What is the difference between a claim denial and an underpayment?

A denial is a claim the payer refuses to pay at all. An underpayment is a claim the payer pays, but at less than the contracted rate. Denials trigger a workflow because the claim shows as unpaid. Underpayments often close out silently.

Which costs a practice more, denials or underpayments?

Underpayments usually cost more in total dollars over a year because they touch a larger share of paid claims and rarely get reviewed after the fact. Denials cost more per claim to fix, but practices tend to catch them since the gap is obvious.

How do I know if a payer is underpaying my practice?

Compare a sample of paid claims against your actual payer fee schedules, line by line. A payer contract audit checking CPT-level allowed amounts is the only reliable way to catch a pattern.

How often should a practice audit payer contracts for underpayments?

Quarterly at minimum, and immediately after any fee schedule update or contract renewal. Underpayment patterns often start right after a contract change.

What is a good denial rate for a medical practice?

Under 5% is considered strong performance. The industry average sits closer to 5-11% depending on specialty and payer mix. Consistently above 10% points to a front-end problem.

Can outsourcing billing fix both denials and underpayments?

Yes, if the vendor runs separate workflows for each. A single team chasing both tends to prioritize denials because they’re more visible, leaving underpayment recovery underfunded.

What is a payer contract audit?

A payer contract audit compares what a payer actually paid against what the signed contract’s fee schedule specifies. It flags line-item gaps that standard AR review misses.

Underpayments vs. Denials: Which One Is Draining Your Practice More?

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