The industry is looking down the barrel of what the insurers say is a billion-dollar question: Are AI-backed billing tools driving up healthcare costs?
Autonomous medical coding, AI-assisted documentation and ambient listening tools for notetaking all promise to reduce administrative burden in healthcare. But that has come at a price for Blue Cross Blue Shield Association of about $942 million over two years, according to research the insurer released last week.
BCBSA said the rise in spending is coming without a corresponding increase in treatment, which the insurer said it would expect if patients were truly sicker. Hospitals are increasingly billing inpatient stays as more complex than before, claiming more patients have a greater number of medical diagnoses that require higher reimbursement.
That means AI-backed billing technologies could be contributing to higher healthcare spending, the insurer said.
“If patients are truly sicker, we’d expect to see more treatment,” said Luke Chalker, BCBSA’s senior vice president of product and data science, in a statement.
“For example, we’re seeing significantly more anemia diagnoses at these hospitals without a corresponding increase in transfusions,” he said. “The disconnect between diagnoses and treatment suggests that AI is identifying more billable conditions, not sicker patients.”
However, the companies that create those billing technologies are pushing back on that accusation, insisting their AI is getting providers what they are owed under the existing rules dictating reimbursement for care between payers and providers.
“Making a claim like this is making it in the context of the current paradigm,” said Dr. Travis Bias, deputy chief medical officer of health information systems at Solventum, whose coding platform is used by more than 80% of U.S. hospitals. Bias, however, noted he had not investigated the BCBSA analysis in close enough detail to dispute or confirm its findings.
“We live in a fee-for-service system, we pay for volume, not for value. So yes, if you collect more codes and do more procedures, the payments will increase.”
The BCBSA isn’t the only payer facing higher costs. Analysts at PwC attribute a 9% increase in insurers’ medical costs next year to AI-backed billing tools.
Payers are worried that these tools are enabling upcoding, when payers or providers submit inflated diagnostic codes to garner more reimbursement.
Correction, not upcoding
Hamid Tabatabaie, president and CEO of Codametrix, a healthcare technology company that uses AI to automate coding for over 500 hospitals and health systems, doesn’t dispute BCBSA’s claims about rising healthcare costs. But he does take issue with the blame being assigned to AI.
Autonomous coding tools are increasing costs for payers, he told Healthcare Dive. But it’s not for nefarious reasons, although he couldn’t rule out very rare instances of healthcare fraud, waste or abuse. Rather, the tools are overwhelmingly capturing what providers couldn’t without technical assistance.
“When last year they submitted their claims, if they weren’t using a valid system, they were missing it,” Tabatabaie said. “And now this year, they have addressed it.”
And in the current fee-for-service environment, capturing a more complete picture of a clinical encounter will lead to higher costs, explained Bias.
Under a fee-for-service system, payers reimburse providers based on the volume of services they render and the complexity of care. This incentivizes providers to deliver more care to maximize revenue and payers to limit care to save costs.
But AI is now making it easier for providers to better capture what they are entitled to under existing rules, raising alarms for payers, according to Tabatabaie.
“Any optimization that a provider does that causes them to receive payment for otherwise what they weren’t receiving — they don’t like that,” Tabatabaie said. “Payers don’t want to pay any more than they absolutely have to.”
Tabatabaie argues that medical codes were never meant to be about billing in the first place. ”Codes are supposed to be codes of clinical concepts,” he said. “They got hijacked by payers because that was the most convenient way to do claims processing.”