Many health systems are treating climbing denial rates as a documentation problem. They’re not. They’re the output of a deliberate, structural shift in how payers operate—one that has outpaced what any human workflow can sustainably address.
Initial claim denial rates hit 11.81% in 2024, up 2.4% from the prior year.1 More telling is the trajectory: in 2022, 30% of providers reported that at least 10% of their claims were denied. By 2024, that figure had risen to 38%. In 2025, 41% of providers were in that same position.3
The financial consequences are arriving alongside the volume—providers are collecting $3 less per $100 billed compared to last year, AR days are up more than 5%, and collection rates from insured patients have dropped from 37.6% to 34.5%.1
Less Friction Up Front, More Complexity on the Back End
Part of what makes this crisis difficult to see clearly is that payers have offered a visible concession: prior authorization denials dropped 7.7% in 2024.1 That registers as progress. What it obscures is where the scrutiny went instead. Medical necessity denials rose 5% over the same period, and requests for additional information jumped 5.4%.1
Jim Bohnsack, Chief Strategy and Client Officer at Aspirion, has tracked this pattern closely. “Payers have shifted from front-end authorization controls to back-end payment integrity reviews,” he says. “Deploying large language models to ingest entire medical records after care has already been delivered, apply proprietary rule sets, and issue retroactive denials or takebacks. The provider, who never had access to those criteria before treatment began, now bears the entire evidentiary burden of rebuttal.”
Why Your Business Office Is Overpowered
Administrative denials—wrong modifier, missing information, coding mismatches—are manageable. Your business office can handle them. Clinical denials are a different category entirely. When a payer disputes medical necessity or challenges a DRG assignment, your team must dig through hundreds of pages of medical records, cross-reference clinical findings against care guidelines and contract terms, and build an airtight appeal. It’s a resource-heavy process that most hospitals weren’t built to absorb at scale.
That’s not one job description. It’s four. And it takes hours per case. When denials arrive in the hundreds or thousands, the math collapses as you simply can’t staff your way out of it. In Bohnsack’s words, “This is fundamentally not a human-addressable problem anymore at this scale.”
DRG downgrades—particularly sepsis-related claims—and inpatient-versus-observation disputes represent some of the highest-dollar, highest-frequency targets. Every payer brings different rules, different policies, and different contract terms to each of those disputes.
What AI Changes About the Economics
AI purpose-built for clinical denials changes the math. It can pull clinical evidence from documents spanning thousands of pages, match findings against care guidelines, coding guidelines, and payer policies, and generate structured appeal drafts for clinical and legal staff to refine. The deliberate design standard: outputs had to be as good or better than what an experienced human reviewer would produce.
The operational case is compelling. Bohnsack reports that Aspirion’s proprietary AI platform has delivered first appeals 2.2x faster, a 20%-plus lift in overturn rates, and cash in the door 20 days sooner—all without adding headcount.2
The Adoption Gap
Despite results like these, only 14% of providers are currently using AI for denials management. The hesitation is understandable. RCM leaders have watched RPA implementations break under real-world volume. Trust must be rebuilt through demonstrated AI-driven outcomes.
That said, provider sentiment is shifting. Provider understanding of AI has grown sharply—62% of providers now have a clear understanding of what AI actually is versus general automation, compared to just 28% a year ago, and 67% believe AI can improve the claims process.3 But only 56% believe their current technology is adequate, down from 77% three years prior.3 Providers who have watched technology investments underdeliver aren’t quick to sign up for another one.
For executives evaluating where to move next, the due diligence questions are familiar: Do you have the capital to invest? The capacity to implement? The capability to execute? The commitment to see it through? Those are the right questions. But for health systems absorbing the compounding impact of higher denial rates, longer AR cycles, and a payer ecosystem that has already automated its side of the equation, there is a fifth question that may matter more than all of them: Do you really have a choice?
The math eventually speaks for itself. For health systems absorbing the compounding impact of higher denial rates, longer AR cycles, and a staffing market that offers no easy relief, the question is no longer whether AI belongs in their denials workflow—it’s how quickly the gap between payer capability and provider response can close.
Sources
¹ Kodiak Solutions / Business Wire. “Rate of Initial Denials of Medical Insurance Claims Continued to Rise in 2024.” https://www.businesswire.com/news/home/20250521892947/en/Rate-of-initial-denials-of-medical-insurance-claims-continued-to-rise-in-2024-Kodiak-Solutions-proprietary-data-show
² Aspirion. “AI-Driven Denials Management Performance.” https://www.aspirion.com/ai-driven-denials-management-performance/
³ Experian Health. “State of Claims 2025.” https://www.experian.com/blogs/healthcare/state-of-claims-2025/
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