🇺🇸United States

Lost Revenue from Unworked and Written-Off Denials

3 verified sources

Definition

Hospitals routinely lose revenue when denied claims are never appealed or are written off instead of being corrected and resubmitted. Industry analyses estimate that a large share of denials are avoidable and many are recoverable, but they are not worked due to process gaps and capacity limits in denial management and appeals.

Key Findings

  • Financial Impact: HFMA reports that about 85% of denials are preventable, and other industry research commonly cites that 3–5% of net patient revenue is at risk from denials that are not successfully recovered; for a $500M hospital this equates to roughly $15M–$25M per year in leakage attributable to denials and insufficient appeals.[9][2][6]
  • Frequency: Daily
  • Root Cause: Denied claims are not systematically analyzed and prioritized, many are allowed to age past timely filing/appeal limits, and denial teams lack the tools and staffing to work all recoverable denials; missing or inaccurate data, coding errors, and prior-authorization/eligibility issues keep recurring, creating a constant stream of unworked denials.[2][1][6]

Why This Matters

This pain point represents a significant opportunity for B2B solutions targeting Hospitals.

Affected Stakeholders

Revenue cycle director, Denials/appeals manager, Patient financial services staff, Coding and HIM staff, CFO, Physician advisors

Deep Analysis (Premium)

Financial Impact

$0.5M–$1.5M per year in workers’ comp revenue lost from denials and underpayments that are not escalated or appealed in time. • $0.5M–$1M per year in workers’ compensation reimbursement lost from denials not fully appealed or settled favorably. • $1.5M–$3M annually (outpatient surgery is growing revenue stream; authorization gaps delay payment 15–30 days; 30–40% of denials unworked due to capacity)

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Current Workarounds

Analysts and managers manually assemble denial lists by CPT or surgeon in Excel, sort by balance, and use email and shared folders to pass around documents and templates for appeals. • Claims analysts manage workers’ comp denials and follow-ups in personal Excel trackers, maintain adjuster contact lists in Outlook, and store correspondence as scanned PDFs on shared drives. • Denial specialists manually compile timelines and documents in Word and Excel, track appeal steps in spreadsheets, and coordinate with case managers and attorneys via email and phone calls.

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Methodology & Sources

Data collected via OSINT from regulatory filings, industry audits, and verified case studies.

Evidence Sources:

Related Business Risks

Permanent Revenue Loss from Missed Appeal and Timely-Filing Deadlines

Waystar notes that payers may allow only 90 days for an appeal on some claims and up to a year on others, and that failing to resolve denials within these windows results in lost reimbursement; in many hospitals, millions of dollars are written off annually due to aging denials that exceed these limits.[6][4]

Denied Claims from Prior Authorization and Eligibility Failures

Experian’s 2024 State of Claims report (cited by RevCycle) attributes 76% of denials to missing, incomplete, or inaccurate data such as eligibility and authorization details, implying that a large portion of denial-related revenue loss stems from these front-end failures.[2] A hospital case example from Adonis shows that fixing missing prior authorizations for certain procedures materially improved financial performance, indicating that prior-authorization denials were a recurring revenue leak before process changes.[3]

Excess Labor Costs from Rework and Manual Appeals

HFMA notes that 85% of denials are avoidable, implying that the substantial labor spent working them is largely preventable overhead.[9] Denial-management vendors emphasize that without automation, organizations must invest heavily in human resources for appeals; for a mid‑size hospital, it is common for dozens of FTEs to be dedicated to denial and appeals work, representing several million dollars per year in salary and benefits tied to avoidable rework.[5][6]

Rework and Lost Revenue from Coding and Documentation Errors

FinThrive identifies coding errors and documentation gaps as common causes of denials that directly affect reimbursement.[1] RevCycle, citing Experian’s 2024 State of Claims report, notes that 76% of denials are due to missing, incomplete, or inaccurate data, which includes documentation and coding errors.[2] This translates into recurring rework costs and lost revenue opportunities across virtually all hospital departments.

Extended Days in A/R from Denial-Driven Payment Delays

KMS Technology reports that when a claim is rejected, reimbursement is typically delayed by 21–45 days.[4] For hospitals with millions of dollars tied up in denied claims, these delays translate into substantial working-capital requirements and interest or opportunity costs, as well as higher risk of eventual write-off if denials are not resolved quickly.[4][6]

Productivity Loss from Manual Denial Work and Bottlenecks

Waystar notes that best practice is to resolve denials as soon as possible and to ensure denials are touched as few times as possible, implying that repeated handling of the same denials wastes staff capacity and delays revenue.[6] KMS Technology warns that without clear priorities and automated workflows, denial backlogs grow, leading to delayed payments and underutilization of staff for higher-value tasks.[4]

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