Hospital financial stability is being increasingly threatened by unpaid and underpaid commercial payer claims, which represent a significant and growing portion of revenue cycle leakage. Recent data and statistics highlight the scale of this problem and its impact on healthcare providers.

Key Statistics and Data

  • Significant Revenue Leakage: Industry analyses consistently show that hospitals lose a substantial percentage of their net revenue to underpayments and denials from commercial payers. Studies have found that this revenue leakage can range from 1% to 11% of annual net revenue, with some estimates for hospitals specifically at 4% to 5% due to various forms of revenue cycle issues, including underpayments and denials. [1, 2, 3]
  • Soaring Denial Rates: The rate of denied claims from commercial payers has been on a sharp upward trend.
    • One analysis of over 1,800 hospitals found that in the first quarter of 2023, 15% of all inpatient and outpatient claims were initially denied by commercial insurers. This rate is significantly higher than for traditional Medicare claims. [4]
    • Another report noted that denials from commercial payers saw a 20.2% increase between early 2022 and mid-2023. [5]
    • Overall, estimates suggest that between 5% and 10% of all healthcare claims are denied annually, costing the industry up to $262 billion. A particularly alarming statistic is that as many as 65% of these denied claims are never resubmitted or appealed, resulting in permanent revenue loss. [6]
  • Costs of Appealing Claims: The process of appealing a denied claim is a major administrative and financial burden for hospitals. The cost to rework or appeal a single claim averages approximately $181 for hospitals. [7] Even when an appeal is successful, the time and resources spent on the process contribute to a hospital’s administrative costs, which have been rising dramatically. A 2024 American Hospital Association (AHA) report found that 95% of hospitals and health systems reported an increase in staff time spent on prior authorization, a major cause of denials. [8]
  • Payment Delays: Beyond outright denials, commercial payers are also increasingly delaying payments. A 2023 analysis by Crowe Revenue Cycle Analytics found that for inpatient claims submitted to commercial insurers, one in three claims weren’t paid for over three months. This payment delay rate was nearly three times higher than for traditional Medicare. [4]
  • Litigation and Legal Action: The prevalence of underpayments has led to large-scale legal action against commercial payers. In late 2024, a judge approved a $2.8 billion settlement plan from Blue Cross Blue Shield to resolve underpayment disputes with Alabama hospitals, highlighting the significant amounts at stake and the potential for legal recourse to address these issues. [9]

Impact on Hospital Finances and Operations

The combined effect of these trends is a major strain on hospitals’ financial health. An AHA report released in late 2024 detailed how rising costs, particularly for labor, drugs, and supplies, combined with inadequate reimbursement from both government and commercial payers, have created “an environment of financial uncertainty.” The report also highlighted that payments for certain services, like outpatient burn and wound care, were on average 43% below costs across all payers. [10] This “cost of caring” deficit is exacerbated by revenue leakage from unpaid and underpaid claims, forcing many hospitals to operate on thin or negative margins. [10]

The administrative burden of managing these claims is also a significant factor. Healthcare billing and insurance-related activities cost an estimated $99,000 per medical provider per year, representing nearly $1 in every $7 collected by a medical facility. [11] This administrative waste, driven in part by commercial payer practices, diverts resources that could otherwise be used for patient care or strategic investments.

References and Citations

[1] MD Clarity. “Healthcare Underpayments: A Guide for Providers.” July 16, 2025.

[2] CapMinds. “Reducing Billing Errors and Revenue Leakage in Mid-Sized Practices.” May 8, 2025.

[3] AKASA. “How To Improve Healthcare Underpayments.” Retrieved August 19, 2025.

[4] AHA News. “Report: Hospitals struggle to collect payments from commercial insurers.” May 22, 2023.

[5] Fierce Healthcare. “Payers’ increasing claims denials, delays ‘wreaking havoc’ on provider revenue cycles.” December 14, 2023.

[6] Thoughtful AI. “RCM Statistics: A Data-Driven Look at Healthcare Finance.” March 12, 2025.

[7] Journal of AHIMA. “Claims Denials: A Step-by-Step Approach to Resolution.” April 25, 2022.

[8] American Hospital Association (AHA). “Survey: Commercial Health Insurance Practices that Delay Care, Increase Costs.” Infographic, November 1, 2022.

[9] Whatley Kallas. “The AHA Issues Report Showing Financial Pressures On Hospitals Due To Increased Costs And Inadequate Reimbursements.” August 12, 2024.

[10] American Hospital Association (AHA). “New AHA Report: Hospitals and Health Systems Continue to Face Rising Costs, Economic Pressures.” May 2, 2024.

[11] Adonis.io. “Why Medical Providers Struggle with Revenue Leakage.” Retrieved August 19, 2025.