What is a healthy denial rate?
A healthy initial denial rate is under 5 percent of submitted claims: HFMA calls that optimal, AAFP calls it more desirable, and both put the industry average at 5 to 10 percent. Optum's 2024 Denials Index, based on hospital claims, found an average denial rate of 12 percent in 2023. Track denial write-offs as a share of net patient revenue too, the metric HFMA lists as AR-6.
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Definition
The denial rate is the percentage of submitted claims that are denied by payers, either as an initial denial requiring rework or a final denial leading to write-off.
The detail
Denial rates have two layers that matter financially. The initial denial rate measures denials at first adjudication. HFMA writes that “the industry average denial rate is between 5% and 10%, while less than 5% is optimal,” and AAFP gives the same ranges for practices. Optum's 2024 Revenue Cycle Denials Index, which analysed about 124 million hospital claim remits, puts the average denial rate at 12 percent in 2023, up from 10 percent in 2020 and 9 percent in 2016. The 2024 CAQH Index repeats that 12 percent for medical and dental practices, citing Optum rather than measuring it itself, so treat it as a hospital-claims number. The second layer is what you finally write off, which HFMA tracks as denial write-offs as a percentage of net patient service revenue (AR-6) without publishing a target. The gap between the two layers is your appeal work. HFMA's guideline is to resolve 85 percent of denials within 30 days, and a denial nobody works is never paid. In Optum's data the largest categories are registration and eligibility (24 percent of denials), missing or invalid claim data (16 percent) and authorization (13 percent), and Optum classes 44 percent of denials as front-end problems. If you are weighing denial-prevention tools before you buy, Becker's Health IT + RCM conference is where most of those vendors and their benchmarks land in one room.
| Metric | Benchmark | Source |
|---|---|---|
| Initial denial rate, optimal | Under 5% | HFMA; AAFP |
| Initial denial rate, industry average | 5% to 10% | HFMA; AAFP |
| Average denial rate, hospital claims, 2023 | 12% (10% in 2020, 9% in 2016) | Optum 2024 Denials Index |
| Denials resolved within 30 days | 85% | HFMA |
| Denial write-offs as % of net patient service revenue (AR-6) | No published target | HFMA MAP Keys |
HFMA and AAFP measure the denial rate in dollars (denied claim dollars divided by submitted claim dollars). Optum's 12 percent comes from hospital claim remits; the 2024 CAQH Index cites the same figure for medical and dental practices.
HFMA lists denial write-offs as a percentage of net patient service revenue (AR-6) among its standard metrics but publishes no public threshold for it; treat any figure you see quoted as a working target, not a standard. Our denial code reference maps the common CARC codes to the team that owns each fix.
Source: HFMA MAP Keys
Optum's 2024 Denials Index puts the average denial rate at 12 percent in 2023, up from 10 percent in 2020 and 9 percent in 2016, based on hospital claims.
The 2024 CAQH Index reports 12 percent of claims were denied in 2023, citing Optum's Revenue Cycle Denials Index.
Source: 2024 CAQH Index
What this means for clinic owners
From Sorso
If you have not run a denial trend report by reason code in the last 90 days, you are losing money you do not know about. The fix is not technology, it is a 15-minute weekly review of denial reasons and assigning the top three to specific people with deadlines.
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What is a healthy days in AR?
Healthy days in AR is under 40 days for most outpatient practices. HFMA puts the ideal range at 30 to 40 days in its 7 KPIs guidance. Above that, the question is not whether something is wrong but which payer or workflow is causing it.
What is a good clean claim rate?
The widely cited target is a 98 percent clean claim rate on first submission. HFMA repeats it in its 7 KPIs guidance, attributing the figure to Becker's ASC Review; it is a target, not a measured average, and every point below it is revenue sitting in rework rather than in the bank.
What is the average net collection rate?
The average net (adjusted) collection rate is 95 to 99 percent, according to the American Academy of Family Physicians, which sets 95 percent as the minimum and says the highest performers reach at least 99 percent. HFMA agrees: “at a minimum, a provider's net collection rate should be 95%, although 97% to 99% is optimal.” Below 95 percent, revenue is leaking somewhere specific and it is usually findable.
What is the average payer mix for outpatient clinics?
No public survey publishes an average payer mix for outpatient clinics. The closest public anchor is population coverage: KFF puts the US in 2024 at 48.6 percent employer-sponsored, 20.4 percent Medicaid, 14.8 percent Medicare, 6.6 percent non-group, 1.3 percent military and 8.2 percent uninsured. Your own mix is set by your specialty: in a Sorso calculation from CMS's 2024 provider-level data, the median ophthalmologist received $167,145 in Medicare payments and the median OB-GYN $6,554. Same programme, about twenty-five times the exposure. Work out which of those two you are before you spend any time on fee-schedule news.
What is a healthy first-pass resolution rate?
A healthy first-pass resolution rate (FPRR) is 90 percent or higher, meaning at least 90 percent of claims are paid in full on first submission without rework or appeal. That 90 percent is the target RCM vendors such as MD Clarity quote; HFMA's 29 MAP Keys do not include FPRR, so there is no standards-body threshold or published national median.
Why are claims denied?
Claims are most often denied for registration and eligibility errors (24 percent of denials in Optum's 2024 Denials Index), missing or invalid claim data (16 percent), missing or denied authorization (13 percent), requests for medical documentation (12 percent) and services not covered (10 percent). Optum's figures come from hospital claims processed in 2023.
How do I appeal a denied claim?
Appeal a denied claim by reading the CARC and remark code, gathering supporting documentation, submitting a written appeal within the payer's deadline, and escalating to second-level appeal or external review if needed. Medicare allows 120 days from receipt of the initial determination to request a redetermination; commercial deadlines come from the plan and your contract. Appeals are worth filing: when Medicare Advantage prior authorization denials were appealed in 2024, 80.7 percent were fully or partly overturned (KFF).
How do I improve my net collection rate?
Improve net collection rate by working denials promptly, reconciling payments against your contracted rates, collecting patient balances at the point of service, and requiring sign-off on write-offs. The target is at least 95 percent, with 97 to 99 percent optimal (HFMA), and each point you recover is worth $50,000 a year on $5 million of allowed charges.
How does prior authorization affect revenue?
Prior authorization drives about one denial in eight: authorization and pre-certification problems caused 13 percent of denials in Optum's 2024 Denials Index, based on hospital claims. Manual transactions cost providers materially more than electronic ones. In the AMA's 2025 survey, practices completed an average of 40 prior authorizations per physician per week, taking about 13 hours of physician and staff time.
What are the most common billing errors in healthcare?
The most common healthcare billing errors are eligibility verification failures, missing prior authorization, incorrect or missing modifiers (especially modifier 25 and 59), upcoding/downcoding, missing documentation for medical necessity, and timely filing failures.
What are Place of Service (POS) codes in medical billing?
POS 11 means office, POS 19 is off-campus outpatient hospital, POS 20 is urgent care, POS 22 is on-campus outpatient hospital, POS 02/10 are telehealth. The code decides whether Medicare pays the physician the office (non-facility) rate or the lower facility rate: in 2026, an established-patient office visit (99213 to 99215) pays 35 to 40 percent less at the facility rate, a Sorso calculation from CMS's relative value file. Below: the 2026 CMS Place of Service codes most practices use.
Why does my medical practice have cash flow problems even when we are profitable?
Profitable medical practices run short of cash because revenue is booked on the date of service but the cash arrives weeks later: HFMA puts ideal days in A/R at 30 to 40, and the 2024 CAQH Index reports that 12 percent of claims were denied in 2023. Payer cycles, denials, patient balances, and bills that fall due on a fixed schedule create cash gaps even when the P&L looks healthy. The fix is a 13-week rolling cash flow forecast that maps expected collections against scheduled disbursements week by week.
What is the right ratio of front-desk staff to billing staff in an outpatient clinic?
We have not found a published front-desk-to-billing ratio for outpatient clinics; the public staffing benchmarks count staff per physician or per provider, not by function. AMGA's 2024 survey puts median clinic staffing at 2.15 FTEs per provider, and MGMA reports that physician-owned practices run one to three more support staff per FTE physician than hospital-owned ones. Size each team to its results instead: denials under 5 percent and 30 to 40 days in A/R for billing, verified eligibility and point-of-service collections for the front desk.
Founder of Sorso and a CFA charterholder. Before Sorso, Stan spent 19 years in corporate finance at institutions including UniCredit and Société Générale — managing a $450M loan portfolio and making senior partner at a major mezzanine lender by 29 — then built a fractional CFO firm exclusively for outpatient healthcare clinics.
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