AHA: Hospitals spent $43B chasing pay from denials, prior auths

Claim denials, prior authorizations, repeated documentation requests and changing billing and coverage rules are delaying payments for care already delivered to patients, forcing hospitals to spend billions on collecting them.

Hospitals spent $43 billion in 2025 chasing payments stuck in this administrative limbo, according to the "Costs of Caring" report from the American Hospital Association (AHA).

The AHA released the latest edition of its annual report yesterday, detailing the financial state of U.S. hospitals using data from its Annual Survey of Hospitals, which covers more than 6,200 hospitals and 400 health systems.

The report, which explored 2025 data, revealed significant financial headwinds for hospitals despite stabilizing margins. In addition to chasing payments, total hospital expenses increased by 7.5% last year, more than twice the growth rate of hospital prices.

The majority of those costs -- 60% -- went to paying physicians, nurses and other clinicians, as well as support staff that enable around-the-clock care and services, AHA reported. These workforce costs were also up by 5.6% in 2025, according to the report.

Additionally, hospitals faced higher costs for supplies and drugs, with increases of 9.9% and 13.6%, respectively.

Rising expenses put significant pressure on hospitals that provide a wide spectrum of services, the AHA explained. Hospitals must also maintain specialized, high-cost equipment and fully staff their care environments to meet community needs, which have only gotten more intense as the population ages.

The report showed that hospitals are caring for sicker patients. About 19% of hospital expense growth observed last year could be attributed to caring for sicker, more complex patients. Overall, about a third of the expense growth was attributed to treating more patients.

Older patients and the rising prevalence of chronic conditions are prompting hospitals to spend more on care, including on the staff and supplies needed to treat these patients. However, the trend toward outpatient care has also left hospitals to care for aninpatient population with greater clinical needs, AHA stated.

The shift in patient acuity added to the payment friction hospitals experienced in 2025. Complex patients and services tend to have higher denial and prior authorization rates. Already, hospitals staff an average of 64 administrative and billing employees dedicated to these functions, representing about 6.5% of total hospital employment. Medical staff are also pulled away from clinical care to complete forms, conduct peer-to-peer reviews and document medical necessity for insurance purposes.

AHA specifically pointed to a growing administrative burden associated with Medicare Advantage, which has high initial claim denial and overturn rates.

Overall, reimbursement rates across payer types did not keep up with hospital expenses last year, the report added. Over 56% of hospital costs were associated with service lines where reimbursement fell short of the cost of care delivery. These service lines included behavioral health, obstetrics, infectious diseases and wound care, AHA reported.

Medicare and Medicaid have historically paid below the actual costs of delivering care, but AHA stressed that the issue is prevalent across payer types, particularly for low-margin hospital services.

The state of hospital finances in 2025 should ring an alarm bell for the industry, according to the AHA.

"Rising costs for labor, supplies, drugs, and administrative burdens caused by corporate insurers, combined with caring for sicker patients, have created challenges for hospitals and health systems," Rick Pollack, AHA president and CEO, said in a statement. "These strains are jeopardizing hospitals' ability to provide around-the-clock care and services that patients and communities need."

Jacqueline LaPointe is a graduate of Brandeis University and King's College London. She has been writing about healthcare finance and revenue cycle management since 2016.