By Ritesh Ramesh, CEO of MDaudit. MDaudit were winners of the ‘Best FinTech Solution for Healthcare and Pharmaceuticals‘ award at The 2025 FinTech Awards.

Denials, at-risk dollars, and external audits – including pre-payment audits – skyrocketed in 2024 and show no signs of slowing in 2025.

If anything, fraud abatement efforts at the federal level have intensified these revenue cycle challenges, with the Department of Government Efficiency (DOGE) joining the Centers for Medicare and Medicaid Services (CMS) in a commitment to identify and claw back improper reimbursements to both healthcare providers and insurance companies.

For healthcare finance leaders, the current revenue and reimbursement landscape necessitates a new approach to revenue cycle management (RCM), one that eliminates silos between compliance and finance and transforms RCM by emphasizing continuous risk monitoring. This includes transforming payer audit workflows by automating and accelerating manual tasks and leveraging AI to analyze and democratize data to eliminate systemic and other issues contributing to audit failures and missed deadlines.

By the numbers

The 2024 MDaudit Annual Benchmark Report documented several trends negatively impacting the financial stability of hospitals, health systems, and other healthcare organizations. Among these was a 126% rise in coding-related denials, representing one of the largest increases in the last three years despite billions of dollars spent on outsourcing coding operations and investing in automated coding technologies.

When those increased denials are coupled with the higher denied amounts across all care settings – hospital inpatient-related denials were up by nearly 220% to $10,000, hospital outpatient by 32.5% to $825, and professional by 24% to $140 – it becomes clear that coding integrity is one of the biggest revenue optimization opportunities.

Medical necessity was also problematic in 2024. MDaudit data revealed a 140% increase in inpatient total denial amounts related to the Medical Necessity and Information Needed category, while outpatient rose 75%.  In fact, more claims dollars were denied in 2024 by Medicare and commercial payers due to a lack of information submitted for the service and medical necessity, driving an increase in final denial dollars across professional (34%), hospital outpatient (84%), and hospital inpatient (148%),

These higher amounts were driven by a 122% increase in commercial payers’ request for information (RFI) denials and a doubling of external audit volumes in 2024. That includes a 100% increase in clinical documentation audits – contributing to a 3-year increase in clinical denials of 51% – and a sizable increase in pre-payment audits that can exacerbate cash flow issues and expose providers to higher denial rates. This accelerated audit activity resulted in a fivefold increase in “at risk” dollars to $11.2 million.

Transforming RCM

Healthcare finance leaders must make RCM transformation a strategic imperative in 2025 to combat audit and denial headwinds and mitigate the impact of slower reimbursement timeframes, which now average four to five weeks. This includes prioritizing revenue optimization and risk mitigation by deploying real-time continuous financial risk monitoring as a cornerstone of stability.

Revenue integrity and revenue cycle leaders should also continue evaluating technology-enabled opportunities that yield the best return on investment and enable them to monitor real-time financial risks on payer trends and denial management while kickstarting automation opportunities that drive operating margins. As technology and AI-enabled productivity improve in the next decade, the upside of their adoption for operating margins is enormous.

A smart early transformation step is to focus on audit response, an area considered a low-hanging revenue capture opportunity due to payers’ growing reliance on pre-payment audits. Investing in technology and analytics will ensure that additional documentation requests (ADRs) are received, processed, and answered on time by the providers within the timely filing limits so that recipients can defend and retain revenue.

Many healthcare organizations are already taking this step by leveraging data and AI to unlock insights and patterns from their historical data. MDaudit data shows retrospective audits in the MDaudit platform increased by 10% in 2024, while prospective audits increased by 275%.

By transforming their revenue integrity function with streamlined workflows and analytics to tackle payer audits, customers in the MDaudit community successfully retained more than $100 million in revenue throughout 2024. These results come from implementing a strong internal compliance program and a cross-functional operating model that connects the dots between billing, coding, CDI, and revenue integrity.

Another easy target for RCM transformation is high-value outpatient services like elective surgeries and some inpatient services, which enable healthy operating margins. Along with pinpointing just what those services are, complex services should be scrutinized. Additionally, organizations should:

• Implement clinical documentation improvement (CDI) programs that drive outcomes tied to RCM and denial management metrics.
• Ensure CDI, billing, coding, and RCM programs are tightly coupled to implement a closed feedback loop from the backend to the mid-cycle to drive efficiencies.
• Automate coding operations and increase utilization of AI-powered systems that amplify errors at scale while keeping “humans in the loop.”

MDaudit data tells the story that transforming RCM processes through advanced technology and a hybrid auditing strategy with both retrospective and prospective audits will result in organizations catching and correcting more errors before payment, resulting in cleaner claims and higher first-pass payment rates. That, in turn, translates into higher cash flows and margins.

Positioned for success

Organizations that successfully drive revenue integrity outcomes do so by breaking down silos and working across the aisle with other functional teams (e.g., compliance, coding, RCM, and clinical) to advance a unified revenue retention and growth agenda. They also:

• Set up a formal revenue integrity program and a steering committee of cross-functional leaders to meet regularly to share insights.
• Leverage data and insights as a storytelling mechanism to deliver value by removing bias and injecting objectivity into discussions and decision-making.
• Deliver success metrics and leverage powerful technology to boost team productivity, streamline manual processes, and establish accountability for tangible outcomes.
• Keep an open mind and learn about outcomes-driving best practices from other organizations and peers.

As the 2024 MDaudit Benchmark Report demonstrates, 2025 winners and losers in the healthcare margin race will be determined by technology, data, and analytics investments that enable real-time and continuous monitoring of billing risks. Deploying technologies that bridge mid-cycle and back-end functions drives more substantial margins and cash flow while mitigating risks tied to payer-driven policies and denials.

Finance and RCM leaders who adopt a progressive, data-driven, people-led, and technology-enabled approach to the revenue cycle will position their organizations ahead of the payers as they move toward a sustainable financial future.