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Despite billions poured into AI-powered revenue cycle tools, U.S. hospitals wrote off a staggering $132 billion in bad debt and claim denials last year — an 18% jump from 2024. A new Kodiak Solutions analysis suggests hospitals may be automating flawed processes rather than fixing them, leaving financial performance largely stagnant.
U.S. hospitals collectively wrote off an estimated $132 billion in bad debt and final claim denials in 2025, representing about 10% of net revenue — and that figure climbed nearly 18% year over year, according to a new analysis from revenue cycle analytics firm Kodiak Solutions. This is happening even as hospital technology budgets have swelled to $69 billion, a 7.6% increase, with AI tools at the center of those investments.
The core problem? Hospitals may be using AI to make broken processes faster, not better. Kodiak researchers warn that providers aren't adequately distinguishing between tools that simply keep the revenue cycle running versus those that actually optimize financial performance. Meanwhile, insurers are deploying their own AI to deny claims more efficiently, creating an escalating arms race where hospitals struggle to keep pace.
By the Numbers:
Why it matters: With margins already razor-thin post-pandemic, hospitals can't afford to keep investing in AI that doesn't deliver measurable financial returns. A strategic rethink — focused on tools that drive real performance improvements, not just operational efficiency — may be critical to long-term sustainability.
