Why is our denial rate increasing?

The three most common drivers of rising denial rates in 2025–2026 are prior authorization failures (34%), documentation insufficiency for E&M level justification (28%), and timely filing violations on secondary claims (18%). Most BI tools show you the denial rate. They don't show you which denial reason is accelerating fastest.

Denial rate increases are almost never uniform. When practices see an overall rate climb from 8% to 11%, they typically have one or two denial reasons that are accelerating while others remain stable. The three dominant categories each have distinct root causes that require different interventions.

Prior authorization failures (CMS CO-50) are surging because payer prior auth requirements expanded significantly in 2024–2025. CMS data shows commercial payers added an average of 12% more procedure codes to their prior auth lists in 2024. Practices operating on legacy auth workflows—where a coordinator checks auth requirements at scheduling but not at coding—are blind to mid-year payer list changes. When a payer adds a CPT code to their auth-required list in March and your team doesn't catch it until audit in October, every claim filed in between is at risk.

Documentation insufficiency (CO-4) primarily affects E&M claims at Level 4 and above. The 2023 AMA E&M guideline changes simplified MDM-based coding, but payers have not uniformly adopted the updated documentation standards. Several major commercial payers still apply pre-2023 criteria during retrospective audit, creating a situation where clinicians document appropriately under AMA guidelines but face denials based on outdated payer medical policies. The fix requires payer-specific documentation templates, not just AMA-compliant ones.

Timely filing violations (CO-29) are disproportionately concentrated on secondary claims. Primary payer processing delays—which averaged 18–24 days for commercial claims in 2025—push secondary claim submission close to or past filing deadlines when practices use manual coordination of benefits workflows. The MGMA preventable denial target is 4% of total denials. Most practices operating above 8% have timely filing as a top-three contributor.

Standard denial rate reporting shows you the aggregate metric. It hides the acceleration rate per denial reason—the velocity at which each category is growing month-over-month. A practice with an 11% denial rate and prior auth denials growing 4% monthly needs a completely different response than one with the same overall rate but stable distributions.

Aggregate denial reports also hide payer-specific patterns. A denial rate that looks manageable at the practice level may conceal that one payer is responsible for 60% of denials—and that payer recently changed their claims editing rules. Without payer-level segmentation of denial reasons, you cannot tell whether you have an internal workflow problem or a payer policy change requiring contract escalation.

Real-time scrubbing data versus retrospective review data tell different stories. Retrospective denial analysis shows you what went wrong. Real-time claim editing data shows you what your scrubber caught before submission. The gap between those two numbers—errors caught vs. errors that got through—is the true measure of your scrubber effectiveness, and most practices cannot calculate it without integrating clearinghouse data with their practice management system.

Build a denial reason dashboard that tracks month-over-month change in denial volume by reason code, not just overall rate. Configure alerts for any denial category that grows more than 15% in a rolling 30-day window. This creates an early warning system for payer policy changes before they reach material dollar impact.

Implement payer-specific prior auth tracking with a procedure-code-level view of which CPTs require auth for each payer. Reconcile this against your clearinghouse's real-time auth requirement feeds monthly. Designate a workflow owner who receives payer policy change bulletins and updates the authorization matrix within 72 hours of notification.

For timely filing denials on secondary claims, implement a coordination-of-benefits tracking queue that flags any primary claim not adjudicated within 21 days. This provides enough runway to submit secondary claims manually before most secondary payer deadlines (typically 90 days from DOS). The MGMA benchmark for preventable denials is 4% of total denials. Practices that reach this benchmark consistently have both real-time scrubbing on initial submission and a structured denial work queue that prioritizes by filing deadline proximity, not just dollar value.