There are between 5 and 10 percent of medical claim denials on average, according to the AAFP.

But this isn’t necessarily a set average. There are many different studies that yield different results. Though not many of these results seem to fall below that range.

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Another study by the Centers for Medicare and Medicaid Services (CMS) for instance reports differently. In 2020, across HealthCare.gov insurers, reports show that 18 percent of in-network claims resulted in claim denials.

These denial rates vary from individual providers as well. This is largely due to the lack of standardization within the healthcare system in general.

The good news is, there is a standardization when it comes to the use of denial codes in medical billing.

Denial codes are sort of like that last piece of that puzzle you’ve been working on for what seems like forever. You know, like that 1,000 piece puzzle you thought would be fun to do but 10 minutes into it you regret it. But instead of a puzzle, you are working to get a claim for a provider to be paid on. Obviously this is slightly higher stakes than your standard puzzle, so it's no wonder medical billing can be frustrating.

Healthcare insurance companies assign these codes to claims that are unable to process.

Denial codes explain why insurance cannot cover a patient’s treatment costs so medical billers can resolve and resubmit the claim. This not only benefits the patient, but it benefits the provider as well.

So where can you find a denial code? It’s good practice to start with the electronic remittance advice (ERA). ERAs contain a lot of different codes that cover a variety of statuses for claims. And of course, I wouldn’t be mentioning ERAs if they didn’t cover denial codes.

To know how to read ERAs, here are a few terms to know.

Claim adjustment group codes help to determine who’s financially responsible for an unpaid amount of the claim balance. These codes contain two alpha characters to represent who’s responsible in combination with claim adjustment reason codes (CARC).

While looking over claim adjustment group codes, which explain who’s financially responsible for a claim balance, consider claim adjustment reason codes (CARC) too.

These codes explain the applied financial adjustments.
If the healthcare provider doesn’t make an adjustment to the claim, there will be no CARC code included in the ERA.

Remittance Advice Remark Codes (RARC) is another term to know. These are good for providing additional explanation for an adjustment given by a CARC. RARCs also can give more information about remittance processing.

Claim denials lack specific criteria set by the insurance company. This could be in regards to insurance coverage plans, limits, or an untimely filing error.

A few of the most common reasons for healthcare denials to watch out for are…

* Missing Information
* Service Not Covered By Payer
* Duplicate Claim or Service
* Service Already Adjudicated
* Limit For Filing Has Expired

Just by knowing these reasons for claim denials, you can help yourself by implementing a plan to prevent them.

I know I just threw a lot of information at you, and there is still plenty more to go over. Now you know that just because you got back a denial code for that claim you sent out a few days ago, that doesn’t automatically mean you won’t be able to collect on it.

We have over 20 years of clearinghouse service experience under our belt and know a thing or two about helping our clients process claims… and handle claim denials. Having a third party clearinghouse not only speeds up the collection process, but allows for better administrative efficiency and gives you more time to focus on growing your practice.

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