For years, hospital finance teams have run revenue cycle on a familiar loop: a claim goes out, a claim comes back denied or underpaid, and staff spend the next several weeks working it back. That loop was manageable when denial rates held fairly steady and reimbursement was reasonably predictable. Neither of those things is true anymore, and the gap between how revenue cycle is typically run and what today’s payer environment actually demands is widening fast.
Denials are climbing, and they are climbing for reasons that have little to do with how hard revenue cycle teams are working. The pressure showing up in the numbers is driven by shifts in payer behavior, patient mix, and administrative complexity that no amount of appeals staffing can fully offset. A reactive model for denials is no longer enough.
The Reactive Model Is Running Out of Room
The numbers make the case on their own. Kodiak Solutions, which benchmarks revenue cycle performance across more than 2,300 hospitals, found that providers on its platform lost more than $48 billion in 2025 to final denials and uncollected patient balances, a 25% increase over 2024. Clinical denials tied to prior authorization and medical necessity accounted for nearly all of that jump, and initial denial rates have now risen for five straight years.
Experian Health’s 2025 State of Claims survey tells a similar story. Forty-one percent of providers now report denial rates above 10%, a figure that has climbed every year since the survey began in 2022, well past the 5% to 10% range HFMA considers a healthy benchmark.
Payers have grown faster, more automated, and more willing to deny first and let providers make their case on appeal later. Reactive revenue cycle management was built for a world where denials were infrequent, and that world has disappeared.
Complexity Is Coming From Every Direction
Payer mix is a large part of why. Fitch Ratings expects the nonprofit hospital sector to keep shifting toward government payers as the population ages. As more claims run through Medicare and Medicaid, more of a hospital’s revenue becomes subject to rules that change frequently and get enforced unevenly across regions and plans.
At the same time, prior authorization requirements have tightened across commercial and Medicare Advantage plans, and payers are increasingly relying on automated systems to flag claims before a human ever reviews them. Documentation gaps that used to slide through review now get caught immediately, often before a claim leaves the payer’s system.
Increased prior authorization requirements and the shifting payer mix (including more Medicare Advantage plans) multiply the places where a claim can be delayed, denied, or underpaid. A process built to react to one denial at a time will not keep pace.
The Cost of Fixing Problems After They Happen
Working a denial after the fact is costly. The American Hospital Association estimates that hospitals spent $43 billion in 2025 simply trying to collect payments insurers already owed them for care that had already been delivered. The average hospital now employs roughly 64 administrative and billing staff, about 6.5% of total hospital employment, largely to manage prior authorization, denials, and repeated documentation requests — staff time that goes toward chasing revenue that should have arrived the first time around.
Some of that revenue never comes back at all. Claims that go unappealed or unresubmitted become permanent losses rather than delayed ones. Kodiak’s analysis of its top-performing organizations recommends directing more resources toward preventing clinical denials rather than just appealing them after the fact. That shift in orientation only works if an organization can see the patterns behind its denials rather than just the individual claims in front of it.
What a Proactive Revenue Cycle Actually Looks Like
Proactive revenue cycle management starts when you look at patterns of claim denials vs. the individual claims themselves. That requires analyzing denials and underpayments at the root cause level, tracing a problem back to the payer, the service line, the documentation gap, or the workflow step that keeps generating it, and fixing that step before claims go out the door instead of fighting each one after it comes back.
Most revenue cycle teams were not built to operate this way. Treating denial and underpayment data as a feedback loop into clinical documentation, coding, scheduling, and patient access is a different discipline than working a queue of appeals, and it gives finance leaders visibility into where revenue is at risk before it turns into a write-off, rather than after. It also changes what success looks like. Recovered revenue still matters, but the number worth watching more closely is how much denial volume never happens in the first place.
Revenue Cycle Belongs in the Strategic Conversation
Hospital leaders can control how quickly their organization identifies the root cause of a reimbursement problem and closes it, regardless of demographic shifts, payer mix, or how aggressively insurers adjudicate claims. With costs rising and margins remaining thin across much of the sector, that capability may be the difference between a hospital making or losing money. Health systems that rapidly detect denial patterns and address root causes through operational improvements are the ones most likely to protect their margins over the next several years. These organizations will hold their footing while others spend the next few years chasing revenue they should have collected the first time.
About Noah Breslow
As CEO of Revecore, Noah Breslow brings more than 20 years of executive leadership experience, with a focus on driving growth, innovation, and transformation in complex, highly regulated industries. Most recently, Breslow was a Partner at Bain Capital Ventures (BCV), where he led their portfolio support team, built out data-driven investment tooling, and helped incubate two startups at the forefront of applying AI in the insurance claims processing and wealth management industries.
Prior to BCV, Breslow served as Chairman and CEO of OnDeck, a pioneering online small business lender, where he built the business from its earliest stages, took it public and ultimately facilitated its acquisition. OnDeck used data and analytics to effectively deliver capital at scale to businesses historically underserved by banks. Earlier in his career, Breslow held leadership roles in product, engineering and marketing. He holds a Bachelor of Science in Computer Science and Engineering from MIT and an MBA from Harvard Business School.
