group PR. In practice, the set-aside account is expected to pay.

Why this happens

The claim’s diagnoses match the condition resolved in the settlement.
The patient’s intake did not capture the lawsuit or settlement.
The health plan was billed directly because nobody knew a set-aside existed.

What to do

Ask the patient about the settlement and who manages the set-aside. Attorneys sometimes arrange for a professional administrator.
Confirm the service is related to the settled injury. If it is not, check the diagnosis codes and ask the payer to review.
Bill the patient or administrator according to their instructions and keep copies of what you send.
If the patient reports the set-aside is exhausted, gather documentation and follow the payer’s instructions before resubmitting.
Do not send the claim back to the payer unchanged; it will likely deny again.

How to prevent it

Add a question about pending or settled injury lawsuits to registration for accident-related visits. Flagging the account keeps later related claims from being sent to the wrong payer. See eligibility and COB denials for more on payer order.

Codes that may appear with N723

PR-201 (Patient is responsible for amount of this claim/service through 'set aside arrangement' or other agreement. (Use only with Group Code PR)): Patient responsibility through a set-aside arrangement; N723 identifies it as a liability set-aside.
CO-20 (This injury/illness is covered by the liability carrier.): The injury or illness is the liability carrier's responsibility, the underlying reason the set-aside exists.

N722 (Patient must use Workers' Compensation Set-Aside (WCSA) funds to pay for the medical service or item.): A set-aside funded from a workers' compensation settlement instead.
N724 (Patient must use No-Fault set-aside (NFSA) funds to pay for the medical service or item.): A set-aside funded from a no-fault settlement instead.
N725 (A liability insurer has reported having ongoing responsibility for medical services (ORM) for this diagnosis.): The liability insurer still has ongoing responsibility; there is no settlement with a set-aside yet.

N723 FAQ

How is a liability set-aside created?

When a personal injury or other liability claim settles, part of the proceeds may be reserved for future medical care related to the injury. Payers such as Medicare may expect those funds to be used before they pay.

Should I bill the liability insurer after N723?

Usually not. A set-aside generally follows a settlement, which means the liability carrier has closed its obligation. Bill the patient or the set-aside administrator instead.

What if the patient says the funds are gone?

Ask for documentation from whoever manages the account, then contact the payer to learn how it wants exhaustion demonstrated before it will consider the claim.

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