Why claim denials are rising and how providers are responding

Payment for healthcare services starts with a claim that details what type of care the patient received, why and the amount charged by a hospital or provider for these services. From there, the claim is typically sent to the patient’s health plan for reimbursement.

But the path to reimbursement for healthcare claims has become much harder for healthcare providers to navigate. That’s due in large part to increased use of AI by health plans to deny claims.

Healthcare claim denials worsen

According to recent data:

• Initial claim denials are claims that are denied on first pass, forcing providers to resubmit. Rates have  climbed to nearly 12% in 2024. That’s an increase of 2.4% year over year, according to Kodiak Solutions data.
• Nearly two-thirds of healthcare organizations plan to increase spending on AI through 2026. Over 40% say AI solutions for revenue cycle management are a top focus, a recent survey found.
• The rate of denials has increased even as providers have reduced prior authorization denials by 7.7%.

The impact of claim denials on providers and patients

As the rate of claim denials continues to rise, both providers and patients struggle with the impact.

For providers, soaring rates of claim denials:

• Significantly slow cash flow
• Require health systems to invest additional resources to overturn denials
• Increase the expense of pursuing claim payment

For patients, claim denials:

• Often lead to frustration with the provider rather than the health plan
• Create payment confusion (e.g., “How much do I owe? If my claim has been denied: Will the health plan change its mind?”)
• Can result in delays in or cancellation of needed services

As one healthcare revenue cycle expert told HFMA, “Having to call a patient to say, ‘I’m so sorry, but we don’t have your authorization here from your insurance company, so we have to reschedule your procedure, and I apologize that you’ve already taken PTO and arranged transportation.’ That becomes a patient dissatisfier. They’re not upset with their payer when that happens. They’re upset with the provider.”

How healthcare organizations are reducing claim denials

Leading health systems are going on offense against denials by:

• Process automation and machine learning – Incorporating robotic process automation and machine learning to help ensure claims are as clean as possible and for work queue management
• AI solutions – Leveraging AI-powered “bots” to check on claim status and prior authorization status to avoid initial denials and respond to denials more quickly  
• Payer liaison teams – Creating payer liaison teams to work directly with health plans in addressing recurring issues with denials
• AI-powered denials management – Adding generative AI for predictive denials management and proactive appeals

Denials management resources

Find out more

HFMA has conducted research around increasing claim denials and their impact. For more information about rising rates of denials and how healthcare organizations are responding, check out these resources:

• Battle of the Bots
• Curing Payment Confusion
• Bridging the Payer-Provider Divide

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