The Real Cost of Contesting a Claim: When $57 Chases $100

Hospitals, health systems and medical practices cut both initial and final denial rates in the first half of 2026, yet the gains did not translate into better cash performance, according to a Kodiak Solutions analysis released Sept. 15. Insurers recouped more money after paying claims, and providers won back less on appeal, the company found in data from more than 2,300 hospitals and 375,000 physicians on its platform.

The findings land on top of an older cost problem. Hospitals spent an average of $57.23 per claim to contest denials in 2023, up from $43.84 a year earlier, according to Premier. On a $100 claim, that average would consume more than half the claim's value before any money comes back. As more of the dispute between payers and providers moves to the period after payment, the economics of contesting a claim are shifting, particularly for outpatient and multi-site groups with small revenue cycle teams.

Kodiak data show denials falling while takebacks climb

The overall initial denial rate fell to 10.63% in the first half of 2026 from 12.00% a year earlier, and final denial write-offs fell to 3.07% of net revenue from 3.31%, TechTarget reported from the Kodiak data. Near-term cash moved the other way. Sixty-day cash performance declined to 96.74% from 100.28%, according to the report.

Takebacks, money an insurer has already paid on a claim and later recoups, rose to 1.57% of accounts receivable from 1.38%, a 13.8% increase, according to Kodiak. Recoveries after appeal fell from 2.48% to 2.21% of accounts receivable, a decline of about 11%, Kodiak's data show. The rise in takebacks held across every payer and patient setting Kodiak analyzed.

"Revenue cycle leaders must ask themselves three questions: How much did we collect? How hard did we have to work to collect those funds? And, crucially, how much of what we collected did we keep?" Matt Szaflarski, vice president of revenue cycle intelligence at Kodiak, said in the release.

Medicare Advantage and commercial plans widen the gap

Medicare Advantage plans showed higher initial and final denial rates than traditional Medicare, and more than double the percentage of takebacks, even though both operate under the same coverage rules, Kodiak found. For inpatient claims, the Medicare Advantage initial denial rate was 9.15% in the first half of 2026, compared with 4.21% for traditional Medicare, according to TechTarget. From January through June, final denial rates were 3.76% for Medicare Advantage and 2.22% for traditional Medicare. Prior authorization and precertification issues accounted for nearly 2.5% of Medicare Advantage inpatient initial denials, and requests for information accounted for about 2.5%.

Commercial plans followed a similar pattern. The commercial initial denial rate fell between the two periods, but the commercial final denial rate rose 9.1% to 2.89% of accounts receivable, and commercial takebacks rose 12% to 2.25%, according to Healthcare Finance News. Many commercial plans are run by the same companies that operate Medicare Advantage products, Kodiak noted.

The $57 question behind contesting a claim

Premier's estimate comes from a national survey of hospitals, health systems and post-acute providers. Fierce Healthcare reported that the survey covered 280 Premier member hospitals. Premier put total 2023 claims adjudication costs at more than $25.7 billion, up 23% from $19.7 billion the prior year, and said added labor accounted for 90% of claims processing expenses. It reached the total by applying the roughly 15% average denial rate from its survey to the about 3 billion claims insurers process each year.

Much of that spending went toward claims that were eventually paid. About 70% of denials were ultimately overturned and paid, according to Premier, which estimated that nearly $18 billion "was potentially wasted arguing over claims that should have been paid at the time of submission." Those figures reflect the provider side only and do not include the billions payers spend, Premier noted.

The Premier data predate the takeback trend in Kodiak's numbers, and Premier did not separately estimate the cost of contesting a recoupment. A takeback often reopens a claim that already posted as paid, which means the appeal starts after the revenue has been booked.

Practices name denials their biggest revenue leak

Physician practices describe the same pressure. In a Jan. 6 MGMA Stat poll, 48% of medical group leaders named denials and appeals their practice's largest source of revenue leakage, compared with 23% who cited front-end issues. In a July 28 poll with 203 responses, 32% said days in accounts receivable were higher than a year earlier, 43% said they were about the same and 22% reported a decrease, according to MGMA.

Leaders whose days in A/R rose cited slower payment, initial denials, downcoding, medical record requests, prepayment audits and lengthy appeals or reprocessing timelines, MGMA reported. MGMA benchmarking puts first-submission denial rates for practices at 7% to 8% over the past four years. For ASC administrators and medical group CFOs, each recoupment or downcoded claim draws on the same limited staff hours as new denials.

New prior authorization rules reshape the front end

Federal rules are also changing the conditions under which claims are authorized. Under CMS-0057-F, operational provisions took effect Jan. 1, 2026, requiring Medicare Advantage organizations, Medicaid and CHIP fee-for-service programs and Medicaid and CHIP managed care plans to send prior authorization decisions within 72 hours for expedited requests and seven calendar days for standard requests, according to CMS. Qualified health plan issuers on the federally facilitated exchanges are excluded from those timeframes. Payers covered by the rule must also give a specific reason when they deny a prior authorization, and prior authorization API requirements begin Jan. 1, 2027.

Traditional Medicare is testing its own version. CMS's WISeR model began Jan. 1, 2026, in Arizona, New Jersey, Ohio, Oklahoma, Texas and Washington and runs through 2031, according to CMS. Technology companies review medical necessity for selected services, including skin and tissue substitutes, electrical nerve stimulator implants and knee arthroscopy for knee osteoarthritis. Providers can submit a prior authorization request or have the claim go through medical review before payment.

Vendors and EHR developers push prevention upstream

Black Book Research's 2026 hospital RCM vendor rankings, released June 8 and based on surveys of more than 1,300 validated provider-side participants, profiled 420 vendors across 49 categories. "The 2026 rankings reveal which vendors are performing against current-year financial issues: payer friction, denial prevention, prior authorization, front-end quality, AI auditability, cash forecasting, contract yield, patient affordability and CFO-level revenue predictability," said Douglas Brown, managing partner of Black Book Research. Among qualified respondents, 74% prioritized denial prevention over post-denial recovery, according to Black Book.

Oracle Health announced AI capabilities for prior authorization, clinical document quality integrity, charge capture and integrity, medical coding for professional fees and appeal management at its Health and Life Sciences Summit in Orlando on Sept. 23, according to the company. The capabilities are not yet available. Oracle said they are planned for general availability in the coming months. "AI gives us an opportunity to prevent revenue cycle problems before they lead to denials and delayed payments," said Seema Verma, executive vice president and general manager of Oracle Health and Life Sciences. Analyst firm Futurum Group noted planned integration with Oracle Fusion Cloud Applications for financial reconciliation and analytics.

Most of these tools target the front end of the claim, from scheduling and authorization through coding. Kodiak's data suggest a growing share of the dispute now happens after payment.

The next marker arrives Jan. 1, 2027, when prior authorization APIs under CMS-0057-F come due. Like Oracle's new tools, those requirements are aimed mainly at the front end. If takebacks keep rising while initial denial rates fall, the denial rate will become a weaker gauge of payer behavior, and the figure that matters most to CFOs will be the one Szaflarski pointed to: how much of what was collected stays collected.