Variation in medical claim denials: safety-net providers are hardest hit

Medical claim denials impose substantial costs on providers but may also reduce low-value care, resulting in lower expenditures and better quality. Little is known about how denial rates vary across payer and provider segments, including for safety-net providers.

Using a large, multipayer claims dataset from 2019, we examined initial denials, appeal patterns, and final denials by payer segment, service type, and provider safety-net status.

Medicaid managed care had the highest initial denial rate for professional claims (15.1%), while Medicare Advantage had the highest rates for inpatient (20.0%) and outpatient (16.5%) claims. Safety-net providers faced uniformly higher initial denial rates than nonsafety-net providers across professional (13.6% vs 9.2%), inpatient (18.3% vs 14.7%), and outpatient (13.3% vs 12.9%) services.

Safety-net providers absorbed a disproportionate share of denial costs. These providers' lack of negotiating leverage to secure favorable terms with payers could be 1 driver of these disparities, as could higher rates of low-value care delivery. A standardized framework for the terms and conditions governing payer-provider contracts could help ensure all claims are decided based on the same set of rules.