Everything to Know About Denial Rate

With so many metrics related to healthcare revenue cycle management (RCM), it’s possible to lose sight of metrics that matter. As the leading reimbursement firm with a dedicated focus on HME and pharmacy, Prochant is here to help providers meet their financial goals. One of the key performance indicators (KPIs) we believe is crucial to your revenue cycle success is your Denial Rate metric.


What is Denial Rate?

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.

Denials should be classified as preventable and unpreventable. The ultimate goal is to submit a clean claim, thereby reducing the number of touches on the invoice and improving cash flow.  However, sometimes due to insurance requirements, you must obtain a denial first so that you can submit it elsewhere for reimbursement. These are considered unpreventable, and so there should be minimal focus on those types of denials. 

Analyzing denials on a regular basis offers opportunities to improve workflow processes to minimize these denials.


How is Denial Rate calculated?

Step 1: Count all the claim lines with a denial

Step 2: Count all the claim lines billed

Step 3: Use same date range for both steps 1 and 2

Step 4: Denial Rate = Claim lines with denial divided by total claim lines billed


Why is Denial Rate important?

High denial rates lead to re-work and potentially loss of collectable revenue. In order to increase collections and reduce redundant work, it is necessary to focus on the denials that can be eliminated to promote "one touch”—meaning the claim is generated, transmitted, and paid without collection team intervention.


What is considered Good, Okay, At Risk?

  • Good: Less than 10%
  • Okay: 11-15%
  • Not Optimal: Greater than 15%

These percentages are based on the industry-recommended benchmark.


Role-based questions to ask

Executives are most concerned about denials when the denial rate KPI is in the “okay” or “not optimal” column. It is most important to understand what has caused these denials to increase. The executive should also want to improve workflow processes in order to reduce the number of denials.

Questions someone in this role should be asking:

  • What are our top denial reasons?
  • What is our denial rate by payer?
  • What is our denial rate by product?
  • Is our denial rate (month over month, by count) holding steady, trending up, or trending down?
  • What improvement projects are in place to correct workflows and reduce the number of denials?

If you are a middle-level manager, you need to understand what needs to be done to course correct the volume of denials. You should be interested in the same issues as the executive, but you will be digging into the details to uncover the answers and create projects to improve the rate.


What else should you be looking at for correlation or causation?

  • Typically denials increase alongside payment activity, but this is correlation, not causation. You should still be looking at denials and trying to stop them.
  • Has billing increased? One would think this could cause more denials, but in actuality, the claim lines billed would also increase. 
  • Look at Open Orders. Do you have more of an unwanted, incoming scenario? Really evaluate intake practices. Find your top denials and launch projects to stop denials at intake.


Tools to Help Track

Looking for a platform to help keep track of important KPIs like Denial Rate? Our new billing tool, Prochant Analytics, is guaranteed to supercharge your payment velocity. Read the white paper here.

Headquartered in Charlotte, North Carolina, Prochant’s client base includes national HME and pharmacy providers and health systems. Our scalable solutions, years of experience, and advanced technology provide best-in-class results to the healthcare community.