Commercial healthcare costs are projected to rise 9% next year. This marks the highest increase in nearly two decades, driven partly by providers adopting artificial intelligence documentation and coding tools. According to a new PwC report released Thursday, nearly 70% of surveyed health plans identified this AI adoption as a top three factor inflating costs, though labor and supply expenses remain the primary drivers.
How AI billing tools inflate costs
Health systems are actively deploying AI products that record clinical notes and suggest billing codes. This technology allows clinicians to document more diagnoses and comorbidities during visits. Consequently, this leads to coding for more complex care and higher reimbursement, even when the clinical work or treatment provided to the patient remains unchanged.
Glenn Hunzinger, U.S. health industries leader at PwC, said this intensified coding is not necessarily inappropriate. Many health systems previously missed correct codes due to high patient volumes and complex internal systems. "The ability to use technology and AI to more appropriately code or code things that they were never able to, that's the trend we're seeing," he said. "It does have an impact on that 9%, albeit it's not the biggest piece."
With thin profit margins and looming federal healthcare spending cuts to Medicaid, hospitals increasingly rely on these tools to maintain financial stability. Professionals in revenue cycle management may find it useful to understand these shifts through an AI Learning Path for Medical Billers, as automation reshapes how claims are processed and reimbursed.
Broader economic pressures on the system
While AI captures attention, it is not the largest driver of the projected cost increase. The PwC report, which surveyed actuaries at 27 health plans, identified several larger inflationary forces. Elevated labor and supply expenses lingering from the pandemic continue to strain providers.
Market consolidation also fuels higher spending. As providers merge, they gain a greater bargaining position over payers. Nearly 65% of surveyed respondents cited contracting pressure from providers as a top three factor for the coming year.
Additional cost drivers include the Independent Dispute Resolution process established by the No Surprises Act. Providers are winning the vast majority of these out-of-network billing disputes and earning higher reimbursements than typical. Rising pharmacy costs, particularly for expensive GLP-1 medications, and increased demand for behavioral healthcare further push spending upward.
Why this matters for healthcare professionals
Professionals working in healthcare must prepare for sustained financial pressure and evolving administrative workflows. While AI documentation tools currently increase reimbursement rates by capturing previously missed codes, they also invite closer scrutiny from health plans managing a 9% cost surge. Understanding how these tools function within the broader AI for Healthcare ecosystem will be essential for clinicians and administrators managing tighter margins and stricter payer audits.
Hunzinger noted that technology could eventually reduce overall spending by automating administrative tasks and reducing provider burnout. However, he cautioned that innovation moves slowly in a highly regulated field. "It's a tough environment to operate in, in a flawless fashion," Hunzinger said. "Because at the end of the day, it's patients, it's people. So that's why it probably takes a little bit longer."
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