Physician practices got a raise from Medicare this year. After a 2025 cut, the 2026 fee schedule lifted the conversion factor about 3%, helped by a one-year statutory bump. Read the fine print, though: a -2.5% efficiency adjustment offsets much of it, the increase is temporary, and practice operating costs keep climbing faster than the update. Margins stay thin, and when margins are thin, revenue that leaks out of the billing cycle is revenue you can’t earn back by seeing more patients.

So, practice leaders watch the denial rate, and they’re right to. Initial denials now run in the 11% to 12% range across providers and keep climbing. Our own analysis of more than 630 million professional claims put the average denial rate at 14.6%, with Medicaid the worst at 20% to 23%. The denial story is real.

A claim can be accepted, adjudicated and paid, and still be paid below your contracted rate. That’s an underpayment, and it never lands in a work queue. No denial code. No appeal. It clears your AR and looks like a win. The harder part: most practices can’t see their underpayment rate by payer at all, and you can’t manage what you’re reporting never surfaces. When underpayments occur, the analysis found payers pay an average of 27% below the allowed amount.

Even the money you chase mostly gets away. Across payers, recovery averages about 29%, roughly 70% of contested revenue left on the table. And its weakest where the need is greatest: Medicaid carries the highest denial burden but recovers only about 19%, while Medicare Advantage shows the highest underpayment exposure of any payer.

Faster payment makes this easier to miss. Payers are remitting more quickly than a year ago, and better cash flow feels like better performance. It isn’t the same thing. A claim that pays fast can still pay short.

Put it together and the picture changes. Total leakage is denials plus underpayments, minus the recovery you never make, payer by payer. Manage one part while blind to the rest and you’re working from a partial view of your own margin.

That’s the gap our latest analysis set out to measure, across 630 million professional claims and five payer types. It also asks four questions worth sitting with. The first: can you see your underpayment rate by payer, right now? If the answer is no, you’re managing one of your largest sources of leakage with the lights off.

Click below to access our Annual Healthcare Payments Report Card, where you can view the full findings.