Hospitals and insurers have been fighting an AI billing war for the better part of two years, with providers deploying the technology to optimize and defend their coding, and payers using it to audit and push back.
“AI is placing pressure on cost through RCM tools, and we have seen those patterns in terms of service intensity, and cost per encounter going up,” UnitedHealthcare CEO Tim Noel said at a June media event attended by Becker’s. “It clearly has occurred, and that is a source and driver of trend. I don’t think that that’s going to be persistent. That’s a moment that we’re in that will get to saturation.”
Revenue cycle executives and physicians have described the ongoing dynamic as an “AI arms race,” that has been adding administrative cost and friction on both sides. Last month, PwC projected that employers’ medical cost trend will reach its highest level in 17 years in 2027, pointing to provider adoption of AI documentation and coding tools as one of five primary inflators. Nearly 70% of surveyed health plans ranked it among their top three concerns, and roughly 20% named it the single largest driver.
Mr. Noel said UnitedHealthcare is already working to move beyond paid-claims data to understand “more upstream where these hot spots are.”
“The global trends are the global trends, and there are some opportunities to address those in the moment, and we are,” he added. “But we also have to look for new sources of affordability moving forward.”
UnitedHealth Group has previously said it will spend a combined $3 billion on AI this year and next, and has more than 1,000 use cases in production across its businesses. The company has been explicit about its strategy of developing AI-powered software products internally and selling it to the rest of the healthcare industry. Optum Integrity One, an AI-assisted coding and RCM platform the company sells to hospitals, is currently its best-selling AI product and has been deployed across more than 100 systems.
Since mid-2025, other major insurers, including Elevance Health, Cigna and Centene have also been flagging what they describe as “aggressive provider coding” as a growing concern. A March report from the Blue Cross Blue Shield Association offered what the organization described as the first publicly available data connecting AI-assisted coding to rising healthcare costs. The research analyzed commercial inpatient claims covering a three-year window ending in March 2025 and found that among hospitals with the sharpest growth in case complexity, per-member costs increased 9% between 2023 and 2024, with coding intensity estimated to account for about 20% of that rise. Projected nationally, the researchers put potential excess inpatient spending tied to AI-enabled coding at roughly $663 million, with outpatient exposure of at least $1.67 billion.
Health systems have largely contested the “aggressive coding” framing, saying that higher-acuity documentation reflects a sicker patient population and stricter compliance with coding standards.
“The idea that hospitals are coding aggressively to drive up costs is misleading,” Robert Boos, a former vice president and chief revenue officer at Lynchburg, Va.-based Centra Health, told Becker’s last fall. “Coding is governed by strict federal and industry standards, and health systems invest heavily in compliance, training and auditing to ensure accuracy.”
Dennis Laraway, executive vice president and CFO of Cleveland Clinic, previously told Becker’s that the friction runs deeper than a technology-based coding dispute, and that neither side benefits from the current dynamic.
“We don’t control the purse strings, so we’re often responding to claims edits, rules, bulletins and things of that nature that guide, from the purse-string holders — from government payers, CMS, Medicaid plans to small, medium and large commercial plans across our communities,” he said. “We do our best to adopt change, create billing editors and claim editors, and try to align with the rules and with changes over time to minimize as much friction as we can.”
“The payer-provider friction is really unsustainable, and just because both sides can ramp up AI algorithms doesn’t make that better,” Mr. Laraway added. “We do need to figure that out better in the industry, between both the payers and providers.”
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