| For all the talk about AI’s potential to cut healthcare costs, it seems to be doing the opposite. |
| An analysis by the Blue Cross Blue Shield Association last week blamed healthcare providers’ use of AI for hiking Blues companies' claims costs by an extra $653 million over two years. The group found that hospitals are increasingly billing inpatient stays as more
medically complex without actually providing more treatment. |
| This is an insurer-backed white paper, so we’re taking it with a grain of salt. And to be frank, the amount of additional costs isn't huge. The two-year total is just 1% of what one large Blues company paid out in benefit expenses in a single year. |
| Still, the idea that AI is inflating costs isn’t far-fetched. The Blues released a similar analysis in March, but the recent scrutiny over the risks of AI might be why this one’s getting more attention. |
| We wrote last year that insurers were complaining in earnings calls about aggressive AI-driven coding and billing practices by hospitals. Earlier this year, Aledade CEO Farzad Mostashari warned that “bot-on-bot violence” between hospitals and insurers could jack up costs in the traditional fee-for-service healthcare environment. |
| In a NEJM perspective published in July, David Blumenthal and Meredith Rosenthal of the Harvard T.H. Chan School of Public Health echoed Mostashari when they wrote that for doctors whose reimbursement is tied to volume, AI may maximize revenue by “enhancing collections for the highest justifiable level of care and capturing compensable
services that previously went unbilled.” |
| Insurers aren’t powerless. They’ve told investors in the past that they planned to respond by using AI to restrict and deny payment. What we don’t know is just how much money they’ve saved by doing so. |
| But experts agree that for AI to lower costs, our health care system has to totally shift toward rewarding outcomes and cost-containment over volume. This is happening in some pockets, including in accountable care organizations and the CMS’ ACCESS model. |
| But fee-for-service remains the dominant way healthcare is paid for in the US. Until that changes, expect AI to be inflationary. |
| - Shelby |
| P.S. - Our very own Ngai Yeung will be moderating one of the sessions at Endpoints News’ annual AI Day! She’ll be discussing the implications of AI on the healthcare workforce. Sign up to watch the virtual session here. |
