Hospitals deliver the care. Then they fight to get paid for it. The numbers behind that fight got worse again in 2025 — and the data no longer supports the industry's old comforting story that denials are a paperwork problem.
Kodiak Solutions, whose revenue-cycle analytics platform draws on data from more than 2,100 hospitals and 300,000 physicians, reported that payers initially denied 11.81% of claims in 2024 — up 2.4% from 2023 and up from 10.2% in 2020. The 2024 rate was 15.7% higher than the 2020 rate. Then came Kodiak's inaugural State of the Healthcare Revenue Cycle report, covering 2,300 hospitals and 350,000 physicians: the average initial denial rate climbed again in 2025, to 11.6%, and the median final denial rate — claims never paid at all — rose from 2.5% to 2.7%. Net revenue leakage jumped 25% in a single year.
Experian Health's 2025 State of Claims survey found 41% of providers now say at least one in ten claims gets denied — up from 38% in 2024, the third consecutive year of increases. Whatever the dataset, the direction is the same.
The $18 Billion Collection Tax
Denials are not free to fight, and the cost of fighting them is itself a crisis. The American Hospital Association estimates hospitals spent nearly $18 billion in 2025 overturning claim denials — and when prior authorization, repeated documentation requests, changing billing rules, and other collection activities are included, the figure reaches $43 billion. That is $43 billion spent not on patient care but on collecting payment for care already delivered.
Premier's analysis put claim adjudication costs at $25.7 billion in 2023, up 23% from the prior year — and estimated that nearly $18 billion of it was unnecessary, because roughly 70% of denied claims were ultimately overturned and paid. The average administrative cost to rework a single denied claim rose from $43.84 in 2022 to $57.23 in 2023. HFMA research breaks it down further: $47.77 to rework a Medicare Advantage denial, $63.76 for a commercial one. Industry estimates of per-claim rework costs range from $25 to $118 depending on complexity, with difficult appeals exceeding $180.
Read that again. Payers deny claims they will mostly end up paying, and providers spend tens of billions of dollars reversing denials that should never have been issued. It is a tax on the entire system, paid in administrative labor.
The Pattern Inside the Numbers
Kodiak's data reveals what payers are actually doing. In 2024, initial denials related to authorization issues fell 7.7% — providers got better at prior auth, so payers shifted ground. Denials tied to medical necessity rose 5%, and requests for more information rose 5.4%. The RFI increase was concentrated exactly where you would expect: commercial health plans and Medicare Advantage plans run by commercial insurers, with RFI denial rates up 1.5% and 4.8% respectively.
As Kodiak's Matt Szaflarski put it: "Payors appear to be using initial denials to slow payments, even though they ultimately pay approximately 90% of claims." The denial is not always a coverage decision. Often it is a cash-flow decision — the payer's cash flow, improved at the provider's expense. True accounts receivable days rose 5.2% year over year. Providers collected 34.46% of what insured patients owed, down 8.3% from 2023.
And providers are losing the appeals war at the margin. Kodiak's 2025 data showed the average overturn rate slipping to 42.1% from 42.7% — clinical denials, the kind involving prior authorization and medical necessity, are notoriously difficult to reverse and accounted for nearly all the increase.
Payer Variation: Not All Denials Are Equal
The national average conceals sharp differences by payer type, and the differences are getting sharper. Medicare Advantage plans run by commercial insurers have become the industry's most aggressive deniers — Kodiak's data showed initial request-for-information denial rates for MA plans up 4.8% in 2024, the steepest increase of any payer category. Commercial plans followed at 1.5%. Traditional Medicare, for all its bureaucracy, denies at lower rates and with more predictable rules.
This is not an accident of administration. MA plans are paid a fixed per-member amount by the federal government; every claim denied is margin retained. The incentive structure is direct and undisputed, which is why MA denials have drawn congressional scrutiny, OIG investigations, and a wave of CMS rulemaking aimed at curbing prior-authorization abuse. The plans' response has been to shift from authorization denials — which regulators were watching — to medical-necessity and information-request denials, which attract less attention. The game adapts faster than the rules.
For providers, the implication is operational: denial strategy must be payer-specific. The documentation that satisfies a commercial plan's medical-necessity review may not satisfy an MA plan's, and the appeal timelines, peer-review processes, and escalation paths differ by contract. Hospitals that manage denials as a single workflow are fighting five different opponents with one playbook.
The old story was that denials were errors to be fixed. The data tells a newer, uglier story: denials are a business strategy, and it is working.
"Every denied claim is a loan the hospital never agreed to make — interest-free, to the insurer."