Denial Rate Benchmarks for Physician Practices by Payer Type

A physician practice comparing its overall denial rate to an industry average is doing math on the wrong number. That average blends Medicare fee-for-service, Medicare Advantage, commercial insurance, Medicaid, and ACA marketplace claims into one figure, and those five categories behave nothing alike. A practice with a comfortable overall rate could still have a Medicare Advantage book running well above it, quietly bleeding revenue while the blended number says everything's fine. The problem compounds because the data itself is uneven: federal rules force Medicare Advantage plans to report their denial rates publicly, but no such requirement touches commercial insurers, so practices trying to benchmark commercial payers are often working with estimates instead of disclosed numbers.

What the current benchmarks say about overall denial rates

The trend line is not subtle. Initial claim denial rates climbed to 11.8% in 2024, up from 10.2% in 2020, a jump that outpaces general claims volume growth and points to something structural rather than seasonal. Hospital-level data backs this up: Kodiak Solutions, drawing on more than 2,300 hospitals and 375,000 physicians, put the overall hospital initial denial rate at 11.6% in 2025, with the median final denial rate rising from 2.5% in 2024 to 2.7% in 2025.

The dollar figures make the trend harder to shrug off. Kodiak found revenue leakage grew 25% year-over-year, with hospitals collectively missing $48.4 billion in 2025. That number rose faster than the denial rate itself. Denied claims are carrying bigger dollar amounts than they used to. A rate increase of a percentage point or two sounds manageable until you realize the claims behind it are worth more money each year.

The gap between initial and final denial rates deserves its own line of attention, because that's where the operational story actually sits. Most denials get overturned eventually. But overturning them costs staff time, appeal paperwork, and weeks of delayed cash, so a low final rate doesn't mean the problem is small. It means the problem moved from the payer's ledger to the practice's workload.

Traditional Medicare's predictable floor

Traditional Medicare, the fee-for-service program, is widely cited as running among the lowest initial denial rates of any payer category. Kodiak's 2025 inpatient data puts it at 5% initially, with a final denial rate of just 1%, the lowest of any payer category in the dataset by a wide margin.

Structural factors explain this. Medicare's rules are published, stable, and the same for every provider in the country. There's no plan-level variation the way there is with Medicare Advantage, where each insurer sets its own prior authorization criteria. When CMS changes policy, it does so through a public rulemaking process, announced well in advance, so practices have time to adjust billing before the rule takes effect.

That predictability changes what a spike in traditional Medicare denials actually means. It's almost always a front-end issue: eligibility not verified, documentation incomplete, a claim filed past the deadline. It's a front-end issue: eligibility not verified, documentation incomplete, a claim filed past the deadline. Those are fixable problems inside the practice's own workflow, which makes traditional Medicare denials some of the most preventable in the entire payer mix.

Medicare Advantage's fastest-growing denial problem

Medicare Advantage tells a different story. Initial denial rates for MA plans average around 15.7%, and Experian's data puts the figure above 17%, more than double the traditional Medicare rate. Year-over-year, MA denials spiked 4.8%, the steepest increase of any payer category tracked.

Kodiak's 2025 inpatient breakdown shows MA at an 11% initial denial rate with a 5% final denial rate, which is a smaller initial number than the broader industry estimate but a telling one: that final rate is higher than commercial's 3%. MA denials, once issued, are simply harder to overturn than commercial ones. The average dollar amount tied to a denied MA claim rose 22.4% to roughly $1,000, so each denial that sticks costs more than it used to.

None of this is really surprising once you remember what Medicare Advantage actually is. It's a private insurance product built on top of a public program, administered by companies that also sell commercial plans and apply many of the same utilization management tools, including prior authorization requirements that traditional Medicare doesn't use. MA looks and behaves like commercial insurance because, functionally, it is commercial insurance wearing a Medicare label.

Commercial payers: the widest range and the most payer-specific variation

Commercial insurance is roughly 13.9% for overall initial denial rates, but that single number hides more variation than any other payer category, because "commercial" covers dozens of insurers each running different prior authorization rules, different medical necessity criteria, and different appeals processes.

Kodiak's 2025 inpatient data shows 21% of commercial inpatient claims denied on first submission, a striking figure that drops all the way to 3% after appeals. That gap, from 21% down to 3%, says the appeals process works. It also says a huge share of commercial denials never should have happened in the first place, and fixing them requires burning staff hours a practice would rather spend elsewhere.

Outpatient claims run a bit gentler at 11% initial denials, with final denial rates lower after appeals. But the revenue math flips. Commercial outpatient net revenue leakage ran higher than inpatient in 2025, according to Kodiak data. The likely explanation is dollar value: outpatient claims are usually worth less individually, so appealing them costs more relative to what's recovered, and practices let more of them go unchallenged.

Medicaid and ACA marketplace: the outlier rates most practices do not plan for

Medicaid inpatient claims get denied at a 44% initial rate. Nearly half of everything submitted bounces back on first try. The final denial rate drops to 6% after appeals, which is the steepest initial-to-final swing of any payer category by a wide margin.

A drop from 44% to 6% suggests a large share of these denials are overturnable through the appeals process. But knowing that doesn't make the rework free. For safety-net practices running thin margins and lean billing staff, chasing down such a wide gap's worth of appealable claims is an enormous administrative lift, one that a smaller commercial-heavy practice would never have to absorb at that scale.

Managed Medicaid, run through private insurers under state contract, is in between: an 18% initial denial rate and a 4% final rate, closer to commercial behavior than to Medicaid fee-for-service. And the ACA marketplace has its own outlier statistic: insurers selling plans on HealthCare.gov denied approximately 85 million in-network claims in 2024, which works out to 19% of all in-network claims submitted that year. That's nearly one in five marketplace claims rejected before appeal even enters the picture.

How specialty mix shifts the benchmarks within each payer category

Payer type is only half the equation. Specialty shifts the numbers again, sometimes by a wide margin, within every payer category discussed so far. Industry-wide, primary care and internal medicine tend to run among the lower initial denial rates by specialty. Behavioral health and ABA therapy sit far higher, consistently cited as carrying some of the heaviest denial burdens of any specialty category. Orthopedics, cardiology, and mental health all run denial rates meaningfully above primary care, reflecting their heavier prior authorization exposure.

Different specialties get denied for different reasons. Different specialties get denied for different reasons. Primary care denials cluster around eligibility problems, the kind of thing a front-desk verification catch would prevent. Surgical specialties like orthopedics run into prior authorization far more often, since procedures carry higher costs and payers scrutinize them harder before approval. Behavioral health gets hit hardest by medical necessity denials, where the payer disputes not whether the service happened but whether it was clinically justified, a much harder argument to win on appeal.

Medicare Advantage plans layer specialty variation on top of an already elevated baseline. Across specialties, MA denial rates run well above what the same specialty would see under traditional Medicare, which confirms the earlier point: MA doesn't just deny more often overall, it denies more within nearly every clinical category a practice might run.

Reading the gap between initial and final denial rates as a diagnostic tool

Every payer category examined here follows the same shape: high initial denials, much lower final denials. Mathematically, that means most denials are recoverable. Practically, it means something else entirely, because recoverability only matters if someone actually does the recovering.

A large share of denied claims are never resubmitted or appealed. That statistic turns "recoverable in principle" into permanent loss for most of the money involved. Meanwhile, providers who do appeal win about 70% of the time, a success rate that should make appealing the default response to any denial, not the exception.

The reason it isn't the default comes down to cost. Reworking a denied claim carries real administrative labor costs, and those costs scale quickly with claim volume. Multiplying that by the volume of claims a mid-sized practice denies in a given month turns appealing everything from an obvious decision into a resourcing question: does the practice have enough billing staff to chase every recoverable dollar, or does it have to triage?

What a billing operation needs to use these benchmarks rather than just report them

None of these benchmarks do much good sitting in a spreadsheet as an aggregate number. A practice needs payer-level tracking, broken out by Medicare, Medicare Advantage, each individual commercial carrier, Medicaid, and marketplace plans separately. An overall denial rate can look stable while an 8-percentage-point gap opens up between the best-performing payer relationship and the worst, and that gap is invisible until someone splits the data out.

Payer rules also shift without warning, which makes point-in-time benchmarking a moving target rather than a fixed reference. Payer criteria can tighten between plan years with little notice, and practices that had been getting routine authorization approvals can start seeing denials without changing a single thing about how they treated patients. The clinical approach stayed the same. The payer's rulebook didn't.

That kind of shift is why institutional memory matters so much in billing. Knowing which documentation language a specific payer accepts, which modifiers it honors without a fight, how its appeals reviewers tend to respond, none of that is written down in a policy manual anywhere. It's accumulated knowledge that lives in the people doing the work, and it compounds over time the way any specialized skill does. When billing staff turns over, that knowledge usually leaves with them, and the practice starts relearning lessons it already paid to learn once.

Speed is the last piece, and it's getting less forgiving. Kodiak's data shows providers' average success rate in overturning clinical denials actually slipped, from 42.7% down to 42.1%, even as overall denial rates climbed. Volume is rising faster than practices can process appeals, which narrows the window to recover revenue before a denial ages past the point of being worth the fight. Benchmarks tell a practice where it stands. Speed, staffing, and whether anyone on the team still remembers how the last fight with that particular payer went determine what happens after that reading.