The healthcare payment system is hemorrhaging money, and the traditional “detect and recover” approach in payment integrity is not just failing—it’s actively making the crisis worse. While payers and providers continue to operate under outdated postpayment recovery models in their payment integrity programs, the financial and operational costs are spiraling toward an unsustainable breaking point.

The Staggering Price of the Status Quo

The numbers tell a sobering story of inefficiencies and unnecessary healthcare costs. Healthcare providers across the healthcare industry are spending nearly $26 billion annually just fighting claim denials—a 23% increase from the previous year.¹ For hospitals alone, this translates to $20 billion annually appealing denials after an initial claim review, with more than half of this amount completely wasted on claims submissions that should have been paid initially.²

But the financial burden extends far beyond appeal costs, spanning the full payment integrity process. Hospitals allocate substantial resources each year to billing and insurance-related activities for each physician, with a significant share of these expenses stemming from the labor-intensive process of reworking denied claims. For individual providers, each denied claim costs between $25 to $181 to rework and resubmit, depending on complexity and setting.³

The Payer Perspective: Hidden Healthcare Costs Mounting

While providers bear the visible burden of denials, health plan payers face their own escalating cost crisis. With denial rates averaging 12.5% across the industry—and reaching as high as 49% in some instances⁴—the administrative machinery required to process, review, and manage these denials, including prepayment and postpayment review, is enormous.

Consider the math for a typical large payer processing 150 million claims annually:

• 18.75 million claims are initially denied
• 7.5 million claims are resubmitted (40% resubmission rate)⁵
• Clinical review costs can range from $20-50 per case for complex audits⁶

Recovering overpayments further adds to this strain. Even at conservative estimates, this translates to hundreds of millions in administrative costs—money that could be redirected toward patient care or operational improvements.

The Provider Abrasion Crisis

Perhaps most damaging is the mounting provider abrasion caused by these inefficient processes. Industry-wide, healthcare payers are spending $8-12 billion annually on provider abrasion and experience costs.⁷ This isn’t just about money—it’s about relationships fundamental to healthcare delivery.

Recent data shows that commercial Medicare Advantage plan denials rose 55.7% in 2023, yet 75% of these denials were subsequently overturned.⁸ This means three-quarters of the administrative burden, provider frustration, and system costs were entirely unnecessary.

The human cost is equally stark: 100% of surveyed providers report that staffing shortages are significantly impacting their ability to submit accurate claims.⁹ The current system isn’t just expensive—it’s unsustainable for the healthcare workforce.

The Ripple Effect of Inaction

Continuing with postpayment recovery models creates a vicious cycle:

For Payers:

• Escalating administrative costs from denial claims processing and appeals
• Strained provider relationships affecting network stability
• Increasing regulatory scrutiny as denial rates climb
• Resource-intensive manual review processes that don’t scale

For Providers:

• Lack of visibility into claims data
• Mounting administrative burden diverting resources from patient care
• Cash flow disruptions from delayed payments
• Staff burnout from repetitive, non-value-added rework
• Deteriorating relationships with essential payer partners

For the Healthcare System:

• $400 billion lost annually to fraud and improper payments¹⁰ (10% of a total $4.3T in national healthcare expenditures)
• Provider consolidation driven by administrative burden
• Reduced access to care as providers exit networks
• Systemic inefficiencies that increase costs for everyone

The Math of Moving Left

The current approach of catching errors in payment accuracy after they occur is fundamentally flawed. When 40% of denied claims are resubmitted⁵ and 75% of denials are overturned⁸, the system is clearly broken. Instead of healthcare cost containment through automation, we’re spending billions to create problems that shouldn’t exist in the first place.

Consider this: if we could prevent just half of unnecessary denials through pre-claim education and transparent claims data analytics, a large payer could see tens of millions annually in administrative cost savings alone. More importantly, providers could redirect thousands of hours from claim rework to patient care.

A New Paradigm: Prevention Over Recovery

The solution isn’t to improve postpayment recovery—it’s to eliminate the need for it entirely. By moving payment integrity interventions to before claims are created, we can:

• Prevent improper payments rather than catch them
• Educate providers proactively on payment policies instead of reactively
• Transform provider relations from adversarial to collaborative
• Reduce costs for both payers and providers
• Improve accuracy through targeted, AI-powered workflows and guidance

The Cost of Waiting

Every day the industry delays moving toward pre-claim solutions, the costs compound. Provider frustration grows. Administrative expenses mount. Most critically, the fundamental trust between payers and providers—essential for effective healthcare delivery—continues to erode.

The healthcare system can no longer afford the luxury of postpayment recovery. The data is clear: the current approach is unsustainable financially, operationally, and relationally.

The question isn’t whether the industry will move toward pre-claim payment integrity—it’s whether your organization will lead the transformation or be forced to follow.

The cost of doing nothing has never been higher. The time for pre-claim payment integrity is now.

Ready to move beyond postpayment recovery? Learn how Point Zero Payment Integrity powered by artificial intelligence advanced technology is transforming healthcare organizations with provider education before claims are created at pointzeropaymentintegrity.codoxo.com.To contact us directly, visit: https://pointzeropaymentintegrity.codoxo.com/#!chapter2.

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1. Claims adjudication cost healthcare providers more than $25.7 billion in 2023 – a 23% increase from the previous year. (Source: Premier)
2. Hospitals are spending just under $20 billion annually appealing denials, with more than half of this amount wasted on claims that should have been paid at the time of submission. (Source: AHA)
3. The cost per denied claim (to providers) ranges from $25 to $118 (Source: Pana Healthcare Solutions) / The cost to rework or appeal denials averages $25 per claim for practices and a whopping $181 per claim for hospitals (Source: AHIMA Journal, 2024)
4. 10-15% of claims are denied (avg. 12.5%) (Source: Experian Health 2024 State of Claims report via Healthcare Dive) / While denial rates remained consistent at nearly 15%, they ranged as high as 49% in certain instances (Source: Premier 2025)
5. 40% of denied healthcare claims are resubmitted (Source: AHIMA, Claims Denials: A Step-by-Step Approach to Resolution, April 2022)
6. Most published payer-side estimates for clinical review fall in the $20–$50 per claim range(Source: One Percent Steps)
7. The average annual cost to a healthcare payer for provider abrasion and provider experience costs = $8B–$12B (industry-wide) (Source: CAQH & AMA; reported in HFMA)
8. Denials issued by commercial MA plans rose sharply by 55.7% in 2023 (Source: Strata Decision) / 75% of these denials were subsequently overturned (Source: study by the Department of Health and Human Services’ (HHS) Office of Inspector General (OIG))
9. In a recent survey of 200 providers, 100% of respondents indicated that staffing shortages are having a significant, negative impact on their ability to submit accurate claims for payment. (Source: MedCity News covering Experian Health report)
10. Sophisticated fraud schemes cost the industry up to  $430 billion annually. Financial losses due to health care fraud are estimated as high as 10% of national health expenditures. (Source: National Health Care Anti-Fraud Association) U.S. national health expenditures were $4.3 trillion in 2021. (Source: CMS.gov)