The High Cost of Denied Claims: Stop Leaving Money on the Table

Running a hospital, clinic, or medical practice is more than caring for patients—it’s also about keeping the business side healthy. One of the biggest challenges practices face today is denied claims. These denials quietly eat into your revenue, disrupt cash flow, and often create more work for your staff.

In fact, industry studies show that hospitals lose billions every year because of denied or unworked claims. What makes this worse is that many of these claims could have been prevented or recovered. Every denial left unresolved is money left on the table—money that could support staff, fund new technology, or expand patient care.

This blog post will walk you through why denied claims are so costly, the common reasons they happen, and most importantly, what you can do to reduce and recover them.

Why Denied Claims Hurt So Much

Denied claims are more than a nuisance. They come with hidden costs that most administrators underestimate. Let’s break it down:

1. Lost Revenue
   Every denied claim represents payment your practice earned but didn’t receive. Even a denial rate of 5–10% adds up to thousands—or millions—for larger facilities.
2. Rework Costs
   Denied claims aren’t just lost money; they also cost money to fix. On average, it takes staff hours, multiple phone calls, and back-and-forth with payers to resubmit or appeal. Some estimates say reworking a single claim can cost $25–$30 in staff time.
3. Delayed Cash Flow
   Payment delays disrupt financial stability. Practices often wait months for reimbursement while expenses—payroll, supplies, overhead—don’t stop.
4. Burnout for Staff
   Your billing team spends time chasing down denials instead of focusing on clean claims and strategic improvements. That creates frustration and lowers productivity.

In short: denied claims eat away at both the top line (lost revenue) and the bottom line (higher costs).

The Most Common Reasons for Denied Claims

Most claim denials aren’t mysterious—they stem from a handful of preventable issues. Knowing these reasons is the first step to fixing them.

1. Incomplete or Incorrect Patient Information
   A missing date of birth, wrong insurance ID, or outdated address can cause an instant rejection.
2. Eligibility Issues
   Sometimes services aren’t covered under a patient’s current plan, or eligibility wasn’t verified before the appointment.
3. Coding Errors
   Using outdated codes, mismatched CPT/ICD-10 combinations, or simple typos can lead to denials.
4. Lack of Authorization
   Many insurers require prior authorization for certain procedures. Skipping this step is a common reason for denials.
5. Timely Filing
   Each payer has strict filing deadlines. For example, the Centers for Medicare & Medicaid Services (CMS) outlines specific claim submission deadlines—and missing them means automatic denial.
6. Medical Necessity
   If documentation doesn’t clearly show why a service was needed, payers often deny claims.

What’s important here is that the majority of denials are avoidable with the right systems and checks in place.

The Financial Impact in Numbers

To put this into perspective:

• The average hospital faces claim denial rates between 6% and 13%.
• Roughly 65% of denied claims are never reworked—meaning most organizations simply give up on them.
• Reworking costs add up quickly, with every dollar spent chasing a claim reducing your overall reimbursement.

For a mid-sized practice submitting thousands of claims a year, even a small denial rate can mean hundreds of thousands of dollars in lost revenue annually.

Imagine what your practice could do with that money: new diagnostic tools, expanded patient programs, or simply reducing financial stress.

Why Denials Get Ignored

You might wonder: if denied claims are so costly, why don’t practices aggressively work every one? The reality is:

• Limited staff time: Billing teams are stretched thin, balancing daily submissions, patient inquiries, and compliance requirements.
• Complex processes: Each payer has its own rules, portals, and appeal systems, making follow-up time-consuming.
• Low-value claims: Staff often focus on larger-dollar claims, letting smaller ones slip away. Over time, those “small” denials add up.

It’s a system that feels overwhelming, but it doesn’t have to be.

Turning the Tide: Strategies to Reduce Denials

The good news is that denied claims aren’t inevitable. With the right approach, you can prevent many denials and recover more of what you’re owed.

1. Get It Right the First Time

The best denial management strategy is prevention.

• Verify insurance eligibility before every visit.
• Double-check patient demographics at check-in.
• Use claim-scrubbing software to catch coding errors before submission.

2. Standardize Workflows

Create step-by-step processes for your billing team. Clear workflows reduce errors and help staff handle claims consistently, no matter who’s on duty.

3. Track and Analyze Denials

Don’t just fix denials—study them.

• Which payers deny most often?
• Which reasons repeat?
• Which departments generate errors?

This data helps you tackle the root cause instead of fighting the same battles month after month.

4. Prioritize High-Dollar Claims

Not all denials are equal. Focus first on claims that have the biggest financial impact, while also working to prevent smaller ones from happening.

5. Appeal Strategically

Many practices avoid appeals because they seem time-consuming. But well-prepared appeals can recover significant revenue. Keep documentation organized and create templates to streamline the process.

6. Train Your Team Continuously

Payer rules, coding updates, and compliance requirements change often. Regular training keeps your staff sharp and reduces avoidable mistakes.

7. Consider Outside Help

If denials overwhelm your team, consider working with denial management specialists or outsourcing part of the process. For many practices, this ends up being more cost-effective than hiring additional staff.

Building a Culture That Doesn’t Tolerate Denials

Beyond processes and technology, mindset matters. Organizations that treat denials as “part of the job” lose more money over time. Those that build a culture of accountability and prevention see better results.

Encourage staff to view denied claims as learning opportunities. Celebrate improvements, share success stories, and make denial prevention a shared responsibility—not just the billing team’s problem.

The Payoff: Stronger Finances, Better Care

When denied claims are reduced and recovered, your practice benefits in multiple ways:

• More predictable revenue
• Stronger cash flow
• Less staff burnout
• Greater ability to reinvest in patient care

Ultimately, reducing denials isn’t just about money—it’s about ensuring the financial stability needed to keep delivering excellent healthcare.

Final Thoughts

Denied claims may feel like a routine headache, but they represent a serious threat to your bottom line. The high cost isn’t just the lost payment—it’s the hours of staff time, the frustration, and the long-term impact on your practice’s growth.

The solution isn’t complicated: strengthen front-end processes, monitor denials closely, train your team, and don’t be afraid to appeal. Each small step adds up to significant savings. Your practice deserves to keep the revenue it earns. Don’t let denied claims take that away. Stop leaving money on the table—and start turning denials into dollars.