Denials are unequivocally one of the biggest problems for US health systems. But across the revenue cycle industry, most technology companies and outsourcing firms are not economically incentivized to solve the denial problem. They’re incentivized to make it manageable.
The way pricing works spells it out pretty plainly. Typically, pricing is based on a percentage of collections, per-claim fees, or FTE-based contracts. Every one of those models ties vendor revenue to the ongoing existence of the denials problem.
A denial management tool that eliminated denials would eliminate its own revenue stream.
BPO firms are incentivized to automate their own workforce to improve their margin while maintaining the same business model and pricing with their clients. The business model isn’t aligned with the end-state outcome health systems actually need (no more denials); it’s aligned with perpetuating the workflow and the problem.
This isn’t a criticism of the people inside these companies. Most of them are genuinely trying to help solve problems. But this is a structural observation about what the market selected for. Health systems needed the problem managed, vendors built tools to manage it, and a multi-billion dollar industry grew up around that transaction. Nobody in that system had a strong incentive to question whether managing the problem was the same as fixing it.
The SaaS industry went through a version of this. For years, enterprise software companies sold systems of record, digitized versions of existing workflows, priced on seats and modules, valuable because they organized information but not because they did anything intelligent with it. The market rewarded scale and stickiness, not necessarily outcomes. The economics shifted and buyers started asking whether the software was actually changing results, not just digitizing the process. The vendors that couldn’t answer that question clearly found themselves exposed.
The revenue cycle industry is earlier in that same curve, but the pressure is building.
The tell is in the language. Think about how RCM vendors describe their value — faster workflows, more touches per FTE, better workqueue management, improved overturn rates. All of those can be valuable, but it’s all fundamentally about doing the same work more efficiently. Those improvements are not about doing less of that work because the upstream problem was prevented. Efficiency and elimination are different categories of value, and the market has been selling the former while health systems increasingly need the latter.
The shift that’s coming isn’t primarily about AI.
It’s about the question changing from “how do we work denials better” to “how do we stop generating them?” It just so happens that AI makes that second question answerable in a way it wasn’t before. This is forcing the entire vendor landscape to reorient. The platforms built around prediction and prevention become more valuable.
In the revenue cycle industry, the vendors that will matter in five years (and the health systems with the strongest margins) are not the ones with the largest denial management workflows. They’re the ones building systems that make those workflows unnecessary.
