AI in healthcare is driving costs up 9% instead of cutting expenses, PwC report reveals

How AI is making health care even less affordable

Why it matters: For all of the ways AI could meaningfully improve patients' lives, making care more affordable isn't one of them. Driving the news: PwC on Thursday estimated that medical costs will go up by 9% in the employer market next year, and by 8.5% in the individual market. One of the largest drivers is providers' use of AI-enabled software and scribes that more thoroughly document the care that's delivered. * Such tools are being used "to capture greater billing complexity, and plans are absorbing the cost," per the report. * PwC said the financial impact isn't so much due to people using more medical services as "changes in coded severity, case mix and paid amount per claim." The big picture: Within the health care system, the current incentives are "to do more and get paid for more," Paul Markovich, CEO of Blue Shield of California parent company Ascendiun, told Axios this week. * Companies "will take AI and say, 'How can I use this to further my self-interest?'" he said. * However, he added that AI "ultimately will bring a lot of the administrative costs out of the system." Between the lines: It's not only that AI is helping providers make more money per unit of service. It's also poised to flood the system with more products and services. * "AI makes any system more efficient -- and since our health system is already super efficient at driving fee-for-service units of care and coding, I think it is going to drive up both and make health care spending grow even faster," said Venrock partner Bob Kocher. * Most of the investment and adoption is for managing revenue cycles and for drug development that will bring promising but pricey new drugs to market, he added. Yes, but: The current hype around using AI for administrative tasks -- including billing -- will burn off, shifting the focus to AI uses that improve patient outcomes, Harvard Medical School associate professor Hossein Estiri said. * "I think health care systems are beginning to realize that the market narrative isn't where the real value is. I think the real value is to improve patient lives," he told Axios. * AI will "enable more proactive health and make care more precise," he added. The result is fewer sick people and a lower cost of care. A timely new UBS report analyzes the impact of AI tools on both insurers and hospitals through financial and competitive lenses. * AI will likely make the entire insurance industry more efficient, but the financial gains from lower administrative costs will be "competed away over time" and reinvested in other ways. * That's because administrative AI use isn't likely to give any one insurer an advantage, with the entire industry is pursuing the same efficiencies. * Among hospitals, big for-profit operators like HCA, Tenet and UHS have the financial and operational ability to invest aggressively in AI faster than nonprofit hospitals. That market advantage may last for awhile. What we're watching: Whether AI's arrival changes incentives along with payment systems.

AI was supposed to cut health care costs. One of its first jobs was charging you more, PwC report shows | Fortune

TL;DR: You might have expected AI to cut healthcare costs, whether it's by reducing paperwork, automating the doctor's notes, or thinning out hospital staff. But a new 60-page PwC report suggests the reverse: So far, one of its most widespread uses is making medical bills bigger. It's an example of how AI isn't only good at making tasks more efficient -- it's also very good at finding more granular ways to boost a sector's bottom line. What happened: AI is one of five potential drivers of health costs climbing up to 9% in 2027 -- matching this year's rate, the highest since 2010-11 -- per PwC. The key reason: AI note-taking tools are documenting more specifics about diagnoses and medical complications that a rushed human clinician might have lumped into one broad "code" -- a standardized billing label that tells insurers what to pay. Those extra details can justify a higher severity (read: higher paying) code, even if the actual care a patient receives is the same as before. The devil is in the billing details: One Blue Cross Blue Shield analysis found that some hospitals saw the billing code for acute posthemorrhagic anemia in new mothers jump from 4% to 12.3% of maternity admissions between 2022 and 2025. The number of blood transfusions (a common treatment for this condition), meanwhile, barely budged. An audit of the hospital system with the steepest rise in this code found that fewer than 20% of the cases actually met the clinical criteria for a diagnosis. The rise in higher-intensity coding coincides with hospitals' growing use of AI for billing. According to BCBS, "coding intensity" added $22 million to maternity spending at the hospitals studied in three years. The big but: AI is the report's top-ranked new pressure, but it's not the biggest driver of costs overall -- old standbys like labor and supply costs still account for more of the increase, one of the report's authors told Healthcare Dive. And AI tools could eventually push the other way, driving down costs by automating hospital administrative work or catching diagnoses earlier. Bottom line: AI is often pitched as a way to optimize whatever industry it touches -- trimming waste and making systems faster and cheaper. But in healthcare, one of the first things it has optimized is how to charge you more. As one health insurance exec put it: Companies "will take AI and say, 'How can I use this to further my self-interest?'" -- WK This report was originally published by Tech Brew.