Why Medical Practices Are Replacing Their RCM Vendor in 2026?

There is a quiet frustration many healthcare leaders recognize; when teams are working harder than ever, but revenue performance still falls short of expectations. 

Clinical teams are seeing more patients. Billing staff are processing more claims. Leadership is making more decisions with more variables than ever before. And yet, at the end of every quarter, the margin report tells the same story; effort is not translating into financial performance the way it should.

It rarely gets discussed in board meetings as a single problem, because it does not look like one. It shows up instead as a denial rate that keeps climbing, an AR aging report that never quite clears, a physician who spent two hours on documentation instead of patients, a payment that came in 30% below contract rate, and no one who can explain exactly where the disconnect happened.

That disconnect has a name. It lives inside the revenue cycle and for most healthcare organizations today, it is growing faster than it is being addressed.

In 2025, U.S. hospitals spent an estimated $43 billion just trying to collect payments for care that had already been delivered. That includes $18 billion spent specifically on overturning denied claims; not on improving care, not on technology, not on workforce. On fighting to collect what was already earned.

Let us walk through the ten revenue challenges that are prompting healthcare leaders right now to rethink their RCM strategy, the data behind each one, and what those signals should mean for the way you evaluate or re-evaluate your RCM services partner.

1. Are Rising Denial Rates Weakening Your Revenue Cycle Performance?

Claim denials have always been part of managing a revenue cycle. What has changed is the scale, the speed, and the sophistication behind them. Here is the trajectory, and it is not ambiguous.

In 2022, 30% of providers reported that at least 10% of their claims were being denied. By 2024, that figure climbed to 38%. Now, in 2025, 41% of providers say their claims are denied over 10% of the time, and the concern is: if this trend continues, how much further could denial rates climb?

The nature of denials is also evolving. Payers are no longer relying purely on human reviewers; they’re deploying AI to automate denial management, prior authorization, rejection decisions, flag under-documented claims, and accelerate the pace of denial at a speed that internal teams built for a slower era simply cannot match.

Initial claim denials hit 11.8% in 2024, up from 10.2% just a few years earlier; with Medicare Advantage plans seeing a 4.8% spike from 2023 to 2024 alone.

The question for every CFO and RCM director is simple: if payers are using technology to deny faster and smarter, what are you using to prevent, catch, and appeal at the same pace?

The right RCM partner doesn’t treat denial management as a clean-up function. It treats it as a prevention system; with upstream analytics that catch what’s going to be denied before it ever leaves your building.

2. Is Administrative Workload From Billing Tasks Increasing Clinician Frustration?

When the conversation turns to physician burnout, it usually lives in the HR lane. The revenue cycle connection tends to get missed and that missed connection is expensive.

As per JAMA study, primary care physicians spend approximately 3 hours per day on clinical documentation alone. When including all administrative tasks, the AMA estimates physicians would need more than 24 hours per day to complete all recommended care and administrative requirements.

More than two of five primary care physicians in the U.S. report administrative burden as the primary reason for their burnout. The most common culprit cited repeatedly in survey after survey? Prior authorization.

According to Medscape’s 2024 Physician Burnout Report, 63% of U.S. physicians cite “too many bureaucratic tasks” as their top cause of burnout. And 94% of physicians report that prior authorizations lead to delays in patient care, with 78% saying it often or sometimes results in patients abandoning recommended treatment entirely.

This matters for your RCM strategy in a way that doesn’t always get connected explicitly: burned-out clinicians make documentation errors. Documentation errors produce coding inaccuracies. Coding inaccuracies generate denials. Denials age into uncollectables. The chain from clinical frustration to financial leakage is shorter and more direct than most finance leaders recognize.

Turnover from burned-out primary care physicians costs the U.S. $260 million in excess healthcare costs each year, according to an April 2022 study in the Mayo Clinic Proceedings. The hidden financial cost of a physician who leaves recruitment, temporary coverage, productivity ramp-up for a replacement, can reach $500,000 per physician.

An RCM services partner that reduces administrative burden on clinical staff doesn’t just improve workflow. It protects your most expensive and hardest-to-replace asset.

3. Are Climbing AR Days Disrupting Revenue Predictability?

Accounts receivable days are one of the most honest metrics in healthcare finance. When AR days trend upward, it is almost never a sign that one department is falling behind. It is a sign that multiple processes, from patient intake to claims submission to denial follow-up, are not working together the way they should.

The benchmark most revenue cycle leaders use: AR days should ideally range between 30 and 40. AR over 90 days should be less than 10%, while self-pay AR over 90 days should be less than 30%. But those benchmarks have been increasingly difficult to hit.

The average number of AR days over 90 days is at 77%, a 21% increase from 2024; a growing backlog driven largely by payers taking longer to process payments and an increase in denial rates.

If your AR days are trending in the wrong direction, it’s rarely because your billing team isn’t working hard. It’s almost always a system problem: inadequate follow-up automation, denial root cause analysis that isn’t feeding back into prevention, or payer-specific workflow gaps. An RCM partner should not just be working with old AR. They should be measuring why it aged in the first place.

Automation plays a critical role in stopping this cycle at its source. RCM platforms that use AI to predict which claims are most likely to delay, trigger proactive follow-up before accounts age, and automatically route high-risk AR for priority attention are materially outperforming manual follow-up workflows. The organizations closing the AR gap are not simply working harder on collections; they are intervening earlier and more intelligently across the entire claim lifecycle.

4. Are Front-End Workflow Gaps Causing Downstream Revenue Loss?

There is a fundamental timing problem in how most organizations experience front-end revenue cycle failures. The errors happen at patient registration and intake. The financial consequences show up 30 to 45 days later; in the form of denials that trace back to a missing insurance ID, an eligibility check that was never run, or a prior authorization number that was entered incorrectly.

The 2025 State Of Claims Report, more than a quarter of respondents say that at least 10% of denials result from inaccurate or incomplete data collected at patient intake; errors that occur during registration, when critical patient information is first collected and entered. 54% of providers say claim errors are increasing, and 68% report that submitting “clean” claims is now more challenging than it was a year ago.

This reliance on multiple systems creates inefficiencies and redundancies, requiring staff to rerun eligibility checks and manually reconcile data, resulting in slower workflows, higher administrative burden, and greater risk of errors that trigger denials.

Front-end failures are not a patient access problem. They are a revenue problem; one that typically doesn’t show up on a denial dashboard until 30 to 45 days after the fact. A capable RCM partner closes the loop between patient registration accuracy and claims outcomes, and has the analytics to prove it.

Key Revenue Cycle Pressures Impacting Financial Performance

5. Are Underpayments Quietly Eroding Contracted Reimbursements?

Denials get attention because they are visible. Underpayments are silent, and in many organizations, far more damaging over time.

For every dollar that a payer denies, there is a dollar it may simply underpay, and unlike a denial, an underpayment does not arrive with a rejection notice. It arrives looking like payment.

In 2023, hospitals absorbed $130 billion in underpayments from Medicare and Medicaid; a figure that is worsening, growing on average 14% annually between 2019 and 2023. Medicare reimbursement covers just 83 cents for every dollar hospitals spent on care in 2023.

Medicare Advantage has become a particular pressure point. Hospital reimbursement from MA plans fell 8.8% on a cost basis between 2019 and 2024, while MA patients required observation stays that grew to 36.9% longer than traditional Medicare patients by 2024; up from 28.6% in 2019. In 2024, MA plans reimbursed just 49% of the actual cost for patients held in observation status.

Most providers discover underpayments too late or not at all. Payment variance reports from standard practice management systems are limited in scope and frequently miss significant revenue. 

RCM partners with contract management capability built into their platform, not as an add-on, but as core infrastructure, give healthcare organizations something most have never had: consistent, systematic visibility into whether every payer is honoring what was agreed.

6. Is Past RCM Vendor Disappointment Shaping Your Current Strategy?

There is a pattern that emerges frequently in conversations with healthcare finance leaders about RCM outsourcing. The initial engagement came with strong promises, improved denial rates, faster collections, better reporting. Twelve months in, the numbers had not moved meaningfully. Staff were still managing the same problems. The reporting was summary-level and always lagging. And renegotiating or exiting the contract proved harder than anticipated.

A Q1 2025 survey of revenue cycle leaders from 220 hospitals and health systems by Black Book Research found that 79% are actively restructuring or reassessing outsourcing contracts in favor of technology-first solutions.

The reasons are predictable. Traditional RCM outsourcing models, particularly offshore-heavy, volume-based arrangements, were built for a simpler payer environment. 

Many healthcare leaders have experienced: slow denial appeal turnarounds that exceed filing deadlines, AR work that prioritizes easy-to-collect accounts over high-value aged claims, coding teams that don’t understand clinical nuance, and reporting dashboards that tell you what happened but not why.

The Change Healthcare cyberattack in February 2024 accelerated this rethinking for many. The disruptions caused some practices, burned by their vendor’s inability to maintain operations to pull RCM functions back in-house, even temporarily, underscoring how completely a vendor failure can paralyze an organization’s financial operations.

Past vendor disappointment shouldn’t drive you toward either extreme: full outsourcing or full insourcing. It should drive you toward asking harder questions before you commit: 

• What does the contract SLA say about denial overturn rates? 
• What is the escalation path when AR ages? 
• Who owns the reporting, and how frequently? 
• What happens if there’s a security incident?

7. Is Growing Payer Complexity Overwhelming Internal Billing Teams?

The payer landscape in 2026 is not more complicated than it was five years ago in degree. It is more complicated in kind and that distinction matters for how organizations staff and support their revenue cycle function. 

This is the underappreciated structural shift that is quietly breaking internal billing operations everywhere.

Medicare Advantage now covers more than 54% of all Medicare-eligible beneficiaries, according to KFF 2024 enrollment data. It has introduced plan-by-plan prior authorization rules, coding requirements, and medical necessity criteria that vary not just by insurer, but by product line, geography, and plan year.

According to the American Medical Association’s 2025 Prior Authorization Survey, physicians and their teams spend an average of 14.6 hours per week managing prior authorization requests alone time that translates directly into staffing cost and administrative burden with no clinical value delivered.

In 2025, hospitals spent nearly $18 billion overturning claims denials and an estimated $43 billion total trying to collect payments insurers owe for care already delivered. The average hospital employed about 64 administrative and billing staff dedicated to these functions, roughly 6.5% of total hospital employment.

Here’s the structural problem. Payers invest continuously in technology and expertise specifically designed to manage, deny, and delay claims. Most internal billing teams, even excellent ones, are not resourced to keep pace with the sophistication and volume of what payers are throwing at them. It’s not a people problem. It’s a scale and capability mismatch.

An RCM partner brings payer-specific expertise that no internal team maintaining coverage across dozens of plans simultaneously can realistically replicate. The depth of knowledge required, at the claim line level, by payer behavior is a full-time specialization. Organizations that treat it as a general billing function are leaving that gap open.

8. Is Your Cost-to-Collect Rising Without Meaningful Revenue Improvement?

This is the metric that exposes the most uncomfortable truth in RCM: you can be spending more and collecting the same  or even less.

The Healthcare Financial Management Association (HFMA) defines cost-to-collect as the total revenue cycle cost divided by the total patient service cash collected. It allows providers to understand not just how much they’re earning per claim, but how much it costs to collect that revenue.

The national picture is alarming. Moody’s reports hospital costs jumped 8% in 2024, but revenue only grew 4%. Most hospitals are operating on razor-thin margins, averaging just 1% in 2025, while labor accounts for 56% of hospital spending.

According to Deloitte’s 2025 Global Healthcare Outlook, 70% of healthcare executives cite improving operational efficiency as their top priority as administrative costs continue to rise.

The right RCM partner should be able to show you, explicitly, how their model drives cost-to-collect down. Not by doing less, but by doing the right things more efficiently. Any vendor that can’t articulate their impact on your cost-to-collect doesn’t understand your actual financial problem.

9. Are Outsourced Workflows Creating IT, Security, or Compliance Concerns?

For any RCM partnership evaluation, the security and compliance framework deserves the same scrutiny as financial performance. 

That means HIPAA compliance as a baseline, SOC 2 Type II certification as a standard, Business Associate Agreements with explicit liability allocation, documented incident response timelines, and evidence of regular third-party security audits, not as optional disclosures, but as qualification criteria.

Many healthcare providers and RCM vendors face difficulties addressing cybersecurity risks due to limited budgets, outdated systems, and a lack of cybersecurity expertise. Threats such as ransomware, data breaches, and system downtime can disrupt the revenue cycle, causing financial losses, reputational harm, and potential legal penalties.

Beyond cybersecurity, compliance risk from outsourced workflows is multidimensional. Data flows between your EHR, clearinghouse, and vendor systems create exposure points at every handoff. 

Due diligence for any RCM outsourcing partner must include detailed review of data governance protocols, BAA terms with clear liability allocation, incident response timelines, and evidence of regular third-party security audits. HIPAA compliance, SOC 2 Type II certification, and enterprise-grade cybersecurity practices are baseline requirements, not differentiators.

Ask your RCM partner directly: what happens on day one of a cyberattack, to their systems and yours? If they can’t answer that clearly, that’s your answer.

10. Is Your Current RCM Model Failing to Provide Leadership With Financial Visibility?

This is the challenge that often shows up last on a list of RCM pain points, but it is frequently the one that sits at the root of all the others.

In a survey by Eliciting Insights and HFMA, 84% of health system leaders said “lower reimbursement from payers” was the top reason for poor operating margins. But lower reimbursement is frequently misdiagnosed, it’s often partially a visibility problem. 

You can’t negotiate better contracts if you can’t see where underpayments are occurring. You can’t fix denial patterns if you can’t attribute them to specific front-end gaps. You can’t predict cash flow if your AR data is always two weeks old.

The CFO who said it most clearly was Kathrynne Johns of Allegiance Mobile Health: “The right RCM partner offers scalability and efficiency at a fraction of the cost of adding headcount.” 

But scalability without visibility is just outsourcing your blind spots.  The reporting capability of any RCM partner you consider should be treated as a non-negotiable: real-time dashboards, denial root cause attribution, payer performance benchmarking, and AR aging by payer segment, all visible to your finance and operations leadership without requiring a data request.

Your Revenue Cycle Deserves More Than a Vendor. It Needs a Partner

Choosing the right revenue cycle services partner is not a procurement decision. It is a decision about whether the financial foundation of a healthcare organization, the system that converts clinical work into the revenue that sustains everything else, is built to perform in the environment that actually exists today.

The right partner prevents denials before they happen. Connects clinical documentation to financial outcomes. Operates with AI and automation where speed and accuracy matter most. Protects the data and systems the revenue cycle depends on. And gives leadership real-time visibility to make decisions that move the numbers.

Every month you spend with an RCM model that isn’t performing is a month of revenue you will never recover. Denied claims age into write-offs. Underpayments go undetected. AR days compound. And the cost to collect keeps rising while collections stay flat.

The question is whether you choose to change it on your terms, proactively, strategically, and with a partner who has earned the right to that conversation or whether the next financial quarter makes that decision for you.

Ready to see what a high-performance revenue cycle looks like for an organization like yours? Let’s talk.