Write-offs climbed nearly 18% year over year as bad debt and final denials ate into margins, even as revenue cycle technology budgets grew, according to a recent Kodiak analysis.

Hospitals have operated on razor-thin margins coming out of the COVID-19 pandemic due to surging operating expenses, growing administrative friction and rising uninsured and underinsured rates.

Coupled with industry-wide staffing shortages, hospital leaders have invested more in technology, especially AI tools, to bolster their bottom lines. Collectively, these budgets have increased by 7.6% to $69 billion this year, according to a February report from Forrester cited in the Kodiak analysis.

Revenue cycle management has been a hotbed of hospital IT investments, especially with emerging agentic AI technologies that promise to take some resource-intensive — and notoriously burdensome — tasks, such as prior authorizations.

Despite these steep investments, though, hospitals continue to face the same revenue cycle challenges over the last couple of years. The Kodiak analysis found that the hospitals using their platform lost $52 billion last year from bad debt and final claim denial write-offs, with that number growing exponentially when extrapolated to all 6,100 registered hospitals in the country.

The write-offs stemmed from bad debt, which as a percentage of net revenue has hovered around 7% over the past three years. Final denial rates also plateaued at around 3% during this time.

While these key metrics of hospitals’ financial health haven't increased, facilities are losing more money overall, likely due to high-dollar denials, case mix shifts and a rising tide in total hospital revenue.

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