In my effort to understand and analyze claim denials in the hospital industry, one trend has become increasingly clear—hospitals rely heavily on consultants to overturn denials rather than preventing them. While many of these consultants are highly effective, one individual I spoke with boasted a 91% overturn rate. That sounds impressive, but it raises an important question:

If they’re so successful at overturning denials, why do hospitals continue to spend billions on this problem every year?

According to the American Hospital Association, hospitals and health systems in the United States collectively spend an estimated $19.7 billion annually to overturn claim denials. That’s not a one-time expense—it’s an annual cost, proving that these problems aren’t being eliminated, only corrected after the fact.

The Root Cause: A Broken Process?

Hospitals continue to face the same denial issues year after year, yet instead of fixing the root cause, they remain locked in a reactionary cycle, funneling money into external consultants to recoup lost revenue.

This raises several critical questions:

• Are the same people making the same mistakes?

• Is the denial process fundamentally broken?

• Do departmental silos contribute to these recurring problems?

• Or is it a combination of all these factors?

One thing is certain: denial-related inefficiencies have created an entire industry of consultants and third-party services thriving on hospitals’ ongoing struggles. Hospitals are paying billions to fix the same issues repeatedly, rather than investing in internal, sustainable solutions.

Why Aren’t Hospitals Looking Internally for Solutions?

Maybe they have—or maybe they don’t know how. The people doing the work are the greatest untapped resource in denial prevention. They see the gaps firsthand and often develop their own workarounds to compensate for process inefficiencies.

Yet, if one department isn’t providing the necessary information to another, the silo mentality prevents true collaboration, leading to avoidable denials.

The Case for Incentivizing Hospital Staff Instead of Consultants

Some may argue, “Why should we incentivize staff to do their jobs?” But let’s flip that question:

Why are hospitals willing to pay consultants millions but not invest in their own employees to solve the problem?

Ironically, I attempted to research how much hospitals and health systems annually spend on employee recognition and incentives related to denial prevention—and despite using AI-powered searches, I found nothing. That suggests little to no structured investment in recognizing and rewarding hospital employees for denial prevention efforts.

It’s time to rethink the approach.

A Smarter Way Forward: Internal Incentives & Cross-Functional Collaboration