Medical Claims Denials On the Rise, A Recent Survey Reveals

As healthcare providers continue to navigate the complexities of modern claims management, the latest data from Experian’s State of Claims 2024 report paints a concerning picture: denial rates are rising, complicating revenue collection and creating a cascade of operational challenges. Providers now face denial rates as high as 10% to 15%, putting significant strain on their revenue cycles. The upward trend of denied claims is more than just an administrative headache—it represents a tangible threat to the financial health of healthcare organizations.

A Growing Concern for Providers

The increase in claims denials is tied to multiple factors, with healthcare organizations experiencing a range of inefficiencies across the claims processing landscape. Denial rates have steadily climbed over recent years, and this growing problem isn’t merely a reflection of changing payer policies or more stringent regulatory scrutiny. Providers now face more complex billing requirements, while also struggling with outdated claims management infrastructure. These systemic issues are leaving many organizations under-equipped to handle the intricacies of modern healthcare billing.

Providers are forced to invest more resources into addressing rejected claims, increasing operational costs as they appeal and resubmit claims. Not only does this extend the time to collect revenue, but it also diverts staff time away from patient care and core operations, adding administrative overhead. For many, the path to financial stability is becoming a complicated balancing act as they try to reduce denial rates while dealing with the escalating complexity of healthcare claims.

Key Drivers of Denials

According to Experian’s report, the surge in denials can be traced to several root causes, including:

• Tighter Regulatory Scrutiny: Payers are increasingly tightening their guidelines to comply with evolving regulatory frameworks. The complexity of these rules often leads to denials based on small technicalities.
• Complex Billing Requirements: The transition to value-based care has further complicated the billing process, making it challenging for providers to match the right documentation with reimbursement requirements.
• Coding Errors and Incomplete Information: Simple mistakes in coding, missing patient data, and authorization issues remain the leading causes of denials. Inadequate coding practices and failure to secure prior authorizations often leave providers scrambling to correct errors after claims have been rejected.

The Impact on Revenue Collection

Denials don’t just result in delayed payments—they also contribute to long-term financial instability. According to a 2019 survey, claim denials cost U.S. healthcare organizations an estimated $262 billion annually. This represents a substantial burden, particularly for smaller providers who may lack the financial resilience of larger systems.

Beyond the financial toll, the administrative burden of reworking denied claims adds another layer of stress. As more resources are devoted to revisiting rejected claims, healthcare organizations find themselves with fewer operational resources available for patient care and other revenue-generating activities. This, in turn, further threatens their bottom line, creating a vicious cycle of inefficiency and financial strain.

Outdated Systems and Inefficient Workflows

One of the primary reasons for the growing denial rate is the continued reliance on outdated technology and inefficient claims processing workflows. Many providers still use legacy systems that don’t integrate well with modern electronic health records (EHRs) or payer platforms. This creates data silos, leading to missed opportunities for real-time claims processing and error resolution.

The failure to adopt advanced technologies like artificial intelligence (AI) and machine learning (ML) further exacerbates these issues. Though these innovations hold promise for streamlining claims management, the upfront costs and complex integration processes have slowed adoption. As a result, many healthcare organizations are struggling to keep up with the demands of modern claims management, causing delays in claims submission and verifications.

Value-Based Care and Claims Processing Disconnect

While the healthcare industry is shifting toward value-based care models, claims processing is still largely grounded in traditional fee-for-service methods. This disconnect between the care delivery model and the claims infrastructure creates friction. Value-based care relies heavily on accurate data sharing between providers and payers, but outdated claims processing systems often fall short of supporting this level of collaboration.

The State of Claims 2024 report underscores the need for providers to modernize their claims management processes to align with value-based care. As the industry moves closer to 2025, there is an urgent need for healthcare organizations to rethink their revenue cycle strategies to avoid further financial losses.

Leveraging Technology and Data Analytics

To address the rise in claim denials, healthcare organizations must embrace technology, particularly data analytics, as a critical tool for improving claims accuracy. By adopting advanced data analytics platforms, providers can gain real-time insights into their claims management processes, track patterns that lead to denials, and identify coding errors before they become costly issues.

Healthcare organizations that invest in these technologies can proactively address potential claim denials, reducing the number of appeals and resubmissions. The result is a more efficient revenue cycle, improved first-pass claim approvals, and reduced administrative overhead.

Automated claims processing, fueled by AI and machine learning, offers another avenue for improvement. These technologies can reduce human error, speed up claims workflows, and ensure that claims are submitted with the highest level of accuracy on the first attempt. Providers that have integrated AI-driven solutions into their revenue cycle management are already seeing tangible improvements in efficiency and financial outcomes.

The Case for Outsourcing Revenue Cycle Management

Given the complexities and challenges of modern claims processing, many healthcare organizations are turning to third-party revenue cycle management service providers to improve their financial outcomes. Partnering with specialized RCM experts like Bristol Healthcare Services allows providers to leverage cutting-edge technology and expertise that they may not have in-house. Outsourcing claims processing can significantly reduce denial rates, speed up revenue collection, and relieve the administrative burden on internal teams.

Furthermore, third-party vendors can offer more flexible, cloud-based solutions that ensure better interoperability between provider systems and payer platforms, allowing for seamless claims management.

Click the link to learn more about our denial management services and our full-scale revenue cycle management services, designed for medical practices of all sizes.

The Path Forward: Modernization and Continuous Training

To navigate the rising tide of claims denials, healthcare providers must focus on modernizing their claims infrastructure and investing in continuous staff training. Cloud-based claims management platforms offer better integration with payer systems, helping providers keep pace with the latest billing and reimbursement requirements. Additionally, continuous staff education on coding updates and payer policy changes is critical to avoiding common errors that lead to claim denials.

With the right mix of technology, expertise, and training, healthcare organizations can overcome the challenges of rising claim denials and strengthen their revenue cycles.

In Conclusion

As denial rates continue to climb, healthcare organizations face mounting pressure to modernize their claims management processes. The State of Claims 2024 report makes it clear that outdated technology, inefficiencies, and evolving payer policies are contributing to this growing issue. By embracing AI, data analytics, and partnerships with third-party RCM providers, healthcare organizations can reduce denial rates, improve financial performance, and navigate the shift toward value-based care with greater efficiency.