The Hidden Costs of Claims Processing Errors – And How to Fix Them
Claims processing may not always make headlines, but its impact on a payer’s bottom line, compliance posture, and reputation with members and providers is massive. When errors occur—whether from inconsistent workflows, outdated systems, or undertrained, overwhelmed staff—the consequences cascade quickly.
Billions are lost each year due to denials, rework, and delayed reimbursements. The result? Higher administrative costs, regulatory risk, and a poor experience for the very people payers are built to serve.
According to the 2023 CAQH Index, the U.S. healthcare system spends $89 billion annually on medical and dental administrative transactions. Of that, $18.3 billion could be saved annually by modernizing administrative workflows. Many of today’s inefficiencies stem from avoidable errors and outdated manual processes, which continue to drain resources and erode trust between payers, providers, and members.
So, what are the hidden costs of claims processing errors, and more importantly, how can payers mitigate these risks?
In this blog, we’ll explore:
The financial impact of claims processing errors and how they affect a payer’s bottom line.
The operational burdens created by inaccurate claims adjudication.
The member experience implications that can damage trust and retention.
Best practices to reduce errors, improve efficiency, and scale claims operations without compromising compliance.
By understanding these challenges and implementing strategic solutions, payers can lower costs, reduce regulatory exposure, and deliver higher quality service at scale.
The Financial Toll of Claims Processing Errors
Direct Costs: Rework, Denials, and Administrative Expenses
Claims errors aren't just frustrating—they're expensive. Recent data indicates:
Claim Denial Rates: According to KFF, insurers on HealthCare.gov denied nearly 1 in 5 in-network claims (19%) in 2023, with rates ranging from as low as 1% to as high as 54%, depending on the insurer.
Cost of Reworking Denied Claims: According to the Journal of AHIMA, the administrative cost to rework or appeal a denied claim averages $25 for physician practices and can escalate to $181 for hospitals. These expenses compound rapidly for payers managing high volumes.
Unaddressed Denials Leading to Lost Revenue: Approximately 65% of denied claims are never reworked, representing significant lost revenue and missed recovery opportunities.
For payers looking to lower administrative costs, reduce revenue leakage, and simplify operations, a more strategic approach to adjudication is essential.
Indirect Costs: Delays, Compliance Risks, and Member Retention
Beyond direct expenses, claims processing errors introduce a range of broader risks:
Regulatory Penalties & Compliance Issues – Failure to meet evolving regulatory requirements (such as CMS standards or state-specific mandates) can result in hefty fines—up to $25 million for non-compliance with regulations such as the Health Insurance Portability and Accountability Act (HIPAA) and the Affordable Care Act (ACA).
Member Churn – Billing disputes and unresolved claims drive dissatisfaction, increasing the likelihood that members will switch plans.
Provider Friction – Denied or delayed payments disrupt provider cash flow and strain payer-provider relationships.
In short: what looks like an internal process issue can quickly become a reputational one.
Operational Challenges: The Hidden Burden on Payers
The Administrative Backlog & Staff Burnout
According to the 2024 CAQH Index, U.S. healthcare administrative tasks consume over $90 billion annually, with fully manual transactions—like fax-based or paper-heavy claims without digitization—costing nearly 3x more than electronic ones ($3.45 vs. $1.28). Even traditionally manual processes—like paper-based claims—can be optimized through digitization, intake validation, and rules-driven workflows, helping payers reduce costs without overhauling their existing systems.
This shift reduces:
Excessive staff hours dedicated to claim corrections and appeals
Burnout from repetitive manual tasks
Turnaround delays and avoidable errors
These inefficiencies make it harder for payers to scale quickly or adapt to shifting volumes—especially during peak enrollment or eligibility windows.
System Gaps & Data Inconsistencies
Lack of integration between payer and provider systems leads to claim discrepancies, missed attachments, outdated coding, and incorrect member data—often resulting in unnecessary denials and compliance risk.
A better solution starts with tight data validation, structured intake, and automation that aligns with plan-specific rules.
Impact on Member Experience & Satisfaction
Claims processing errors don’t stay behind the scenes—they show up in the member journey:
Billing Confusion – Unexpected charges and disputes lead to frustration and mistrust. A 2023 J.D. Power study found that billing-related issues are a top driver of member dissatisfaction.
Access to Care Delays – Denials and delayed approvals can interfere with treatment timelines and health outcomes—especially for those with chronic or urgent care needs.
Increased Contact Center Activity – Errors often drive spikes in member outreach as individuals seek clarity or corrections, adding strain to service teams and eroding trust in the process.
Delivering quality service to members requires more than call center scripts—it starts upstream, with claims processed accurately and on time.
Reducing Errors Through Smarter Services & Operational Support
Reducing errors in claims adjudication requires more than just better software—it demands precise processes, purpose-built staffing, and deep operational alignment. Imagenet brings all three—working directly within payer-owned systems to deliver fast, accurate claims support without disrupting existing platforms or policies.
Here are four proven strategies we’ve supported for our clients:
1. Strengthen Pre-Adjudication Processes
Ensure documentation, coding, and eligibility data are clean before adjudication begins.
Implement rules-based intake and verification workflows to minimize downstream rework.
Apply payer-specific edits through manual and semi-automated review within existing systems.
2. Leverage Specialized Claims Talent
Assign trained examiners who are fluent in Medicaid, Medicare, commercial, and dual-eligible logic.
Use domain-specific teams for nuanced areas like appeals, COB resolution, and medical coding reviews.
Maintain consistency and accuracy even during seasonal or project-based volume spikes.
3. Improve Workflow Visibility & Quality Controls
Route claims efficiently through payer-defined business rules.
Use quality assurance programs to catch financial and procedural errors before they affect payment.
Monitor error trends through QA to uncover training opportunities and reduce denial-related issues.
4. Maintain Compliance with Confidence
Adhere to CMS and state-specific turnaround and documentation requirements.
Provide auditable workflows and staffing models that align with regulatory expectations.
Support internal audit teams through third-party validation, special project investigations, and fraud detection.
A Smarter Approach to Claims Adjudication
Claims processing errors represent a significant—but preventable—challenge for healthcare payers. By modernizing operations through scalable expertise, tight system integration, and compliance-driven processes, payers can cut costs, ensure compliance, and deliver faster, more accurate resolutions for members and providers alike.
At Imagenet, we specialize in helping payers transform claims operations with:
Proven adjudication workflows executed within payer-owned systems
Expert teams that scale quickly to meet demand and eliminate backlog
Embedded quality and compliance safeguards at every step
Deep alignment with plan-specific rules, policies, and turnaround standards
Ready to reduce errors, lower costs, and scale smarter—without changing your systems? Connect with Imagenet to explore how our integrated services can strengthen your claims operations.
Looking to reduce costs, eliminate errors, and scale your operations—without overhauling your systems?