How AI is solving the long-running dispute between US hospitals and insurers over who will pay for medical bills

Artificial intelligence (AI) is reportedly helping both hospitals and insurance companies in the US to settle a long-standing dispute. A Reuters report cited industry executives and analysts to claim that AI is resolving disputes over medical billing and reimbursements between US hospitals and insurers.

Hospitals are using AI tools to document procedures and justify higher payments, while insurers are deploying similar systems to review whether treatments and billing claims are necessary, creating a technology-driven contest over healthcare costs, the report noted.The development highlights how technology is becoming part of the process that determines how much insurers pay healthcare providers. Experts say the widespread use of AI on both sides has made it difficult to predict whether hospitals or insurers will benefit more from the new tools.

How hospitals and insurers are adopting AI tools to manage claims and reimbursements

In recent months, insurers have increased the use of AI systems to identify treatments and medical bills they believe are unnecessary, Reuters reported. At the same time, hospitals have adopted AI-based software that helps document services and assign medical billing codes, potentially leading to higher reimbursement rates, according to company statements and interviews with industry analysts reviewed by Reuters.

The issue was highlighted by Centene, which focuses largely on Medicaid coverage for low-income Americans. The company said some hospitals may be using revenue software aggressively to trigger higher payments.“There have been some of these pockets where folks coming into the emergency department with a fever, all of a sudden all have sepsis,” Centene CEO Sarah London said at an investor conference last year, referring to a serious condition that often requires extensive medical treatment.

Insurers say AI-driven coding could increase healthcare spending

A review conducted by the Blue Cross Blue Shield Association found that about $663 million in inpatient hospital spending and at least $1.67 billion in outpatient spending may be linked to more aggressive coding practices enabled by AI tools nationwide.“We are seeing more AI tools used at different points in the care and billing process, and when those tools operate independently, they can unintentionally lead to friction,” Razia Hashmi, vice president of clinical affairs at the association, told Reuters.The broader debate comes as the United States continues to spend a significant portion of its economy on healthcare. According to data cited by Reuters, healthcare spending in the country accounts for about 18% of gross domestic product.

AI expected to help control healthcare costs

Both hospitals and insurers argue that AI could ultimately reduce costs in the healthcare system. Consulting firm McKinsey & Company estimates that for every $10 billion in revenue, insurers could save about $970 million by using AI for claims management, prior authorization reviews, and clinical decision support.Other projections suggest AI could also reduce hospital costs over time. In a research note published in September, Morgan Stanley estimated that AI-driven improvements in hospital care could save up to $900 billion by 2050. Still, some experts say the use of AI on both sides could cancel out the advantages.“The idea of (AI) bot versus bot is intrinsically a situation where no one's going to win,” said Christina Silcox, research director of digital health at the Duke-Margolis Institute for Health Policy.

Healthcare companies are increasing investments in AI

Healthcare organisations have increased spending on AI tools across the sector. Venture capital firm Menlo Ventures reported that healthcare AI investment reached about $1.4 billion in 2025, nearly three times the level recorded in 2024, based on a survey of 700 industry executives.Health systems accounted for about $1 billion, or 75% of total spending, while outpatient providers spent roughly $280 million.

Insurance companies contributed about $50 million.Several insurers have also outlined plans for AI investments. UnitedHealth Group has said AI could help the company save nearly $1 billion in 2026 and plans to invest about $1.5 billion in the technology this year, with similar spending expected in 2027. Executives said the company’s UnitedHealthcare division has focused on using AI to guide patients toward appropriate care.Meanwhile, Humana has estimated its AI investments could generate more than $100 million in savings over several years. CVS Health said its Aetna insurance business is investing in AI systems designed to improve clinical care and coordination with healthcare providers.

Hospitals also turning to AI to counter insurer scrutiny

Hospitals argue that AI tools are necessary to address increasing claim denials and lower reimbursements from insurers. HCA Healthcare, the largest publicly traded hospital operator in the United States, said it expects around $400 million in cost savings in 2026 from AI initiatives.The company has used AI to automate revenue management processes and assist doctors with clinical documentation. HCA Chief Financial Officer Michael Marks previously described the adoption of AI tools as a response “to the growing denial and underpayment activities from the payers.”Hospital systems say AI can also improve how medical services are documented. Providence Health System said AI tools help ensure procedures are accurately recorded, leading to more precise reimbursements from insurers.Providence Chief Health Information Officer Maulin Shah said both insurers and healthcare providers will need to adjust to the growing role of AI.“It's going to require adjustments in the relationship between the payers and the providers to understand this new reality. Unfortunately, what we're seeing is AI fighting AI,” Shah added.