By Bruce Nelson, Vice President, Access Healthcare
Are the nation’s private and government payers deliberately denying healthcare claims to the disadvantage of healthcare providers? If so, what is in it for the payers to do so? It depends on who you ask.
Payers/insurers often proclaim they are simply “following the rules,” while a healthcare provider may describe denials as “suspiciously arbitrary and maddening.” Regardless of perspective, this fact is indisputable: claim denials are an escalating problem for healthcare organizations, especially in this new world of AI-based payer claims processing systems.
The Real Cost of Denials
Claim denials strike at the heart of healthcare organizations financial stability impacting their cash flow, operational efficiency, and service delivery. Claim denials occur when a payer or insurance company refuses to reimburse for services rendered, often due to documentation errors, coding mistakes, or failure to comply with frequently shifting policy guidelines (talk about maddening!). To add to the confusion, medical necessity denials are also rising, with payer-employed nurses sometimes overruling physician documentation.
The financial consequences are staggering. On average, 20 percent of all healthcare claims are denied—and, astonishingly, up to 65 percent of those claims are never resubmitted. This dynamic is highly profitable for payers from a cash flow perspective: denials allow insurers to delay or avoid payouts, keeping funds on their books or investing the “float” while those payments are in limbo or ultimately written off. Meanwhile, providers are left with significantly lost revenue, especially on small-dollar third-party claims. To make matters worse, an estimated 60 percent of claims that are resubmitted after an initial denial are denied again!
Today, the average cost to simply submit a claim is $6.50. The cost to submit, correct, and resubmit a claim can easily exceed $57 per claim and can run much higher for hospitals or complex cases. Last year alone, U.S. providers collectively spent an estimated $25.7 billion just to fight denied claims—a 23 percent increase from the year before—with nearly $18 billion of that potentially wasted on claims that should have been paid initially. That means about 70 percent of what providers spent battling denials may have been avoidable if claims were paid appropriately the first time
Even when appeals succeed, the process is slow: administrative review and reprocessing often take 45 to 60 days (or longer), especially in “give-and-take” cycles. Providers may wait as long as six months to recover costs after delivering care, particularly when multiple denials are involved in the same claim. These prolonged delays not only tie up critical cash flow but also erode providers’ financial stability, as waiting for reimbursement increases operational costs and limits the ability to invest in staff, technology, or patient care
Sources: Cost of Medical Billing Services in 2025, CareCloud, 2025
Financial Advantage for Payers vs. Disadvantage for Providers
Payers (many of whom are publicly traded companies) benefit from denied claims by holding on to billions in cash and earning additional interest or investment returns during payment delays. Each denied claim is also a potential reduction in “medical loss ratio” obligations (the percentage of premium revenue spent on clinical services), as unclaimed or delayed payouts improve reported profitability.
Providers, on the other hand, face immediate cash flow shortages, increased administrative burdens, higher write-off rates, and reduced ability to invest in patient services. For many health systems, denials contribute to a reduction in cash on hand to record lows, making capital more expensive and threatening operational stability. For example, one analysis found that over the past year, the days of cash on hand among hospitals fell to their lowest point in a decade, a direct effect of contested and unpaid claims.
In summary: The denial and delay of valid claims is a powerful mechanism by which payers increase their bottom line, at least temporarily, while providers absorb operational, opportunity, and long-term financial losses.
Ripple Effect: Beyond the Balance Sheet
Equally disastrous from a patient public relations perspective is that denials often lead to a worsening of the patient’s perception of the healthcare provider itself. A provider can do everything right from a treatment perspective, only to suffer reputationally later when denials and billing disputes become contentious. No patient likes to get a bill post service, especially when they have one or two insurance plans.
Additionally, discharges to post-acute care scenarios, such as skilled nursing facilities, are sometimes postponed because insurers have not approved payment in a timely manner. These delays often result in extended hospital stays, increased patient risk, and higher costs.
Beyond the Immediate Impact: What Comes Next
These examples illustrate how claim denials create a domino effect financially, operationally, and clinically. Addressing this growing issue requires more than just working denials as they come in. It calls for a broader strategy rooted in prevention, technology, and better processes.
In Part 2, we’ll take a closer look at how providers can take control of the denial problem—reducing rework, reclaiming revenue, and strengthening their revenue cycle from the ground up.
About the Author
Bruce Nelson is Vice President of Sales at Access Healthcare, part of the Smarter Technologies family. With more than 30 years of experience in the healthcare industry, Bruce brings deep expertise in revenue cycle management, strategic growth, and client success. Throughout his career, he has helped healthcare organizations streamline operations, reduce costs, and enhance financial performance through innovative, data-driven solutions.
Bruce is known for his ability to build strong, trust-based relationships with clients and partners, and for leading high-performing, results-oriented sales teams. His passion lies in equipping providers and healthcare systems with the tools and insights they need to thrive in a complex and fast-evolving healthcare landscape.
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