AI documentation and billing tools are driving up healthcare costs without improving patient outcomes, according to an Oct. 14 report from the Peterson Health Technology Institute.
The analysis found that under current fee-for-service incentives, administrative AI used for documentation, coding, billing and prior authorization entrenches inefficient workflows and fuels inflationary billing instead of cutting waste.
AI scribes are a central example. After one multihospital health system deployed an AI scribe in its ambulatory and emergency department settings, Level 5 and Level 4 encounters for established patients rose 5% and 7%, respectively. That added an average of $1,004 in monthly revenue per provider, the report said, citing a KLAS Research analysis of an AI scribe vendor’s customers.
Health plans report an immediate jump in coding intensity when providers turn on AI tools, and several are deploying their own algorithms to flag coding outliers and scrutinize claims, per the institute.
Prior authorization shows a similar pattern. Insurers and vendors have not reported evidence that AI lowers the average cost per claim once the cost of the tool is factored in, according to the report. Faster submissions, denials and appeals are instead creating more back-and-forth between payers and providers.
Meanwhile, clinical AI with the most potential to expand access, such as hypertension management and mental health chatbots, remains stalled by payment, liability and licensure rules built for human clinicians.
“On our current trajectory, AI is set to exacerbate existing system failures,” said Caroline Pearson, executive director of the institute.
Ms. Pearson called for payment models that reward outcomes rather than activity. The institute pointed to CMS’ ACCESS model, a 10-year outcome-based program that launched in July 2026 with more than 160 participating organizations, as the most concrete step so far toward paying for AI-enabled care.
The institute, founded in 2023 and funded by the Peterson Center on Healthcare, based the report on 2025-26 workshops with leaders from health systems, health plans, technology companies and federal agencies.
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