How do I appeal a denied claim?
A claim appeal is the formal process of requesting reconsideration of a denied or underpaid claim from the payer, governed by payer policy, state insurance law, and federal ERISA rules for self-funded plans.
Quick answer
Appeal a denied claim by reading the CARC and remark code, gathering supporting documentation, submitting a written appeal within the payer's deadline (typically 90 to 180 days), and escalating to second-level appeal or external review if needed. Successful appeal recovery typically runs 60 to 75 percent.
The detail
The appeal process has predictable steps. First, identify the denial reason from the CARC (Claim Adjustment Reason Code) and RARC (Remittance Advice Remark Code) on the EOB or 835 remittance. These codes are standardized by CMS and tell you exactly what the payer claims went wrong. Second, gather supporting documentation: clinical notes proving medical necessity, prior authorization confirmation, eligibility verification at date of service, corrected claims with proper modifiers, and any contractual documentation. Third, submit the appeal within the payer's deadline (commercial typically 90 to 180 days, Medicare 120 days for redetermination). The appeal letter should reference the specific CARC, explain why the denial was incorrect, and attach supporting documentation. Fourth, if denied at first level, escalate to second-level appeal, then to external review (state-mandated for fully insured plans, ERISA for self-funded). Fifth, track every appeal in a log; recovery rates of 60 to 75 percent are achievable for clinics that work appeals consistently. The bottleneck is timely filing; missed appeal deadlines convert recoverable revenue to permanent loss.
CMS standardized CARC and RARC codes provide specific reasons for every denial.
Source: CMS X12 Code Lists
Medicare appeal deadlines: 120 days for redetermination (level 1), 180 days for reconsideration (level 2).
Source: CMS Medicare Appeals
External review of denied claims is mandated for ACA-compliant plans under federal law.
Source: HealthCare.gov
What this means for clinic owners
From Sorso
Track appeal recovery rate as a monthly KPI. If yours is below 60 percent, the issue is usually documentation quality or missed deadlines, both fixable. Every dollar of denied revenue you do not appeal is a dollar of pure margin lost.
Related questions
What is a healthy denial rate?
A healthy initial denial rate is under 5 percent of submitted claims, with denial write-offs under 2 percent of net patient revenue per HFMA MAP Keys. Industry averages have climbed above 11 percent.
Why are claims denied?
Claims are most often denied for eligibility errors (40 percent of denials), missing prior authorization, coding errors, missing documentation, and timely filing failures, per CAQH and Change Healthcare data.
How do I improve my net collection rate?
Improve net collection rate by working denials promptly (60 to 75 percent recovery achievable), reconciling contractual underpayments, collecting patient AR at point of service, and tightening write-off authorization workflows. Most practices can recover 1 to 3 percentage points within 6 months.
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.
Founder of Sorso. 19 years in corporate finance. Managed a $450M loan portfolio before building a fractional CFO firm exclusively for healthcare clinics.
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