Claim denial rate
What is the claim denial rate?
The claim denial rate, also known simply as the denial rate, is the percentage of claims denied by payors during a specific period. It is calculated by adding the total dollar amount of claims denied by payors and dividing that sum by the total dollar amount of claims submitted within the given period, which is usually a month or quarter.
The industry average for a claim denial rate is between 5% to 10%, the lower the rate, the better.
Some reasons for a high denial rate include:
- Issues with coding, billing, or documentation
- Disorderly patient registration, eligibility verification, and pre-authorization
- Staff who are untrained in billing guidelines and payor policies
What information can be gained from the claim denial rate?
The claim denial rate quantifies the effectiveness of a company’s revenue cycle management processes. A low denial rate indicates a healthy cash flow, which ensures the business has the money needed to sustain itself.
In comparison, a high claim denial rate can result in delayed or reduced payments, decreased patient satisfaction, and increased administrative costs, all of which can affect a healthcare organization’s financial performance.