What is a Denial Rate?

A denial rate is the percentage of medical claims submitted to an insurance payer that are rejected and not reimbursed. It’s calculated by dividing the number of denied claims by the total number of claims submitted over a given period. A high denial rate is a red flag for a practice’s revenue cycle health, as denied claims require additional time and resources to appeal or correct, and some are never recovered at all. Industry benchmarks suggest a healthy denial rate should sit below 5%, though many practices run higher due to issues like incorrect coding, missing documentation, eligibility errors, or failure to obtain prior authorization.