Evaluating Your Practice’s Revenue Cycle: Denial Rate

Denial Rate

Presenter:
Asia Blunt, MBA, CPC
Practice Management Strategist

This six-minute presentation quickly helps you learn how to calculate your practice’s denial rate. After watching this presentation, you will know how to:

  • Obtain a better understanding of the denial rate and find out why it’s important for your practice.
  • Learn how to calculate the denial rate.
  • Discover problems to avoid, such as lack of an internal process to identify mistakes prior to claim submission.

The denial rate represents the percentage of claims denied by payers during a given period. This metric quantifies the effectiveness of your revenue cycle management processes. A low denial rate indicates cash flow is healthy, and fewer staff members are needed to maintain that cash flow.

Best Practice Tips

  • A 5% to 10% denial rate is the industry average; keeping the denial rate below 5% is more desirable.
  • Automated processes can help ensure your practice has lower denial rates and healthy cash flow.

Calculating Denial Rate

To calculate your practice’s denial rate, add the total dollar amount of claims denied by payers within a given period and divide by the total dollar amount of claims submitted within the given period.

Sample Calculation

  • (Total of Claims Denied/Total of Claims Submitted)
  • Total claims denied: $10,000
  • Total claims submitted: $100,000
  • Time period: 3 months
  •  $10,000/$100,000
  • 0.10
  • Denial rate for the quarter: 10%

Other Considerations

Failure to identify mistakes prior to claim submission. Mistakes made during coding and charge entry can result in claims that are adjudicated and rejected by a payer. Establishing an internal process to identify and correct any mistakes prior to claim submission will decrease denial rates and produce a healthier cash flow.

The denial rate represents the percentage of claims denied by payers during a given period. This metric quantifies the effectiveness of your revenue cycle management processes. A low denial rate indicates cash flow is healthy, and fewer staff members are needed to maintain that cash flow.