Hospitals now spend over $20 billion annually on appealing claim denials, largely due to documentation issues and administrative inefficiencies

Yet most hospitals are still stuck in the outdated playbook of denial management – chasing dollars after payers reject claims.

Now, this isn’t just inefficient. It’s financially reckless. Denial management is dead. Prevention is survival.

Every denied claim is more than lost revenue. It’s wasted clinician time, duplicated administrative effort, delayed payments, and eroded patient trust.

In today’s razor-thin margin environment, denials aren’t just back-office problems – they are boardroom crises.

Top Reasons For Hospital Claim Denials

Hospital claim denials occur when payers reject a claim for payment. They can be either:

• Soft denials: fixable and resubmitted.
• Hard denials: permanent revenue loss.

Top reasons include:

• Missing documentation
• Incorrect DRG assignment
• Eligibility mistakes
• Late submissions

These are not billing errors. They represent systemic workflow failures that ripple across the enterprise – from bedside clinicians to CFOs.

Recommended Read: How Inaccurate Billing Is Breaking Healthcare

Who is Impacted by Hospital Claim Denials?

• CFOs: Margin leakage directly impacts financial forecasts. For a 300-bed hospital, denials can quietly drain millions each year – enough to fund an entire cardiology wing.
• Revenue cycle leaders: Endless appeals, rework, and staff burnout.
• CDI and coding teams: Pressure to fix documentation gaps under impossible timelines.
• Clinicians: Distracted from patient care with repeated queries.
• Patients: Confusing or duplicate bills that damage trust.

Denials are not isolated failures. They are enterprise-wide breakdowns.

When and Where Do Denials Happen?

Denials creep in at every stage, but the mid-revenue cycle is the epicenter.

• Registration errors at admission.
• Documentation gaps during care.
• Coding mistakes at discharge.

Between 86% and 90% of claim denials are preventable if errors like eligibility, documentation, or technical mistakes are caught before submission.

Recommended Read: Gaps in Care – Focus on the Ones That Truly Count

Why Denials Are a Critical Issue

Three converging pressures make denials a strategic threat:

• Payer scrutiny is intensifying. CMS recovered $273M in Medicare overpayments in 2023, while audits and private payer crackdowns intensify
• Staffing shortages persist. Coding and CDI teams are stretched thin, creating error risks.
• Margins are razor-thin. With relief funds gone, denials cut deeper than ever.

For CFOs, every 1% rise in denial rate equals millions lost per hospital per year.

Why Denial Management is Dead and Prevention is the Future

The traditional “manage denials after they occur” model is broken. It’s reactive, expensive, and demoralizing.

Denial management = firefighting. Teams spend weeks appealing claims and chasing revenue already lost.

Denial prevention = revenue certainty. Clean claims are created upstream with strong documentation, validated coding, and automated eligibility checks.

Hospitals stuck in management mode are 5 years behind. Prevention is the new standard.

See how hospitals are using ARC+ to cut denials by half.

How Bulwark’s ARC+ Creates Denial Immunity

Bulwark’s ARC+ is the first denial immunity system for hospitals.

• Runs AI-powered audits across 100% of charts – before submission.
• Flags missing diagnoses, CC/MCCs, and DRG mismatches in real time.
• Validates documentation for compliance and audit readiness.
• Cuts preventable denials by over 50% while reducing manual review time by 80%.

ARC+ doesn’t manage denials. It prevents them. That means cleaner claims, predictable revenue, and freed-up staff time.

FAQs

What is the difference between denial management and denial prevention?

In denial management, teams react by appealing claims after payers reject them. In denial prevention, teams act proactively by using technology and workflow improvements to ensure claims are accurate before submission, stopping denials before they happen.

What are the most common reasons for hospital claim denials?

Coding/documentation errors, eligibility issues, and medical necessity disputes, accounting for 70%+ of preventable denials (HFMA).

How much do denials cost hospitals each year?

More than $20 billion annually, with average hospitals losing 2-5% of net revenue (HealthIT.gov, 2024).

Can AI really reduce claim denials?

Yes. AI-powered audits cut denials by up to 50% and review time by 80% (Bulwark ARC+ data).

What’s the difference between preventable and hard denials?

Preventable = fixable upstream. Hard denials = permanent revenue loss.

How does ARC+ help reduce denial rates?

By catching documentation gaps, coding errors, and DRG issues before billing, ensuring claims are audit-ready.

Conclusion

Denials are no longer back-office nuisances – they are billion-dollar drains threatening hospital solvency. In 2025, repeating old denial management tactics is financial malpractice.

The path forward is clear: move from denial management to denial prevention. With smarter workflows, stronger documentation, and AI-powered audits, hospitals can create denial immunity.

Bulwark’s ARC+ is already redefining how hospitals protect their margins, compliance, and clinician focus.

Book a demo with Bulwark to see how ARC+ can help you with denials.