An empty hospital operating theatre (illustrative). Image: Dr. Jayesh Amin / Wikimedia Commons, CC BY-SA 3.0, cropped
Hospitals are billing more patients as medically complex, but they aren’t treating them any differently, according to a new analysis from the Blue Cross Blue Shield Association (BCBSA). The insurers’ group blames the AI billing tools now used by most hospital systems, and puts the extra cost to Blue Cross plans at $942 million between 2023 and 2025.
What Blue Cross found
BCBSA, whose member companies cover about one in three Americans, looked at de-identified hospital claims from early 2023 to the end of 2025. In its white paper, published on September 24, it says the share of hospital stays billed as complex rose from about 37% to about 40% over that time.
Compared with 2023, hospitals billed 55,158 extra cases as complex. BCBSA says those cases alone cost its plans $653 million, an average of about $11,800 each.
The rise didn’t come from more surgeries or procedures. It came from extra “secondary diagnoses” added to a patient’s claim, such as low sodium, acidosis or anemia after surgery. Adding one of these can move a stay into a higher-paying billing category. Many can be picked up from a single abnormal lab result, which BCBSA says makes them “particularly well-suited for detection” by AI software that scans lab data and doctors’ notes. More than 60% of hospital systems now use AI coding tools, according to the group.
To check whether patients were really sicker, the researchers looked closely at major bowel surgery, mostly for colon cancer and diverticular disease. The most complex claims rose from 20.2% to 22.7%, while the simplest fell from 36.6% to 32.8%. Yet at the hospitals where coding grew fastest, ICU use, transfusions and length of stay were the same as elsewhere, or lower.
“Not sicker patients”
Anemia is BCBSA’s clearest example. At the fastest-growing hospitals, 13.7% of bowel surgery patients were diagnosed with anemia, against 9.9% at other hospitals. But fewer of those patients got a blood transfusion: 16.9%, compared with 19.3% elsewhere. Luke Chalker, BCBSA’s senior vice president of product and data science, said:
If patients are truly sicker, we’d expect to see more treatment. The disconnect between diagnoses and treatment suggests that AI is identifying more billable conditions, not sicker patients.
Luke Chalker, Blue Cross Blue Shield Association
David Merritt, the group’s senior vice president of external affairs, said the research “underscores the urgent need to better understand these AI tools” as families face higher costs. BCBSA says the extra spending ends up in higher premiums and out-of-pocket bills.
It’s worth being clear about what the study is. It’s the insurers’ own analysis of their own data, not peer reviewed, and it doesn’t name any hospitals or AI products. Its link to AI is also indirect: the paper says the rise “coincides” with hospitals adopting AI billing software, and that the tools “may be linked” to the extra spending.
Hospitals say patients really are sicker
The American Hospital Association (AHA) had already pushed back. In a fact sheet from July 31, it called claims that AI drives up coding “unsubstantiated”. It says an ageing population, more chronic disease and simpler care moving out of hospitals mean inpatients really are sicker, pointing to its analysis with Vizient that found hospitals’ case-mix index, a standard measure of how ill patients are, rose about 5% from 2019 to 2024. Hospital leaders also say AI helps them record care accurately and fight claim denials, Medical Daily reports.
The AHA also turns the charge back on insurers. It cites a 2025 finding from the Medicare Payment Advisory Commission that upcoding by insurers led to about $40 billion in overpayments to Medicare Advantage plans, and says some insurers use “unsubstantiated allegations” of upcoding to cut what they pay hospitals.
“Bots fighting bots”
Both sides now use AI: hospitals to document and bill, insurers to review and deny claims. The New York Times called the BCBSA study the latest sign that AI is adding to healthcare costs, TechCrunch reports. Shiv Rao, the cardiologist who founded medical AI company Abridge, described where that could lead:
Bots fighting bots, agents fighting agents, a horrible dystopic future nobody wants to live in.
Shiv Rao, Abridge founder, to The New York Times
Rao also said AI could ease tensions and cut costs. Chalker rejected the idea of a fair fight. “It’s not a war,” he told the Times. “It’s a completely one-sided blood bath,” with insurers, in his telling, on the losing end.
Why it matters
Billing is one of the first places AI is changing how money moves through healthcare, and patients pay either way, through premiums or through denied claims. Neither side’s figures are independent yet, so the fight over who is gaming the system is likely to end up with regulators.
Sources: Blue Cross Blue Shield Association, BCBSA white paper, American Hospital Association, TechCrunch, Medical Daily, Inc..
