Read them together and the picture sharpens. The American hospital doesn't have a revenue problem. It has a collection problem — a $43-billion-a-year tax levied by payer complexity, paid in billing staff, appeals, and write-offs. Denial management isn't a back-office function anymore. It's the margin.
The Benchmarks: Worse Than You Think, Getting Worse
Start with the national figures. Kodiak Solutions' revenue cycle benchmarking — the industry's most-watched dataset, cited by HFMA — put the average initial claim denial rate at 11.8% for 2024, climbing steadily from around 10.2% just a few years earlier. Experian Health's 2025 State of Claims survey found 41% of providers now operating above a 10% denial rate, up from 38% the year before — the third consecutive year of increases. A March 2024 MGMA poll found 60% of medical group leaders reporting higher denial rates than the year before; only 11% saw improvement.
Kodiak's March 2026 benchmarking report sharpened the warning. Across all payer categories, the request-for-information initial denial rate for inpatient care rose more than 10%, the clinical initial denial rate rose more than 12%, and the final denial rate for inpatient care rose more than 14%. Median net revenue leakage — final denials and bad debt as a share of billable services — reached 2.80%, and the dollar figure is stark: $48.4 billion in lost revenue for 2025, up more than 25% from $38.6 billion in 2024.
"Denials are not a billing problem. They are a business model problem — and it's the payer's business model, not the hospital's." The denials hospitals face aren't random errors. They're the output of a system optimized to delay.
The Cost of the Fight
Every denied claim carries a rework cost, and the industry has measured it precisely. HFMA research puts the average administrative cost at $47.77 to rework a Medicare Advantage denial and $63.76 for a commercial denial. MGMA's range runs $25 to $118 per claim depending on complexity, with complex appeals exceeding $180. The industry-wide administrative spend on denial rework approaches $20 billion a year.
But the deepest cost isn't the rework — it's the surrender. Roughly 60% of denied claims are never reworked at all, per HFMA. They age out, they get written off, they become permanent revenue losses. HFMA places average net revenue leakage from denials at 4.8% of net patient revenue. Against hospital operating margins that sit under 3%, that leakage is the difference between solvency and distress.
Consider the Medicare Advantage dynamic specifically. A Health Affairs analysis cited by the AHA found MA plans denied about 17% of initial claims — and 57% of those denials were eventually overturned. Hospitals won the appeals and still lost, because the administrative cost of winning is unrecoverable. In 2025, hospitals spent nearly $18 billion overturning denials. The payer's error becomes the provider's expense.
Why Denials Are Rising
Four forces are driving the trend, and none is reversing. First, payer complexity: proprietary payment policies, medical necessity criteria, and post-payment reductions that multiply the ways a claim can fail. Medicare Advantage plans increasingly function like commercial payers, layering their own rules atop traditional Medicare's. Second, staffing: revenue cycle teams face the same labor shortages as clinical departments, and inexperienced staff generate more front-end errors. Third, the underpayment shadow: payers have learned that reducing a payment draws less scrutiny than denying it. HFMA cites estimates that underpayments within payer contracts can reach 11% of net patient revenue — losses that don't appear in denial rates at all because the claim was technically "paid." Fourth, automation asymmetry: payers deploy AI-driven claims editing at scale while many providers still work denials manually, claim by claim.
The widely cited figure that 90% of denials are preventable — from Change Healthcare and the Advisory Board — is both the good news and the indictment. Front-end errors — eligibility, coding specificity, prior authorization, timely filing — cause the majority of denials, not clinical disputes. Experian's 2025 data: missing or inaccurate claim data drives 50% of denials, authorizations 35%, registration errors 32%, code inaccuracy 24%. These are process failures, and process failures are fixable.
The hospitals pulling ahead treat denial management as a systems discipline: root-cause analysis by denial category, Pareto-sorted work queues, pre-bill claim scrubbing, and payer-specific playbooks updated when policies change. The ones falling behind treat each denial as an individual billing problem — and pay the $43 billion tax, year after year.
The strategic question for 2026 isn't whether denials will keep rising. Kodiak's data says they will. It's whether your organization treats the denial rate as a billing metric or as what it actually is: the single most controllable driver of net revenue in the building.