National Claim Denial Rate Benchmarks: Where Do You Stand?

Imagine you spend hours submitting insurance claims only to find out nearly 1 out of every 10 gets denied. That’s a loss of resources and time. Whether you’re a solo provider or running a multi-specialty practice, claim denials silently drain your revenue. 

What’s worse? Most of these denials are preventable.

In this blog, we’ll break down the Claim Denial Rate, what it is, why it matters, how it’s calculated, and the best (real-world) ways to fix it. We’ll also cover common denial codes and give you the latest industry stats.

What is the Claim Denial Rate?

Claim Denial Rate is a metric used in healthcare to measure the percentage of insurance claims that payers deny. It helps organizations monitor billing efficiency and pinpoint areas that need improvement.

Formula:
Claim Denial Rate = (Total Denied Claims ÷ Total Submitted Claims) × 100

Example:
If your practice submitted 1,200 claims last month and 96 were denied, your claim denial rate is:
(96 ÷ 1,200) × 100 = 8%

This means that 8% of your claims did not get reimbursed.

Why is Claim Denial Rate Important?

High denial rates can significantly affect cash flow and increase administrative workload. Each denied claim costs an average of $25–$30 to rework, and about 65% of denied claims are never corrected and resubmitted, according to the American Medical Association.

This not only reduces revenue but also delays payment and can impact patient satisfaction. Over time, consistent issues can hurt your practice’s financial health and efficiency.

Key Tips for Calculating Your Claims Denial Rate

Keep Your Data Updated

Make sure your denial records are always current. Regular updates help you avoid working with outdated information.

Monitor Regularly 

Set a routine to check your denial rates. This helps spot trends early and gives you a clearer picture of what’s going wrong.

Break Down the Data

Segment your data by denial reason, insurance type, or department. This helps you focus on the areas that need improvement.

Use Analytics Tools 

Use data analytics to track and understand denial trends. This lets you make smarter decisions and reduce denials more effectively.

Claim Denial Rates: What’s Happening?

So, how often do insurance claims get denied? Well, on average, about 20% of claims are rejected. But here’s the kicker: some healthcare providers face denial rates much higher than that, which can cause serious financial headaches and extra work.

Now, let’s put it in perspective. 1 in 7 claims gets denied. That’s a whopping over 200 million rejections every year. Imagine the chaos! It means billions of dollars in denied claims annually in the U.S. alone, leading to major revenue losses and more admin costs for healthcare providers.

Common Reasons for Claim Denials

Understanding why claims get denied is the first step toward reducing your denial rate. Some of the top reasons for healthcare claim denial include. 

Denial Code	Description	How to Prevent It
CO-16	Missing or incorrect information	Double-check all required fields before submission
CO-18	Duplicate claim	Avoid resubmitting claims without checking status
CO-29	Claim filed after the deadline	Submit claims within each payer’s filing window
CO-50	Service not covered by the plan	Verify insurance benefits before service
CO-109	Invalid or missing authorization	Confirm pre-authorization when needed

Industry Benchmark for Claim Denial Rate

According to the Medical Group Management Association (MGMA), practices with denial rates above 10% should take corrective actions quickly to avoid revenue loss.

Claim Denial Rates by Insurance Company 

This chart shows how denial rates vary widely among insurers, with UnitedHealthcare having the highest denial rate at 22%.

How to Reduce Claim Denial Rate

Reducing claim denials doesn’t require a complete system overhaul. Here are some straightforward strategies:

Analyze Denial Patterns

Look at denial data regularly to understand why claims are being rejected. Categorize issues as avoidable or unavoidable and focus on patterns.

Improve Front-End Accuracy

Most billing issues begin during patient registration. Make sure all demographic and insurance data are entered accurately. Check eligibility and obtain pre-authorizations where required.

Train Staff Regularly 

Provide ongoing training to your billing and front-desk staff about payer requirements, documentation standards, and updates in coding.

Automate Where Possible 

Use billing software or revenue cycle tools that check for errors before submission, alert staff to missing information, and track claims in real-time.

Monitor Key Metrics

In addition to the Claim Denial Rate, keep an eye on related metrics like:

• Clean Claim Rate (aim for 95% or higher)
• Days in Accounts Receivable (goal: under 40 days)
• First-pass Resolution Rate (target: over 90%)

Appeal Denials Efficiently

Not all denials are final. Set up a process for timely and well-documented appeals. This can help recover lost revenue that might otherwise go unclaimed.

Denials Due to Evolving Payer Requirements

Payer policy changes, such as updates to modifier use or ICD-10 coding updates, can significantly impact claim acceptance rates. These changes are often frequent, and for practices dealing with multiple insurance companies, staying on top of each payer’s specific requirements can be challenging.

Solution: 

• Stay updated on payer policies and coding changes by subscribing to payer newsletters or using specialized tools.
• Regularly train your billing team on updates to modifier usage and coding updates.
• Work with experienced billing professionals who can quickly adapt to new payer requirements to reduce denials.

Final Thoughts

How to lower the claim denial rate? Claim denials are more than just a billing issue; they’re a signal that something in the process needs attention. The good news is that with the right approach, most denials are preventable. By identifying root causes, training your team, using the right tools, and tracking key metrics, you can lower your denial rate and improve the financial health of your organization.