Delivering care is only half the job. Getting paid for it has become a costly operation of its own. In 2025, U.S. hospitals spent $43 billion trying to collect payment for care they had already provided, according to the American Hospital Association’s March 2026 Costs of Caring report.
That figure captures one of the most frustrating parts of healthcare administrative costs: money spent not on patients, but on denials, appeals, documentation requests, and follow-up calls.
This guide breaks down where that money goes, why the cost of getting paid keeps rising, and how hospitals and physician practices can spend less to collect what they are owed.
Breaking Down the $43 Billion
The AHA’s findings show how much effort now goes into collecting payment. Of the $43 billion hospitals spent in 2025 to collect what they were owed, nearly $18 billion went to overturning claim denials alone.
That work requires dedicated teams. In 2024, the average hospital employed about 64 administrative and billing staff for these functions, roughly 6.5% of its total workforce.
The timing makes those costs harder to absorb. The AHA reported that hospital expenses rose 7.5% in 2025, more than twice the 3.3% growth in hospital prices.
The pressure has continued into 2026. Strata Decision Technology data show total hospital expenses rose 7.1% year over year in the first quarter of 2026.
Why Getting Paid Costs So Much
The cost of collecting payment rarely comes from a single problem. It builds from several sources at once.
Denials That Must Be Fought
Every denied claim that is worth pursuing requires investigation, correction, and often a formal appeal. Many denials are eventually overturned, but each one still consumes staff time before the money arrives.
Prior Authorization and Documentation Requests
The AHA pointed to excessive prior authorization, claim denials and delays, repeated documentation requests, and changing billing and coverage rules as key contributors. Each adds steps between delivering care and being paid for it.
Payments Reversed After the Fact
Even paid claims are not always final. Kodiak Solutions data show payer takebacks after payment rose to 1.57% of net revenue in the first half of 2026. Defending those payments adds another layer of administrative work.
Manual Transactions
Much of this work is still done by hand. According to the 2025 CAQH Index, released in February 2026, electronic medical transactions average $3.39 each, compared with $8.03 for manual processing.
The Bigger Picture: Administrative Costs Across Healthcare
The cost of getting paid is part of a much larger administrative burden. CMS data released in January 2026 show U.S. health spending reached $5.3 trillion in 2024, or $15,474 per person and 18.0% of the economy.
Long-term research suggests a substantial share of that is administrative. A Health Affairs research brief reviewing seven published studies estimated administrative spending at 15% to 30% of all U.S. medical spending, and found that at least half of it does not measurably contribute to health outcomes. No newer comprehensive estimate has replaced this range.
The share has also proven stubborn. A national study of Medicare cost reports noted that administrative spending as a proportion of total U.S. health care spending has not declined substantially in 30 years.
Where the Cost of Getting Paid Hides in the Revenue Cycle
Collection costs are spread across every revenue cycle function, and most of them come from doing work twice:
| Revenue Cycle Function | Where the Cost Comes From | What Drives It Up |
|---|---|---|
| Eligibility and registration | Verifying coverage and correcting patient data | Manual portal checks and registration errors |
| Prior authorization | Calls, faxes, and follow-up on pending requests | Payer-specific rules and manual submission |
| Coding and charge capture | Coder queries and corrections | Incomplete documentation and code changes |
| Claims submission | Edits, rejections, and resubmissions | Data errors and inconsistent payer rules |
| Claim status and A/R follow-up | Calls and portal checks on unpaid claims | No automated status tracking |
| Denials and appeals | Investigating, correcting, and appealing | Preventable front-end and data errors |
| Payment posting | Manual posting and reconciliation | Paper remittances and unmatched payments |
The common thread is rework. Every failed first attempt creates a second, and sometimes a third, round of administrative cost.
Physician Practices Feel It Too
The $43 billion figure covers hospitals, but physician practices face the same pressures with fewer resources. A long-standing National Academy of Medicine estimate attributes 13% of physician care spending, and 8.5% of hospital care spending, to billing and insurance-related costs.
For a smaller practice, a few staff members may handle eligibility, authorizations, claims, and appeals at once. Every denial or manual status check pulls those same people away from other work.
Myths vs. Reality About the Cost of Getting Paid
Myth: Collection costs are just the price of doing business.
Reality: Much of the cost comes from preventable rework. Cleaner claims mean fewer denials to fight.
Myth: Cutting billing staff lowers administrative costs.
Reality: Removing staff without fixing the process usually shifts cost into aging A/R, lost revenue, and more write-offs.
Myth: Technology will fix it on its own.
Reality: Automating a broken process makes errors happen faster. Data accuracy and process fixes must come first.
Myth: Only large health systems carry this burden.
Reality: Billing and insurance-related work consumes a meaningful share of physician practice spending as well.
How to Spend Less to Get Paid
Measure the Cost of Collection
Calculate cost to collect by revenue cycle function to see where spending concentrates. Our cost-to-collect benchmarks provide a reference point.
Prevent Denials at the Source
Most denials trace back to data errors and front-end gaps. Fixing the system of record behind repeated denials removes cost from every future claim, as our guide to data accuracy in healthcare billing explains.
Replace Manual Authorization Work
Prior authorization is one of the most labor-intensive steps. Our analysis of the cost of manual prior authorizations shows how quickly that work adds up.
Automate Rule-Based Collection Tasks
Claim status checks, payment posting, and eligibility verification are strong candidates for automation. Our RCM automation guide explains what to automate first.
Rethink the Staffing Model
A blended model pairs in-house oversight with an experienced offshore team for high-volume work. MBW RCM’s offshore medical billing services support this approach with quality and compliance controls in place.
What Will Raise the Cost of Getting Paid in 2027
Several changes ahead will add administrative work for organizations that stay manual:
Medicaid eligibility changes — More frequent checks for expansion adults beginning January 1, 2027, will increase verification and re-enrollment work.
January code changes — The 2027 CPT update, including a major ABA code revision, requires system updates and staff training.
Post-payment reviews — Rising takebacks mean more time defending claims that were already paid.
Conclusion
The $43 billion hospitals spent in 2025 just to get paid shows how much of healthcare administrative costs now go to collecting revenue rather than delivering care. Denials, authorizations, documentation requests, takebacks, and manual transactions all add to the bill.
Hospitals and practices that measure collection costs, prevent denials at the source, automate repetitive work, and modernize staffing can spend less to collect what they have already earned.
MBW RCM helps reduce the cost of getting paid through denial management services, technology and automation services, and revenue cycle analytics that show where cost and rework concentrate.
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Spend Less to Collect What You’ve Earned
Every avoidable denial and manual follow-up adds to your cost of getting paid. MBW RCM can measure your collection costs by revenue cycle function and show where rework is driving them up.
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