Claim Denial Rate in Medical Billing: Initial vs Final, How to Count It, and Benchmarks

Claim denial rate is the percentage of claims a payer denies on the first submission, counted from the remittance. It is the measure of how often the payer said no, before anyone appealed, corrected or wrote anything off.

Most denials are recovered, so a denial is not lost money. Not tracking the denial rate is what costs money, because the same cause keeps producing the same denials every month.

Where you see it

Place	What it shows
835 remittance, claim level	The claim status, and the adjustment reason codes (CARC) with their group codes
835 remittance, line level	Which service line was denied and why; the same claim can pay one line and deny another
Denial report in the billing system	Denials grouped by payer, CARC, provider or code for a date range
HFMA MAP Key AR-5, Remittance Denial Rate	Total actionable claims denied divided by total claims remitted, counted at the claim level
HFMA MAP Key AR-6	Denial write-offs as a percentage of net patient service revenue, the final cost

The annotated Medicare remittance in our sample shows where the group code and reason code sit on each line.

Initial denials versus final write-offs

	Initial denial rate	Final denial write-off
When measured	On the first 835 for the claim	When the account is closed
Unit	Claims (or lines or dollars) denied	Dollars written off because of a denial, net of recoveries
Denominator	Claims submitted or claims remitted in the period	Net patient service revenue (HFMA AR-6) or net charges for the same period
What it measures	Process quality on both sides: your claim and the payer’s edits	What denials finally cost

HFMA defines its denial key around “actionable denials,” those that can be corrected within the organization and resubmitted, and excludes denials for patient responsibility, duplicate claims and recoupments. Those exclusions suit a practice too: PR-1, PR-2 and PR-3 are not denials.

How to count it

Method	Formula	Good for	Watch out for
By claim	Claims with any denied line on the first 835 divided by claims remitted	Process failure rate; comparable to HFMA AR-5	A 20-line radiation claim with one denied 77387-26 line counts the same as a fully denied drug claim
By line	Denied service lines divided by lines remitted	Finding the code or modifier that payers reject	Understates the problem when a whole claim denies
By dollars	Denied billed dollars divided by billed dollars remitted	What is at stake; the AAFP’s version	Dominated by a few high-dollar lines; compare to allowed dollars if you can

Whichever you choose, count the first 835 only and exclude patient responsibility and contractual adjustments.

Benchmarks

Source	Figure	Basis
MGMA, July 2026	First-submission denials of 7 to 8 percent across the past four years; the 2025 Financials and Operations report suggests practices can push below 5 percent	MGMA benchmarking, by claim
MGMA, March 2024	Single-specialty aggregate of 8 percent of claims denied on first submission in the 2023 DataDive, the same rate as 2019	MGMA DataDive Practice Operations, by claim
AAFP	5 to 10 percent is the industry average; below 5 percent is more desirable	Dollars denied divided by dollars submitted
HFMA MAP Keys	No target published; defines the measure (AR-5) and the write-off measure (AR-6)	By claim

A dollar-based rate and a claim-based rate are different numbers, and in oncology the gap is wide.

The top causes by CARC

CARC	X12 description (abridged)	Usual cause	Correct or appeal
16	Claim/service lacks information or has submission/billing error(s)	Missing NPI, invalid code, wrong field; read the remark code	Correct and resubmit
197	Precertification/authorization/notification/pre-treatment absent	No authorization on file, or one issued under a code the payer has since remapped	Confirm the authorization, then appeal with it attached
29	The time limit for filing has expired	Rejected claims nobody re-sent; late charge entry	Usually final; appeal only with proof of timely submission
27	Expenses incurred after coverage terminated	Eligibility not checked before the course started	Bill the correct payer or the patient
4	The procedure code is inconsistent with the modifier used	77387 without 26; 26 or TC on a delivery code	Correct and resubmit
11	The diagnosis is inconsistent with the procedure	Diagnosis order or a code the payer policy does not list	Correct, or appeal with the policy
50	Not deemed a medical necessity by the payer	Payer policy criteria not met or not documented	Appeal with records
18	Exact duplicate claim/service	Resubmission sent before the original was processed	No action; confirm the original paid
97	Benefit for this service is included in the payment for another service	Bundled component billed separately, such as a technical 77387 line	Remove the line
151	Information submitted does not support this many/frequency of services	Units over the MUE or the fraction count, for example 77427	Correct if the count is wrong; appeal with the treatment record if it is right

MGMA’s March 2024 reporting listed the causes practice leaders named most: insufficient documentation, eligibility or ID errors, untimely filing, incorrect modifiers, registration and authorization errors, and payers claiming no prior authorization when one was on file.

Worked example

An illustrative radiation and medical oncology practice, claims remitted in September.

Measure	Figures	Rate
By claim	72 of 1,000 claims had a denied line on the first 835	7.2 percent
By line	190 of 4,600 lines denied	4.1 percent
By dollars	118,000.00 of 1,150,000.00 billed denied, of which two chemotherapy drug claims were 31,000.00 each	10.3 percent

The practice is near the MGMA range by claim and above the AAFP range by dollars; the two drug claims are the difference. By cause: 24 claims with CARC 4 (77387 billed without modifier 26), 15 with CARC 16, 11 with CARC 197, 9 with CARC 18, 7 with CARC 29, 6 with CARC 11.

Ninety days later, 86,000.00 of the 118,000.00 has been paid after correction or appeal, 20,000.00 is in appeal, and 12,000.00 was written off, 8,000.00 of it the CARC 29 claims that were rejected on a 277CA in May and never re-sent. The final denial write-off is 12,000.00 against about 620,000.00 of net charges, or 1.9 percent, and the only unrecoverable part was the timely filing.

What to do

• Count by claim for the trend, by dollars for the priority, by CARC for the fix. All three come from the same 835 data.
• Work denials daily and log the outcome so the write-off rate can be measured.
• Review the five most frequent CARCs each quarter and name the upstream change that would stop each one; most are registration, authorization or charge entry.
• Separate correctable from appealable. CARC 4, 11, 16 and 18 are corrections; 50, 151 and 197 are appeals with documentation; 29 has to be prevented, because it is rarely recovered.
• Iridium Suite’s accounts receivable work queues are built from the posted remittances, so each day’s denials are already sorted for follow-up rather than found on a report at month end.

Related terms

• Clean claim rate
• First pass resolution rate
• Days in A/R
• Net collection rate
• Remark codes: RARC vs CARC
• Timely filing limits

Further reading: X12: Claim Adjustment Reason Codes; MGMA Stat, March 2024: Strategic improvements in your RCM to reduce your practice’s claim denials; AAFP: Managing practice finances; HFMA MAP Keys, 2023 edition (PDF), AR-5 and AR-6.