How to calculate your claim denial rate

The formula

AAFP and HFMA both describe denial rate by dollars: add up the dollar value of claims denied by payers in a period and divide by the dollar value of claims submitted in the same period. ¹²

Many practices also track it by count, which gives more weight to frequent low-dollar denials. Pick one as your headline number and keep using it. Tracking both is useful, because a high count with low dollars points to a front-end process problem, while a low count with high dollars often points to a few large procedure claims.

• Denial rate (dollars) = dollars denied ÷ dollars submitted × 100
• Denial rate (count) = claims denied ÷ claims submitted × 100

A worked example

A hypothetical clinic submitted 2,400 claims worth $420,000 in a month. Payers denied 168 claims worth $29,400. By dollars the denial rate is $29,400 ÷ $420,000 = 7%. By count it is 168 ÷ 2,400 = 7% as well. When the two numbers diverge, look at which claim types drive each one.

What the published ranges say

AAFP calls a 5% to 10% denial rate the industry average and says keeping it below 5% is more desirable. ¹ HFMA gives the same range and suggests resolving 85% of denials within 30 days. ²

Definitions vary between organizations, which makes outside comparisons unreliable. HFMA's Claim Integrity Task Force was formed to standardize how denials are counted and categorized for exactly this reason. ³ Compare your practice to itself month over month before comparing it to anyone else.

Rejections are not denials

A rejection happens before the payer accepts the claim, usually at the clearinghouse, because of a formatting or data error such as a wrong member ID. The claim never entered adjudication, so it can be corrected and resubmitted as a new claim. A denial happens after adjudication: the payer processed the claim and decided not to pay all or part of it.

Keep the two in separate reports. Rejections belong in your clean claim rate. Counting them as denials inflates the denial rate and sends staff after the wrong fix.

Sort denials by cause before you work them

Every denial comes back with claim adjustment reason codes on the remittance. Group a month of denials by reason code and rank by dollars. Most practices find a short list of causes accounts for most of the money. Typical groups:

• Eligibility and coverage: the patient's plan was inactive or the service is not covered.
• Authorization: a required prior authorization or referral was missing.
• Coding: a code pair, modifier or diagnosis link did not pass payer edits.
• Duplicate or timely filing: the claim was already processed or arrived too late.
• Medical necessity documentation: the payer wanted more support for the service.

Fix the cause, then work the queue

Working denials one by one recovers money but does not lower the rate. For each top cause, name the step in the workflow where it starts. Eligibility denials start at scheduling and check-in. Authorization denials start at the referral or order. Coding denials start at charge entry. Assign an owner to each step and review the reason-code ranking monthly so you can see whether the change held.

For the denials already on the books, work the highest-dollar claims closest to their appeal deadline first. Payer appeal windows differ, so keep each major payer's deadline in the work queue.