What is a good claim denial rate for a medical practice?

There is no single right number, because specialty and payer mix change it. The 2024 CAQH Index reports that about 12% of medical and dental claims were denied in 2023, which gives a rough industry reference. Measure your own rate consistently, excluding clearinghouse rejections, and aim to lower it month over month.

What are the most common reasons claims are denied?

Missing or invalid information on the claim, eligibility and coverage problems, absent prior authorization, diagnosis and procedure mismatches, bundling and modifier errors, duplicate submissions, and timely filing. Each shows up as a distinct claim adjustment reason code, which is why grouping denials by code is the fastest way to see your own pattern.

How quickly should denials be worked?

Within a few days of the remittance posting. Every payer sets deadlines for corrected claims and appeals, and a denial that sits for a month has burned part of that window. A daily denial queue with a named owner is more effective than a large weekly batch that nobody finishes.

Should I appeal every denial?

No. Many denials are resolved faster with a corrected claim, especially those caused by missing information or a wrong modifier. Reserve formal appeals for denials on the merits, such as medical necessity, and support them with the payer policy language and the documentation that addresses it.

Can a billing company reduce my denial rate on its own?

Only partly. A billing team can fix coding, submission and follow-up problems and can show you which reason codes are trending. Denials that originate at registration, eligibility or authorization require changes at your front desk, and a good partner will tell you that rather than absorb the cost silently.

Denials

How to reduce claim denials in your practice

By DyBilling editorial teamSeptember 10, 20267 min read

Most practices treat denials as a cost of doing business and work them one at a time as they arrive. That keeps cash moving, but it never lowers the rate. This article lays out the order of operations that does: measure denials by reason code, fix the causes at the point they originate, work what still comes back on a schedule, and check each month whether the fix held.

Start with the denials you already have

Before changing anything, pull the denials from the last ninety days out of your practice management system or clearinghouse. Every electronic remittance (the 835 transaction) carries a claim adjustment reason code, or CARC, and often a remittance advice remark code, or RARC, that says why the payer paid less than billed. Those codes are the raw material. Group the denied lines by code, then by payer, then by billing provider, and attach the dollar value to each group.

The list is usually shorter than expected. A handful of codes account for most of the volume, and a different handful accounts for most of the dollars. High-volume, low-dollar denials eat staff time; low-volume, high-dollar denials are usually the surgical or infusion claims that a single missing authorization can sink. Decide which list you are attacking first, because the fix for each is different.

CO-16 (claim lacks information) and CO-4 (procedure inconsistent with modifier) usually point to registration or charge entry.
CO-197 (precertification or authorization absent) and CO-27 (coverage terminated) point to the front desk and the eligibility workflow.
CO-11 (diagnosis inconsistent with procedure), CO-50 (not deemed medically necessary) and CO-97 (bundled) point to documentation and coding.
CO-29 (timely filing) and CO-18 (duplicate claim) point to the billing office itself.

Separate rejections, denials and underpayments

Three different things get lumped together under the word denial, and mixing them hides the real rate. A rejection was stopped at the clearinghouse or the payer’s front-end edits and never adjudicated; it can be corrected and resent the same day, and it should never sit in a queue. A denial was adjudicated and refused, and needs either a corrected claim or an appeal. An underpayment was adjudicated and paid, just at less than the contracted rate, and needs a contract check and a reconsideration request.

Count them separately. Your denial rate should be denied claims (or denied dollars) divided by claims adjudicated in the same period, with rejections excluded. If your system cannot tell the two apart, that is the first thing to fix, because a rejection rate that looks like a denial rate will send you chasing the wrong problem. According to the 2024 CAQH Index, about 12% of medical and dental claims were denied in 2023, so a practice that measures correctly has a rough industry yardstick to hold its own number against.

Fix the front end first

The largest share of avoidable denials is created before a claim exists. A wrong subscriber ID, an inactive plan, a missing referring provider NPI, a procedure that needed authorization and did not get it: none of these are billing errors in the usual sense, and none of them can be fixed by a better biller after the fact. They are fixed by changing what happens at scheduling and check-in.

Run a real-time eligibility check (the 270/271 transaction) for every scheduled visit, not just new patients, and run it again on the day of service for anything high-dollar. Build a short list of the services in your specialty that commonly require prior authorization and make the authorization number a required field before the appointment is confirmed. Verify demographics against the insurance card rather than the patient’s memory. Each of these steps takes seconds; each of them removes a category of denial you would otherwise pay someone to work.

Fix coding and documentation at the source

The second cluster of denials comes from the chart. Payers deny CO-11 when the diagnosis on the claim does not support the procedure, CO-50 when the service does not meet a coverage policy, and CO-97 or CO-4 when a bundled service is billed without a valid modifier or with the wrong one. Appealing these one at a time is slow and often fails; the durable fix is to change how the encounter is documented and coded.

Pull a small sample of the denied encounters and read the notes against the codes. Common findings are a diagnosis that was in the note but not on the claim, a modifier 25 or 59 appended by habit rather than because the documentation supports a separately identifiable service, and a service with a coverage determination the provider was unaware of. Feed each finding back to the specific provider with the specific chart. General reminders at a staff meeting change nothing; one provider looking at their own denied note changes behavior.

Work what still comes back, on a schedule

Even a well-run practice gets denials. The difference is what happens next. Denials need to be touched within a few days of the remittance posting, sorted by reason code and by deadline, and assigned to a named person. Every item should carry a next action and a date, not a note saying it was reviewed. Sorting purely by dollar value or age without reading the codes is how the same claim gets re-denied for the same reason.

Decide corrected claim versus appeal deliberately. Many denials are resolved faster with a corrected claim, and filing a formal appeal where a correction would do wastes the appeal window. Where an appeal is warranted, it should cite the payer’s own policy language and attach the documentation that addresses the stated reason. Track deadlines on both sides: the CMS Claims Processing Manual requires Medicare claims to be filed within one calendar year of the date of service, and the Medicare appeals process runs through five levels beginning with redetermination, each with its own clock. Commercial payers set their own limits, often shorter, in the provider contract.

How to reduce claim denials permanently: close the loop monthly

Working denials keeps cash moving. Reducing them requires a second, slower loop. Once a month, re-run the reason code report and compare it with the previous month. For each of the top codes, ask three questions: is the volume falling, has the upstream fix been made, and who owns it? A code that keeps appearing after the fix went in means the fix did not take, or the cause was somewhere else.

Track a small set of numbers and resist adding more: first-pass acceptance rate at the clearinghouse, denial rate by count and by dollars, the share of denials overturned, days from remittance to first touch, and write-offs by reason. Write-offs deserve their own line because an untracked write-off is a denial that was quietly conceded. If a practice writes off timely-filing denials without anyone noticing, the denial rate looks better than the revenue does.

Pull the reason code report on the same day each month so the periods are comparable.
Give every top-five code a named owner in the department where it originates.
Review write-offs by reason code alongside denials, not separately.
Keep the payer dimension: a code rising with only one payer is usually a policy change, not a process failure.

Where an outside billing team fits

None of the above requires outsourcing. It requires someone to own the reason code report and the authority to change front-desk and documentation habits. Where a billing partner helps is in doing the daily denial work by code rather than by age, and in producing the monthly trend with volume and dollars attached. That is how DyBilling structures denial management: inside the client’s existing practice management system, with recurring codes traced back to the step that produced them and raised by a named account manager on the monthly review. Where a cause sits with front-desk registration, we say so rather than promise a number, because that fix belongs to your staff.

Questions this article gets asked

What is a good claim denial rate for a medical practice?: There is no single right number, because specialty and payer mix change it. The 2024 CAQH Index reports that about 12% of medical and dental claims were denied in 2023, which gives a rough industry reference. Measure your own rate consistently, excluding clearinghouse rejections, and aim to lower it month over month.
What are the most common reasons claims are denied?: Missing or invalid information on the claim, eligibility and coverage problems, absent prior authorization, diagnosis and procedure mismatches, bundling and modifier errors, duplicate submissions, and timely filing. Each shows up as a distinct claim adjustment reason code, which is why grouping denials by code is the fastest way to see your own pattern.
How quickly should denials be worked?: Within a few days of the remittance posting. Every payer sets deadlines for corrected claims and appeals, and a denial that sits for a month has burned part of that window. A daily denial queue with a named owner is more effective than a large weekly batch that nobody finishes.
Should I appeal every denial?: No. Many denials are resolved faster with a corrected claim, especially those caused by missing information or a wrong modifier. Reserve formal appeals for denials on the merits, such as medical necessity, and support them with the payer policy language and the documentation that addresses it.
Can a billing company reduce my denial rate on its own?: Only partly. A billing team can fix coding, submission and follow-up problems and can show you which reason codes are trending. Denials that originate at registration, eligibility or authorization require changes at your front desk, and a good partner will tell you that rather than absorb the cost silently.

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