Group Purchasing Organization (GPO) Premier Inc,.conducted a voluntary, national survey of member hospitals and health systems from August 8, 2024 to February 4, 2025. Respondents represented 280 hospitals across 23 states, accounting for over 48,000 acute care beds. Respondents were asked to consider all claims from January 1, 2023 to December 31, 2023, the last full year of completed payment data. Findings are presented as averages, weighted by acute bed capacity of the respondent. Respondents ranged in size from single-facility hospitals to large, multi-state health systems.
An analysis of the survey data by Premier shows that claims adjudication costs healthcare providers more than $25.7 billion, according to a new national survey of hospitals, health systems and post-acute care providers conducted by Premier, Inc. This figure represents a 23 percent increase over the $19.7 billion in costs reported in the previous year.
Claims move into the adjudication process after payers issue an initial denial on the submission. While denial rates remained consistent at nearly 15 percent, according to survey data, they ranged as high as 49 percent in certain instances.
In addition, the administrative costs associated with fighting them increased dramatically – from $43.84 per claim in 2022 to $57.23 in 2023. Additional costs primarily resulted from added labor, responsible for 90 percent of claims processing expenses incurred by providers.
Health insurers process about three billion medical claims annually, and approximately 70 percent of denials are overturned and paid. This means that nearly $18 billion was potentially wasted arguing over claims that should have been paid at the time of submission (see Methodology section for more detail).
This continued burden has a tremendous impact on providers’ financial viability. Over the past year, the average number of days of cash on hand for hospitals and health systems overall dropped to 196.8 days, the lowest level in a decade. When providers lack cash on hand, they are unable to re-invest in patient care and may also suffer from downgrades in bond ratings, making cash more expensive and harder to obtain.
In addition, the cost of adjudicating claims reported by Premier’s research does not include those incurred by payers, which average $40 to $50 per submission. Similar to providers, these costs contributed to a 7 percent (or $4 billion) increase in net administrative costs in 2023 across the insurance sector. The added administrative costs match premium increases in 2023, which also grew by 7 percent. Cutting these administrative costs from the healthcare landscape could potentially reduce premium increases faced by consumers.
Payers required prior authorization on a higher percentage of claims in 2023 (more than 20 percent vs. to 17 percent in 2022). However, in certain areas, the increase was more pronounced. In Medicare Advantage (MA), for instance, 30.5 percent of claims required prior authorization in 2023 compared to 25 percent in 2022.
Despite prior authorization becoming more pervasive, the number of denials for these claims after receiving prior authorization increased across the board, often doubling or tripling the rate reported in 2022. An average of 10.4 percent of claims denied included those that were pre-approved via the prior authorization process – up from 3.2 percent in 2022.
Healthcare lacks a unified system for claims submissions, making the process of filing for reimbursement notoriously complicated. Each claim requires multiple data elements to comply, which frequently change. At the same time, each payer has its own unique rules regarding covered services, coding requirements and necessary documentation, making it difficult for providers to navigate. These inconsistencies create room for error, requiring providers to allocate more time to compliance tasks – particularly in a world where patient volumes (and the number of claims) are on the rise.
Claims submission also remains a largely manual process. This further exacerbates the problem, particularly as providers grapple with widespread staffing shortages. In fact, in a recent survey of 200 providers, every respondent indicated that staffing shortages are having a significant, negative impact on their ability to submit accurate claims for payment. Furthermore, 83 percent said staff shortages impede their ability to follow up on late payments or offer assistance to patients struggling to get services covered by insurance.
The lengthy process to adjudicate claims adds insult to injury. Even a small error can flag a claim for denial. Premier survey respondents reported that once denied, they went through an average of three rounds of reviews with insurers, with each review cycle taking between 45 and 60 days.
According to leading insurers, minor clerical and/or data errors are the top reason to deny claims approved via prior authorization. Small mistakes include misspelled names, missing information, documentation and coding mistakes, and inverted numbers (i.e., social security numbers, dates of birth and other vital information). These denials are particularly frustrating, since they should be largely avoidable.
