Health systems risk 'overinvesting' in AI, Moody's says

Health systems stand to improve revenue cycle efficiencies, optimize labor, lower administrative costs and improve patient outcomes when leveraging artificial intelligence correctly. However, not every AI partnership and initiative will be successful, or beneficial, for healthcare providers long term.

An October 2023 Moody's Investor Services report outlined the current opportunities and challenges with AI, noting the credit impact is still uncertain and system-dependent.

"The overall credit impact of AI on the industry will depend on the extent to which healthcare systems can also manage the associated risks, including increased vulnerability to cyberattacks and patient data breaches, as well as heightened regulatory and compliance challenges," the report authors stated.

AI systems must be HIPAA compliant and ensuring data privacy will be expensive for health systems. The investment and expertise needed to implement a successful AI strategy could change the competitive landscape in healthcare, Moody's noted.

"Successful implementation of AI could widen the gap between the best and worst performers by distributing revenue generation for those that do not adapt to the new technology. It could also empower startups to enter established markets and take away market share," the report stated.

The gap won't just be between the "haves" and "have nots" either; large and profitable health systems making the wrong investments or entering into ill-advised partnerships could haunt them long term. AI technologies can "create an outsized reliance on particular vendors and necessitate substantial investment," according to the report.

"Given that AI technology is still in a nascent stage, some healthcare systems will overinvest in opportunities that do not fulfill expectations for them," the report authors warned.

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