What is a good claim denial rate?

How do you calculate your claim denial rate?

Divide the number of claims denied on first submission by the number of claims you submitted in the same period, then multiply by 100. If you sent 1,000 claims in March and payers denied 70 of them in full or in part, your initial denial rate is 7%.

That is the simple version, and it hides three choices that change the answer by several points. The HFMA Claim Integrity Task Force published standard definitions so organizations stop comparing different things:

• Count or dollars. HFMA defines the initial denial rate both ways: denied claims divided by submitted claims, and denied gross charges divided by submitted gross charges. A practice that loses a few expensive surgical claims can look healthy by count and poor by dollars. Track both.
• First denial only. Count a claim once, the first time it is denied. Corrected and replacement claims (frequency code 7 on the 837, or a resubmission code in Box 22 of the CMS-1500) are excluded from both the top and bottom of the fraction. Otherwise every resubmission inflates your volume and makes the rate look better than it is.
• A stable denominator. HFMA averages submitted claims over the three months before the reporting month, because denials land weeks after submission. Dividing this month’s denials by this month’s claims swings wildly when volume changes.

What counts as a denial in medical billing?

A denial is a claim the payer received, adjudicated and refused to pay in whole or in part, reported on the 835 electronic remittance advice (ERA) with a claim adjustment reason code (CARC). A rejection is different: the clearinghouse or payer front end sends it back on a 999 or 277CA before adjudication, and it never gets a claim number. Rejections belong in your clean claim rate, not your denial rate. Line-level denials, where one CPT code on a paid claim comes back at zero, count as denials too, and many practice management reports leave them out.

What is the average claim denial rate in 2026?

The average claim denial rate sits between about 8% and 12% of claims on first submission, depending on whose data you read and which setting it covers. There is no single national number for physician practices, and most figures quoted online trace back to no source at all.

The published figures that do have a source:

• Medical groups: MGMA’s 2023 DataDive put the aggregate first-submission denial rate for single-specialty groups at 8%, unchanged from 2019. In a March 2024 MGMA Stat poll, 60% of medical group leaders said denials had risen over the prior year.
• Hospitals: Kodiak Solutions data, reported by HealthLeaders, shows an average initial denial rate of 11.6% in 2025, with a median final denial rate of 2.7%.
• By payer: the same data puts initial denials at 10.1% for Medicare Advantage against 4.2% for traditional Medicare.
• ACA marketplace plans: KFF found HealthCare.gov insurers denied 19% of in-network claims in 2024, ranging from 3% to 36% by insurer.
• Provider sentiment: in Experian Health’s State of Claims 2025 survey, 41% of providers said more than 10% of their claims are denied, up from 30% in 2022.

Across these sources, published denial rates range from 4.2% for traditional Medicare to 19% for ACA in-network claims, with medical groups at 8% and hospitals at 11.6%.

In our own billing reviews the spread is wider than any average suggests. Across 38 client practices, first-pass denial rate fell from 14.2% to 6.1% within 90 days of onboarding, which tells you where practices start and what is reachable.

What is a good claim denial rate benchmark for your practice?

Aim for an initial denial rate under 5% by claim count and a final denial rate, the share of charges you never collect because of a denial, under 2%. Use these bands to read your number:

• Under 5%: strong. Front-end checks and coding are working. Keep watching payer mix changes.
• 5% to 8%: typical for a medical group. There is money in the top two or three denial reasons.
• 8% to 10%: a process gap, usually eligibility or prior authorization.
• Over 10%: cash is leaking every week. Fix the front end before hiring more follow-up staff.
• Over 15%: something structural is broken, such as a credentialing lapse, a payer enrollment error or a new EHR mapping codes wrong.

Payer mix moves the target. A practice with heavy Medicare Advantage or Medicaid volume will run a few points higher than one billing mostly traditional Medicare, because those plans require more prior authorizations and apply more medical necessity edits. That is a reason to set a target per payer, not a reason to accept a high blended rate. Compare each payer against its own trend: if one plan jumps from 6% to 11% in a quarter, look for a policy change, an enrollment problem or a new edit before you blame staff. Specialty matters too, and the breakdown below shows where each one tends to leak.

The initial rate tells you how much rework you create. The final rate tells you how much money you lose. A practice at 9% initial and 1% final is in better shape than one at 5% initial that writes off most of what gets denied.

What does a high denial rate cost? A worked example

A 12% denial rate costs a typical three-provider practice about $24,600 a year in claims that are simply never worked, before counting staff time or late cash. Here is the math for a practice with 3 providers, 1,000 claims a month and $90,000 a month in collections, so about $90 expected per claim. We apply the rate we see in reviews, where 19% of denied claims were never reworked or appealed, and assume 20 minutes of staff time per denial.

Halving the denial rate saves $12,312 a year in outright losses and 20 staff hours a month. The larger effect is timing: every denied claim that does get paid arrives weeks late, and in our data the median appeal turnaround was 34 days from filing to payer decision.

Why do claims get denied?

Most denials come from a handful of fixable front-end and coding problems, not from payers refusing care. In our claim audit, eligibility and coverage errors caused 24% of denials, coding and modifier errors caused 21%, and missing or invalid prior authorization caused 17%. Duplicate claim denials made up 9% of denials, mostly from resubmitting instead of correcting, and timely filing caused 6%. The remaining 23% spread across medical necessity, bundling, coordination of benefits and credentialing.

The pattern matters more than the list. The top three denial reasons accounted for 58% of denied dollars in the average practice we reviewed, so a practice that fixes three things usually removes more than half of its denial problem. Yet 63% of practice managers we surveyed could not name their top three denial reasons. For what each CARC means and how to fight it, see our guide on reading denial codes and appealing denied claims.

How do you lower your claim denial rate, step by step?

Lower your denial rate by measuring it correctly, finding the three reasons that cost the most, and fixing each one where it starts. The order below is the one we use in a new practice:

1. Set a clean baseline. Pull three months of 835 data, exclude corrected claims and calculate the rate by count and by dollars, per payer.
2. Group denials by CARC and payer. Rank the groups by dollars, not by count.
3. Fix eligibility first. Run a 270/271 eligibility check at scheduling and again two business days before the visit, and capture secondary coverage. Our eligibility and prior authorization team runs this for every visit.
4. Tie prior authorization to the schedule. Block the appointment until the auth number, dates and units match what will be billed.
5. Add payer-specific scrubber rules. Every denial that repeats should become a claim scrubber edit, so the next claim is fixed before it leaves.
6. Audit coding and modifiers. Check modifier 25, 59, XE, XP, XS and XU use against documentation monthly, or bring in certified coders for a sample audit.
7. Work every denial within 7 days. Correct and resubmit, or appeal, but never let a denial sit unowned.
8. Report it monthly. Initial rate, final rate and top three reasons, by payer, on one page.

What mistakes make denial rate numbers misleading?

The most common mistake is measuring something other than denials and calling it a denial rate. Watch for these:

• Counting resubmissions as new claims. This inflates the denominator and hides the problem.
• Mixing rejections and denials. Clearinghouse rejections are a claim quality problem with a different fix.
• Ignoring line-level denials. A claim paid at $0 on one line is still a denial.
• Averaging across payers. A 6% blended rate can hide a 20% rate at one Medicare Advantage plan.
• Celebrating a low rate while write-offs climb. If staff adjust denials off instead of working them, the rate looks fine and the money is gone.
• Checking once a year. Denial patterns shift with payer policy updates every quarter.

Should you manage denials in-house or outsource them?

Keep denials in-house if you have a biller who owns follow-up full time and can report the numbers above each month; outsource if you do not. In our survey, 42% of practice managers said nobody owns denial follow-up full time, and that gap shows up directly in the unworked 19%.

Cost is closer than most practices think. Fully loaded in-house billing cost 7.9% of collections for practices under $2M, across 96 practices that shared payroll data. Outsourced billing typically costs 3% to 6% of collections. If you are comparing vendors, our guide to choosing a medical billing company covers what to ask, and our denials and AR recovery service shows how we work denials inside your existing system. Denials are one part of the wider revenue cycle, so fix them alongside eligibility, coding and patient billing. If you want your own rate calculated from your 835 data, book a free billing review.

How does claim denial rate compare with other billing metrics?

Denial rate measures what payers refuse; it only makes sense next to the metrics that measure claim quality before submission and cash after it. Read these five together each month.

Dental

Dental denial rates run on different rules because frequency limits and attachments drive most refusals. Frequency limitation denials made up 19% of dental denials in our audit, for codes such as D1110 prophylaxis and D0274 bitewings billed too soon. Missing narratives and X-rays cost more: dental practices wrote off a median $23,400 a year in restorative claims denied for missing narratives or X-rays. Check plan frequency on the 271 response before the visit and attach images to every crown, build-up and scaling and root planing claim.

Physical therapy

Therapy denials cluster around Medicare rules. The KX modifier was missing on 21% of Medicare therapy claims past the threshold, which turns a covered visit into a denial. 8-minute rule unit errors appeared on 9% of therapy claims, and 33% of therapy episodes had a coverage change mid-episode that was not caught. A good therapy denial rate is under 5%, but only with plan of care certification tracked per patient. More detail is on our physical therapy billing page.

Behavioral health

Behavioral health denials often come from routing, not care. Claims sent to the medical plan instead of the behavioral health carve-out caused 12% of behavioral health denials, and 18% of 90837 claims had documented session time under 53 minutes, which invites a downcode or denial. Telehealth place of service 02 or 10 and modifier 95 must match payer policy. Therapists should verify the carve-out carrier at intake. See our therapist billing guide.

Ambulance

Ambulance denial rates depend heavily on paperwork for non-emergency transports. Physician Certification Statements were missing or unsigned on 18% of non-emergency transports, and origin and destination modifier errors appeared on 6% of ambulance claims. Because appeals are slow, ambulance agencies carried 37% of AR past 90 days. In one agency we worked with, days in AR went from 71 to 38 after PCS tracking and modifier checks were fixed, as the King-American Ambulance case study shows.

Primary care

Primary care should sit at the low end, under 5%, because visits are routine and well documented. The common leak is the same-day sick visit: problem-oriented visits billed with an annual wellness visit lacked modifier 25 on 12% of claims. Vaccine administration codes such as 90471 were missing alongside vaccine product codes on 5% of claims. Primary care practices carried a median 36 days in AR in our reviews. See primary care billing for payer rules.