Why are claims denied?
A claim denial is the payer's refusal to pay all or part of a submitted healthcare claim, typically accompanied by a Claim Adjustment Reason Code (CARC) explaining the denial.
Quick answer
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.
The detail
Denials cluster into a small number of recurring categories. Change Healthcare's Revenue Cycle Denials Index reports the top categories: eligibility and registration (about 27 percent of denials), missing or invalid information (about 17 percent), authorization or pre-certification (about 12 percent), service not covered (about 11 percent), and medical necessity (about 9 percent). CAQH Index data confirms eligibility as the largest single root cause across payers. Within each category, the underlying causes are mostly preventable workflow issues: not verifying eligibility at booking and check-in, not capturing complete demographics, not running prior authorization before service, using wrong CPT or modifier combinations, and submitting after timely filing windows. The pattern is consistent across specialties: 70 to 80 percent of denials originate at the front desk, not in billing. Fix the workflow there and your denial rate drops faster than any technology investment.
Change Healthcare Denials Index reports eligibility/registration drives ~27 percent of denials and missing info ~17 percent.
CAQH Index reports eligibility verification continues to be the highest-volume administrative transaction in healthcare.
Source: CAQH Index
Industry sources commonly cite that 60–65% of denied claims are never reworked. This widely-referenced figure appears in multiple revenue cycle publications including Change Healthcare's Denials Index and HBMA reports.
Source: AHIMA
What this means for clinic owners
From Sorso
If you have not run a denial reason code report in the last 90 days, do it this week. The top three reasons usually account for half of all denials, and they are almost always fixable with workflow changes that cost nothing except attention.
Related questions
What is a good clean claim rate?
A good clean claim rate is 95 percent or higher on first submission, per HFMA MAP Keys. Most outpatient practices average 85 to 92 percent, leaving meaningful revenue stuck in rework.
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.
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 (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.
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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