How Much Revenue Are Denials Costing Your Billing Company? (with the math)

Denial write-offs are a known problem in medical billing — but the actual dollar impact is often abstract. "We write off some denied claims" doesn't communicate the same thing as seeing the number. This article walks through the math so you can estimate what denials are actually costing your billing company across your book of business.

Industry benchmarks used below: ~12% first-pass denial rate (KFF, Premier), 35–65% of denials never appealed (AHIMA, Kodiak/Crowe), ~54% overturn rate on appealed denials (industry estimate). These are range estimates — your actual figures depend on specialty, payer mix, and current workflows.

Step 1: Start with your gross collections under management

For a billing company, the relevant number is the total dollars billed across all client accounts — not just one practice. Let's use $10M in annual gross collections as a working example. Adjust the numbers for your own book.

Step 2: Calculate the denial pool

At a ~12% first-pass denial rate, a $10M book generates roughly $1.2M in initially denied charges per year. That's the pool your team is working from.

Not all of that is recoverable — some denials are legitimate contractual adjustments (like CO-45) that are write-offs by design. Conservatively, assume 60–70% of the denial pool involves potentially payable claims.

Step 3: Apply the appeal abandonment rate

Industry estimates put the abandonment rate at 35–65% of denials — claims that are never appealed and simply written off. Let's use 50% as a midpoint.

That $390,000 is money that left your clients' practices permanently. For a billing company paid on percentage of collections, this also represents missed commission income.

Step 4: Apply the overturn rate to the abandoned pool

Here's where the opportunity becomes concrete. Industry data suggests that roughly 54% of appealed denials are overturned and paid. Applied to the $390,000 abandoned pool:

On a $10M book, that's roughly $200K in revenue that exists, is owed, and is recoverable — but isn't being collected because the appeals never get written.

Why most billing teams can't close this gap with current staff

The math on manual appeals makes the abandonment rate predictable. MGMA and HFMA benchmarks put the cost of manually reworking a single denied claim at $25–118 in labor — and that's before factoring in the time to pull clinical documentation, research payer policy, and write a claim-specific letter.

At $50 in labor per appeal, working $200K worth of denials would cost $200K+ in billing staff time. The math doesn't work for low- and mid-dollar claims — so they get triaged out of the queue.

The equation only changes when the cost per appeal drops. Use the ROI calculator to see the numbers for your specific book.

What to do with this analysis

The most useful thing you can do with this estimate is break it down by denial code. High-volume, high-recovery codes like CO-50 (medical necessity) and CO-29 (timely filing) often represent a disproportionate share of the recoverable pool. Prioritizing by denial code and dollar value tells you where to focus first.

See the full denial code guide for appeal strategies on the most common codes.