Medical billing remains one of the most error-prone and costly areas in the U.S. healthcare industry. Despite technology advancements, billing errors, denied claims, and documentation gaps continue to drain practice revenue and increase patient financial burden.
In 2025, government data, medical billing statistics, and independent surveys confirm that billions are lost each year due to improper documentation, inaccurate coding, and inefficient billing practices. For healthcare providers, this translates into revenue leakage and higher costs to collect payment. For patients, it often means surprise bills, medical debt, and added credit card debt.
The following statistics highlight the scope of the problem and why healthcare organizations need stronger billing and coding processes, organized into the following categories:
Improper Payments and Government Oversight
Improper payments remain a significant portion of healthcare spending across Medicare, Medicaid, and other government programs. These losses often stem from insufficient documentation, coding errors, and eligibility mistakes. According to government data from the Centers for Medicare & Medicaid Services (CMS):
-
In Fiscal Year (FY) 2024, the Medicare Fee-for-Service (FFS) program had an estimated improper payment rate of 7.66%, representing $31.70 billion in improper payments.
-
Medicare Part C in FY 2024 had an improper payment rate of 5.61% (gross), about $19.07 billion in payments in error.
-
Medicare Part D in FY 2024 had an improper payment rate of 3.70%, amounting to about $3.58 billion in improper payments.
-
The Medicaid improper payment rate for FY 2024 was 5.09%, translating into $31.10 billion in federal funds.
-
Of the Medicaid improper payments in that period, 79.11% were due to insufficient documentation.
-
In FY 2024, CMS reported that the Advance Payments of the Premium Tax Credit (APTC) program had an improper payment rate of 1.01%, totaling $562.93 million.
-
In the same fiscal cycle, the Net Premium Tax Credits component had an improper payment rate of 28.54%, amounting to $362.73 million of improper payments.
-
Combined, the Premium Tax Credit program’s improper payments were estimated at $925.66 million out of $56.98 billion in total outlays, yielding a combined improper rate of 1.62%.
Some of the potential key drivers for this include:
-
Insufficient documentation: missing or incomplete patient records
-
Eligibility errors: patients not meeting program requirements
-
Coding mistakes: inaccurate billing codes affecting payment rates
-
Payment calculation issues: errors applying benefit formulas
-
Fraudulent billing practices: deliberate misrepresentation
Together, these drivers highlight why oversight efforts focus so heavily on documentation, coding accuracy, and verification.
Claim Denials and Delays
Denied claims and delayed payments represent one of the largest threats to healthcare providers’ financial stability. These billing errors extend accounts receivable days and increase administrative costs. Below are several benchmark stats illustrating the frequency of denials, common causes, and the cost/time implications:
-
About 30% of insurance claims are denied on first submission. (BillFlash)
-
Of those denials, 32% are due to issues with coding. (BillFlash)
-
86% of denials are potentially avoidable. (BillFlash)
-
Practices with poor billing automation and staff training see denial rates of 15-20%, vs benchmark of 5-7%. (3Gen Consulting)
-
Errors lead to claim processing delays averaging 2.5 months in many practices. (Medical Billers and Coders)
-
Nearly 17% of insured, working-age adults were denied coverage for a doctor-recommended service. (Commonwealth Fund)
-
45% of working-age insured Americans received a medical bill or copayment for a service they believed should have been fully covered. (Commonwealth Fund)
-
Among those who challenged billing errors, nearly two in five had the bill reduced or eliminated. (Commonwealth Fund)
-
In surveys, fewer than half of people with billing errors challenge them, often due to a lack of awareness of their right to do so. (Commonwealth Fund)
These statistics highlight that denials and delays are frequent and costly, pointing to coding, documentation, and process gaps as chief culprits.
Revenue Leakage and Provider Costs
Billing inefficiencies cost medical practices and healthcare facilities billions annually. From undercoding to denied claims, revenue leakage erodes margins and disrupts cash flow.
-
U.S. hospitals and practices commonly lose 4-5% of their revenue due to revenue leakage. (3Gen Consulting)
-
A practice generating $3M annually might lose $150,000 per year from undercoding and inefficiencies. (3Gen Consulting)
-
Total improper payments in Medicare FFS (FY 2024) — $31.7 billion. (CMS)
-
Poor billing practices cost providers an estimated $125 billion annually. (BillFlash)
-
Practices with high denial rates incur rework costs averaging $25 per claim. (BillFlash)
-
The American Medical Association estimates up to 12% of medical claims are submitted with inaccurate codes. (PCG Software)
-
It is estimated that 80% of medical bills contain at least minor mistakes. (AKASA)
-
One survey found that the average hospital bill over $10,000 has errors amounting to around $1,300 in overcharges. (Dialog Health)
These figures suggest that even small percentages of loss represent large dollar amounts for providers. Reducing inefficiencies not only improves margins but also cash flow and operational stability.
Coding, Documentation, and Error Sources Statistics
Accurate medical coding and proper documentation are essential for billing accuracy, yet clinical documentation errors and human error remain widespread.
Presented below are general error rates and categories, detailed breakdowns, and coder/documentation challenges:
-
Approximately 80% of U.S. medical bills contain some kind of error. (BillFlash)
-
Coding mistakes are cited in about 32% of first-submission denials. (BillFlash)
-
In Medicaid, 79.11% of improper payments are attributable to insufficient documentation. (CMS)
-
According to a study of internal medicine visits, 14.8% had improper payments and 43.9% had incorrect coding in sampled claims. (PubMed Central)
-
In family practice visits, 12.3% had improper payments, and 33.9% were coded incorrectly. (PubMed Central)
-
Within any sample of 200 claims, one survey found 41% overcoded and 45% undercoded. (PubMed Central)
These error sources show that fixing documentation and coding, especially with automation or better training, could reduce a large share of medical billing errors.
Market Size, Outsourcing, and Technology Trends
The medical billing industry continues to grow as healthcare organizations turn to outsourcing, practice management systems, and electronic transactions to reduce administrative errors and costs.
Here are some projections, market valuations, and trends in how billing is handled in U.S. practices:
-
The U.S. medical billing outsourcing market was valued at USD 6.28 billion in 2024. (Grand View Research)
-
That market is expected to grow to USD 6.95 billion in 2025. (Grand View Research)
-
The U.S. medical billing outsourcing market is projected to reach USD 19.7 billion by 2034, from $6.3 billion in 2024 (CAGR ~12.1%). (Market.us)
-
Global medical billing outsourcing is forecasted to grow from USD 19.32 billion in 2025 to USD 54.17 billion by 2034. (Precedence Research)
-
In 2025, outsourcing trends emphasize AI/automation, denials prevention, and end-to-end RCM functions. (Medical Billers and Coders)
-
In some analyses, front-end billing services account for 38.6% revenue share in outsourced billing in 2024. (3Gen Consulting)
These trends suggest that outsourcing and technology solutions are essential for managing complexity and reducing error/denial risk.
Patient Impacts and Billing Transparency
Medical billing errors don’t just hurt providers; they directly affect patients. From medical debt to issues with insurance coverage, errors in the billing process increase the burden on individuals and families.
-
The U.S. Consumer Financial Protection Bureau (CFPB) reports that about 100 million Americans owe a combined $220 billion in medical debt. (Reuters)
-
About 4 in 5 medical bills contain errors. (AKASA)
-
Almost half of insured Americans report receiving unexpected medical bills. (AJMC)
-
Approximately 1 in 5 people received a medical bill they disagreed with or couldn’t afford. (USC Schaeffer)
-
Among individuals who contacted a billing office about issues, 1 in 4 had their bill corrected. (USC Schaeffer)
-
Around 1 in 7 got a payment plan or price discount after contact. (USC Schaeffer)
These patient-centered statistics highlight how billing mistakes ripple beyond healthcare facilities, creating long-term financial hardships and eroding trust, underscoring the urgent need for solutions that protect both providers and patients.
Aptarro Solutions for Medical Billing Problems
Medical billing statistics for 2025 confirm what healthcare providers already know: billing errors, denied claims, and improper documentation cost healthcare organizations billions while creating a financial burden for patients. Rising healthcare costs continue to put pressure on providers and families alike.
The solution lies in accurate coding, better clinical documentation, automated billing processes, and proactive denial prevention.
Aptarro partners with healthcare organizations to address medical billing challenges with proven solutions. Our RevCycle Engine helps reduce billing errors at the source by applying rules that catch inaccuracies before claims go out. For denials, ClaimStaker ensures every claim is scrubbed against the most comprehensive set of billing and coding rules, so providers see fewer denied claims and faster reimbursements.
Reach out today to learn how we can help your organization reduce billing mistakes, capture lost revenue, and build confidence in every claim you submit.
Author