In the near future, the integration of artificial intelligence in healthcare is expected to lead to increased costs, according to Centers for Medicare and Medicaid Services Administrator Dr. Mehmet Oz, who spoke on Wednesday. However, Oz believes that the long-term benefits of AI will outweigh these initial costs.
At Oracle’s annual health and life sciences summit in Orlando, Oz stated, “Short term, AI is going to be inflationary because it’s going to turbocharge the ability of the current billing systems to work more effectively.” This statement highlights the potential for AI to drive up healthcare costs in the short term.
The dual effect of AI on healthcare expenditures
The healthcare industry has seen rapid adoption of AI in various areas, including clinical and administrative functions. AI has shown promise in reducing the administrative burden on clinicians, improving clinical documentation, and streamlining payment processes.
However, researchers have noted a correlation between the use of AI in coding and billing and rising healthcare costs, which could become a systemic problem if left unaddressed.
AI-powered coding allows healthcare providers to bill insurers for a wider range of conditions when treating patients. While providers argue that this technology enables them to bill more accurately, insurers claim that it is being used to increase charges without a corresponding increase in actual medical care.
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A study released by the Blue Cross Blue Shield Association on Thursday found that the increased billing has resulted in an additional $1 billion in healthcare costs between 2023 and 2025. The study’s findings have raised concerns that AI tools may be contributing to higher healthcare spending.
Government initiatives and the role of accountable care organizations
The Trump administration has been a strong supporter of AI adoption in healthcare, despite rolling back regulations on the technology. In June, the CMS established a new office focused on health technology and AI implementation, and has incorporated an AI focus into several initiatives, including its health tech ecosystem and anti-fraud efforts.
Accountable care organizations are groups of healthcare providers that take responsibility for providing care to specific patient populations, such as Medicare enrollees. The aim is to shift away from a fee-for-service model, where providers bill for each service, towards models that focus on health outcomes, incentivizing providers to use AI as a tool for clinical efficiency rather than a means of generating bills.
The CMS has launched several initiatives to boost participation in accountable care organizations, citing potential savings of billions of dollars for Medicare and reduced spending.
However, critics of the accountable care organization model argue that it poses financial risks for providers if they fail to reduce spending while maintaining quality care, and adds a new layer of bureaucracy to their operations.
