🇺🇸United States

Escalating administrative labor cost to rework and manage denials

3 verified sources

Definition

Physician organizations incur significant labor cost to identify, correct, and appeal denied claims. Hospitals and health systems spent an estimated $19.7B in 2022 overturning denials; labor represents about 90% of claims processing expense, making each denial a cost‑multiplier that also affects physician billing departments.

Key Findings

  • Financial Impact: $19.7B per year across U.S. providers for denial overturn work; for a practice with thousands of monthly claims and 10–15% denial rates, rework labor often consumes multiple FTEs costing low to mid six figures annually.
  • Frequency: Daily
  • Root Cause: Rising denial rates (up to 11–16%+ of claims), manual workflows, and reliance on phone/fax/payer portals require highly trained staff to chase information, correct coding, and manage appeals. Understaffing (43% of providers report understaffing in denials/RCM) forces overtime or the hiring of expensive specialized billing resources.

Why This Matters

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

Affected Stakeholders

Revenue cycle directors, Billing and coding staff, Denial management teams, Practice administrators, CFOs/finance leaders

Deep Analysis (Premium)

Financial Impact

$100K-$250K yearly in denial management labor • $100k-$300k annually • $100k-$500k annually in labor

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Current Workarounds

Ad-hoc Excel by Medical Assistants • Billing Manager coordinates appeals via spreadsheet workflows • Centralized Excel dashboard for denial trends and appeals

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Methodology & Sources

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

Evidence Sources:

Related Business Risks

Lost physician revenue from denied claims never reworked or appealed

Industry-wide, U.S. providers spend $19.7B annually fighting denials while leaving a large share of collectible dollars unpursued; for a mid-size physician group with 10–15% denial rates, unreworked denials commonly translate into hundreds of thousands of dollars per year in net lost revenue.

Underpayment and payer takebacks eroding expected physician revenue

System‑wide under-collection (3 percentage‑point drop from 97% to 94% of expected revenue within six months) scales to millions per year for larger organizations and substantial six‑figure annual losses for mid‑size physician groups with high payer mix exposure.

Hidden cost of repeated data corrections and registration errors

Per‑denial processing costs in medical practices average around $40–$50, and with tens of thousands of denials annually even for moderate‑size groups, this easily reaches the mid‑ to high‑six‑figure range in avoidable labor costs per year.

Cost of poor documentation and coding quality driving preventable denials

With denial rates often 10–17% of claims and nearly one‑fifth due to preventable administrative quality issues, mid‑size practices can see hundreds of thousands in annual cash impact from delayed payments, extra labor, and irreversible losses when documentation cannot support full resubmission.

Delayed cash flow from high initial denial rates and multi-round appeals

Hospitals reported collecting only 94% of expected revenue within six months as denials rose, a three‑point decline that signals material working‑capital strain; in physician groups, similar denial dynamics stretch days in A/R and require increased credit lines or cash reserves, often costing tens of thousands annually in financing and liquidity management.

Physician and staff capacity drained by denial follow-up instead of patient care

Lost provider capacity from even one hour per week per physician diverted to denial work equates to thousands in missed revenue per provider per month; scaled across a multi‑physician practice this often totals low to mid six figures annually in unrealized billable visits or procedures.

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