U.S. hospitals lost an estimated $132.2 billion in net revenue to bad debt and final insurance denials in 2025, according to a Nov. 4 analysis from Kodiak Solutions.
The analysis found that 2,400 hospitals and 375,000 physicians using the Kodiak platform lost $52.1 billion to bad debt and final insurance denials in 2025, up 17.6% from 2024. Extrapolating those findings to approximately 6,100 U.S. hospitals, Kodiak estimated nationwide revenue leakage of $132.2 billion.
Revenue leakage has hovered around 10% of net revenue since 2023, according to Kodiak’s report, “The revenue cycle performance plateau.” The rate reached 10.5% in 2025, up from 9.9% in 2024, before declining to 9.8% through October 2026.
Bad debt accounted for 7.4% of net revenue in 2025, while final insurance denials represented another 3.1%. Both measures have remained relatively stagnant over the past several years, despite continued investments in AI and other revenue cycle technologies.
The plateau comes as hospitals increase their technology spending. Average hospital health IT operating expenses rose more than 15%, from $9.1 million in 2022 to $10.5 million in 2024, according to Definitive Healthcare data cited in the report. Meanwhile, healthcare providers’ collective technology budgets were projected to increase 7.6% to $69 billion in 2026, according to Forrester.
Revenue cycle management remains a leading investment priority, with 43% of acute care providers identifying it as one of their top three health IT priorities, according to Bain & Company and KLAS Research data cited in the report.
“Revenue cycle leaders must view information technology, including AI, as no more than table stakes for improving financial performance,” Matt Szaflarski, vice president of revenue cycle intelligence at Kodiak Solutions, said in a news release. “Some investment is necessary to sit at the table and play the game, but to succeed, revenue cycle leaders need to focus on the capabilities needed to optimize financial performance.”
The report noted that improvements in claims processing and denial management do not necessarily translate into lower revenue losses. Hospitals may resolve denials more efficiently while still facing reimbursement challenges that increase administrative costs and delay cash collections.
Mr. Szaflarski said hospitals need to look beyond technology investments and focus on data-driven insights to identify the causes of revenue leakage, understand why financial projections are missed and address barriers to converting net revenue into cash collections.
Click here to access the report.
