Why are claims being denied in 2026? 'Services not covered' now tops the list

The visit happened. The documentation is in the chart. The claim went out clean, or so the billing team thought. Three weeks later it comes back with a reason code saying the service isn't covered. The practice has billed that service to that payer for years.

For a growing share of practices, that is no longer an occasional annoyance. It is the main way claims fail.

Experian Health's fourth annual State of Claims survey, released this fall, found that "services not covered" is now the most common reason for denials. It is the first time that reason has ranked No. 1 since the survey began in 2022. It appeared in the top three for 53% of respondents, well ahead of frequently changing payer policies at 31%. Code inaccuracy and difficulty obtaining prior authorization tied for third at 25% each.

The survey was fielded Aug. 5-23, 2026. It drew 204 health care staff responsible for finance, billing, registration, reimbursement, claims and collections, ranging from directors to chief officers. The report doesn't break out results by organization type, so it reflects provider organizations broadly rather than physician practices specifically. Still, its trend lines match what practices have been describing for several years.

A plateau isn't a recovery

The headline number barely moved. Forty percent of respondents said 10% or more of their claims are denied, compared with 41% in 2025, 38% in 2024 and 31% in 2022. Fourteen percent said more than 15% of their claims are denied.

Holding steady near the highest level the survey has recorded is not good news. Three-quarters of respondents agreed that denials are increasing. Eighty-nine percent said reducing denials is a priority for their organization in 2026, up from 82% last year and 76% in 2022.

The pressure on the payer side also edged up:

• 79% said payer reimbursement is more challenging, up from 76% in 2025.
• 78% said payer policy changes are more frequent, up from 77%.
• 64% said time to reimbursement is increasing.
• 53% said errors in submitted claims are increasing.

Wael Khouli, M.D., MBA, a former health system chief medical officer, described that dynamic in an April commentary for Medical Economics. "Payer policies are not just more complex; they change more frequently, with less notice and with greater specificity than they did even five years ago," he wrote. "Prior authorization requirements have expanded into services that were once routinely approved. And the documentation bar for medical necessity has been raised in ways that put real pressure on already-stretched clinical teams."

That helps explain why "not covered" has climbed to the top of the list. A service a practice has billed routinely for years can become a denial overnight when a plan narrows its coverage policy or adds an authorization requirement. Nothing about the care has to change.

The report's trend data on self-assessment shows the strain. Sixty-nine percent of respondents said their organization manages denials quickly and efficiently, down from 75% a year earlier. Sixty-five percent said submitting clean claims is harder now than it was 12 months ago. Sixty-eight percent said denials are occurring at a higher rate than a year ago.

Winning the appeal, losing the money

The report's most useful finding for practices may be the gap between resubmitting a claim and getting paid for it.

Providers are good at the first part. Eighty-six percent said they successfully resubmit denied claims at least half the time. Only 30% said they recover 80% to 100% of denied revenue, however. Another 52% said they recover only 50% to 70%. In other words, a successful appeal often still means a partial write-off.

That math is harder for small practices than for health systems with dedicated appeals staff. Khouli wrote that the denial problem hits independent physicians harder in part because of the write-off calculus. "When a $400 or $600 claim gets written off because there's no time to appeal it, that's not a rounding error; that's real money that affects whether payroll gets met, whether the practice can upgrade equipment or whether the physician can afford to keep their doors open at all," he wrote.

He also argued that many of those losses are avoidable, writing about the revenue practices write off when appeals don't pencil out. "Here's the part that gets me: Around 70% of appealed claims can be successfully overturned. The denials aren't mostly legitimate. Many of them are wrong," he wrote. "But the appeal never got filed, because the team didn't have time, or the filing window closed, or someone made a judgment call that the claim wasn't worth the effort."

The broader economy is adding urgency. Seventy-nine percent of survey respondents agreed that economic conditions make payer reimbursement more urgent, the highest result since the survey began. Seventy-five percent said they are very or somewhat concerned about reimbursement from both payers and patients over the next 12 months. For a practice, slower payer dollars and shakier patient collections squeeze the same cash flow.

The AI paradox

The survey's technology findings point in two directions at once.

Fewer respondents said they use automation than a year ago:

• 20% said they use robotic process automation, down from 25% in 2025.
• 9% said they use AI in claims, down from 14%.

At the same time, 64% said they definitely or probably plan to invest in AI for claims and denial management. Eighty-three percent said they would fully replace existing technology for a compelling return on investment. The report's authors offered several possible explanations for the drop, including caution, AI that is embedded in tools and not visible to users, or tools that were removed. They concluded that providers appear to be adopting the technology slowly.

Opinion on AI's potential is split. Thirty-eight percent said AI can dramatically change the claims process, and another 38% said it can, but it will take a while. Eight percent said it is likely only for organizations that can afford the investment, and 11% said no.

That hesitation stands in contrast to the payer side, where the technology is already shaping decisions. As Medical Economics reported in coverage of rising support for human review of AI claim denials:

• Seven states passed laws this year limiting how insurers use AI in coverage decisions.
• A bipartisan House bill, the Doctors Not AI Act, would bar AI systems from issuing denials that involve clinical judgment. The Medical Group Management Association endorsed it Oct. 16.
• Traditional Medicare began requiring prior authorization for a set list of services in six states on Jan. 1 under the CMS WISeR model. Technology vendors review the requests using AI and other tools.

Shawntea "Taya" Gordon, MBA, FACMPE, CEO of Atlas & Perpetua Healthcare Consulting, described the imbalance to Physicians Practice, Medical Economics' sister publication, at MGMA's annual conference. "It's so overwhelming now, especially with payers using AI and things like that," she said. "They're able to review things faster, deny things faster, and we're still pretty manual in terms of our appeals efforts."

Payer-side technology vendors argue that the tools can reduce denials rather than add to them. Brian Covino, M.D., chief medical officer of Cohere Health, which sells prior authorization technology to health plans, made that case in an August interview about how AI-assisted prior authorization works inside a health plan. "Artificial intelligence is never used to deny care. That's non-negotiable," he told Medical Economics. "A significant portion of denials in prior authorization is due to a lack of information needed to make the decision." He said real-time prompts that flag missing items, such as a required MRI, have cut missing-information issues by 30% to 40% in his company's experience.

Whichever view proves right, the asymmetry matters for practices. If payers are automating review while practices are pulling back on automation, the manual side of the exchange keeps falling further behind.

Where the progress is

The survey does show one clear improvement, at the front desk. Forty-three percent of respondents said inaccurate data collected at registration and intake causes 5% to 15% or more of their denials. That is down from 52% in 2025 and 53% in 2024. Focus on eligibility checks, demographics and coordination of benefits at intake appears to be paying off.

Asked how they reduced denials over the past year, respondents most often cited:

• Upgrading or replacing claims technology (48%)
• Automating or expanding portal claim reviews (40%)
• Digitizing registration (37%)
• Automating payer-policy tracking (37%)
• Providing accurate patient estimates (27%)

Measuring progress is still uneven. Respondents most often said they track time spent on appeals compared with the amount recovered (31%) and clean claim rate (31%). Fewer track denial rate (23%) or time spent on appeals alone (16%).

That measurement gap echoes Khouli's advice. He wrote that organizations making progress "treat denial data as operational intelligence, not just a report. They track denial patterns by payer, by service line, by physician, by reason code, and they use that data to drive prevention upstream, before claims are submitted. A denial that never happens is better than a denial that gets appealed and overturned."

For a practice facing a surge in coverage denials, that kind of tracking is where prevention starts. Sorting denials by reason code and payer can show which plans changed coverage rules, and which services now need authorization or documentation they didn't need last year.

The stakes for physicians

The report frames denials as an organizational and technology problem, closing with the question, "What is the cost of doing nothing?"

For physicians, the costs are already clear:

• Unpaid work. A service is delivered and then has to be defended, sometimes more than once.
• Partial recovery. A successful appeal can still leave 30% to 50% of the claim unpaid.
• Clinical time. Hours go to rejustifying care that was already given.
• Financial pressure. For independent practices, each write-off adds to the strain behind consolidation decisions.

Khouli described the clinical side of that cost in his commentary. "Clinicians spend hours redocumenting care they already delivered, rejustifying decisions they already made, dealing with prior auth delays for treatments their patients need now, and that friction accumulates," he wrote. "It is a real contributor to burnout, and it pulls physicians and nurses away from what they actually came to do."

The survey shows the denial rate has stopped climbing, at least for now. It does not show the problem easing. Coverage rules are shifting faster than practices can track them, and payers are automating faster than providers. Until practices can close those gaps, the money lost on each denied claim will keep adding up.