Hospitals and health systems faced increasing financial pressure in 2024 as collection rates from insured patients declined and initial claim denials continued to rise, according to data from Kodiak Solutions.
- The collection rate for commercially insured patients dropped from 37.6% in 2023 to 34.4% in 2024, a significant decrease that compounds existing revenue challenges for healthcare providers.
- Initial claim denials rose to 11.8% in 2024, up from 11.5% in 2023 — marking the fourth consecutive year of increases in denials. Since 2020, initial denials have surged by 15.7%.
- Final denial rates held steady at 2.8%, but that’s still a 16.7% increase compared to 2020.
The background: Much of the rise in denials stems from commercial health plans and Medicare Advantage plans, which saw increases in request-for-information (RFI) denials from 2023 to 2024. These plans continue to be the top sources of denied claims.
Between the lines: Providers have attempted to offset revenue losses by improving point-of-service (POS) collections and bad debt recovery efforts. However, these strategies alone haven’t been enough to fully counteract the financial strain.
The impact: For revenue cycle leaders, these headwinds highlight the need for a more proactive and data-driven approach to managing collections and denials.
“While our data suggest that these headwinds continue to gather strength, I am encouraged by the conversations that my colleagues and I are having with revenue cycle leaders across the country,” said Matt Szaflarski, Vice President of Revenue Cycle Intelligence at Kodiak Solutions.
Szaflarski noted that leaders are using data to pinpoint problem areas and implement creative solutions to improve revenue cycle performance in 2025.
The response: Hospitals and health systems are deploying a mix of operational, contractual, and technological strategies to mitigate the impact:
- Enhancing patient education and communication around health plan benefit design and the financial experience to reduce confusion and increase timely payments.
- Tighter integration between clinical and revenue cycle departments to ensure smoother claims submission and fewer errors that lead to denials.
- Stronger language in payer contracts and service-level agreements (SLAs) to limit pre-payment audits and denials, providing more financial predictability.
The bigger picture: Industry-wide data supports the growing challenge of claim denials. A Premier survey of hospitals, health systems, and post-acute care providers found that nearly 15% of all claims submitted to private payers are initially denied — including some that were pre-approved through prior authorization.
- On average, 3.2% of all claims denied were ones that had already received prior authorization.
- More than 54% of denied claims were ultimately paid, though many providers lack the resources to fully pursue appeals.
