Hospitals lost over $48B from claims denials, uncollected bills

Hospitals are losing an exorbitant amount of revenue from final claim denials and uncollected medical bills from patients, according to a new report from Kodiak Solutions.

The healthcare technology company released its inaugural “State of the healthcare revenue cycle” report based on aggregated and normalized revenue cycle data from 2,300 hospitals and 350,000 physicians that use the Kodiak Platform and Kodiak Revenue Cycle Analytics.

The revenue cycle benchmarking report revealed severe revenue leakage in 2025 from payments that providers could have collected but didn't. Kodiak reported a 25% increase in net revenue leakage, driven by increases in final denial rates.

The median final denial rate of hospitals in the report rose from 2.5% in 2024 to 2.7% in 2025. Clinical denial rates, including denials for lack of prior authorization and medical necessity, accounted for nearly all the increase in denial rates, the report stated.

Providers are generally seeing higher denial rates from payers. The average initial denial rate also increased to 11.6% in 2025, from 11.4% in 2024, and the average denial rate involving a request for information increased to 3.6% from 3.4%.

Additionally, the average clinical denial rate grew to 2.6% in 2025 from 2.4% in 2024. These types of denials are notoriously difficult to overturn or appeal, according to the report. In fact, providers were less successful overall in overturning denials last year, with the average rate dropping slightly to 42.1% from 42.7%.

While providers had more trouble with denials, they also face challenges collecting money from patients.

The report found that the median bad-debt rate for hospitals included in the report increased from 1.1% to 1.3%. Bad debt occurs when providers are unable to collect from patients or their payers, resulting in a write-off.

While the growth in bad debt and claim denial rates doesn't seem that significant, the report found that rising rates across the board resulted in $48.4 billion in lost revenue last year.

The report stated that small increases in bad-debt and claim-denial metrics led to such massive revenue leakage for two reasons.

First, who denied claims mattered. For example, commercial payers tend to reimburse hospitals at higher rates than Medicare and Medicaid.

Second, denials for some services lead to more revenue leakage. Claims for inpatient care, for instance, usually carry much higher dollar amounts than those for outpatient care. So, a final denial of inpatient care by a commercial payer could result in significant revenue loss.

The report found that commercial payers weren't more likely to issue final denials versus Medicaid, Medicare or their managed counterparts. However, commercial net revenue leakage was greater in 2025. For inpatient care, the rate increased to 6.6% from 5.4%. For outpatient care, it grew to 10.3% from 8.9%.

"Payor behavior led to denial increases and a slight decline in the rate of overturning initial denials, with both driving the large overall increase in net revenue leakage from 2024 to 2025," said Matt Szaflarski, vice president of revenue cycle intelligence for Kodiak. "The positive news on cash flow shows that revenue cycle teams can mitigate headwinds with strong performance on the things they can control."

Best practices include instilling tight accounts receivable discipline, focusing on limiting denial resources on preventing clinical denials and maintaining rigorous front-end patient pay processes, Szaflarski stated.

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.