Insurers denied more claims on clinical grounds in 2025 compared with 2024, says new report.
Insurers denied more claims on clinical grounds in 2025 compared with 2024, leading to a 25% increase in net revenue leakage, according to a new report by Kodiak Solutions.
Denials and an increase in uncompensated care represented more than $48 billion in revenue losses for the 2,300 hospitals in the Kodiak analysis for the State of the healthcare revenue cycle. This is an increase from $38.6 billion in 2024, according to the Kodiak Solutions Revenue Cycle Analytics benchmarking analysis.
The increases in clinical denials were for lack of prior authorizations and for medical necessity.
Both initial and final claims denials were variable by payor category, with Medicaid leading in both categories. Commercial denials contributed more to revenue leakage because commercial health plans pay higher rates.
Medicare Advantage plans had initial and final denial rates more than double the rates for traditional Medicare, the report showed.
“Payor behavior led to denial increases and a slight decline in the rate of overturning initial denials, with both driving the large overall increase in net revenue leakage from 2024 to 2025,” said Matt Szaflarski, Kodiak VP, Revenue Cycle Intelligence.
The median final denial rate increased from 2.5% in 2024 to 2.7% in 2025, and the median bad debt rate rose from 1.1% in 2024 to 1.3% in 2025.
Kodiak’s data analysis comparing 2025 with 2024 also found: Patient responsibility share of net revenue increased from 6.8% in 2024 to 7.3% in 2025; and that health systems collected less of that patient share, with the rate declining from 45.1% of net revenue in 2024 to 42.4% in 2025.
Szaflarski said three best practices for revenue cycle leaders focus on: tight accounts receivable discipline; focusing limited resources on preventing clinical denials; and maintaining front-end patient pay processes.