Hospitals deployed artificial intelligence tools to squeeze $942 million in extra healthcare costs from American patients over just two years — and the bills kept climbing while actual care stayed flat.
The findings represent one of the first comprehensive attempts to quantify how AI-powered medical coding systems are reshaping hospital billing practices across the country. While the healthcare industry has promoted artificial intelligence as a tool for improving diagnostic accuracy and operational efficiency, the Blue Cross Blue Shield analysis suggests these technologies are being leveraged primarily to maximize reimbursement rather than enhance patient outcomes.
A Blue Cross Blue Shield Association analysis released Thursday exposes how AI coding software has become a billing bonanza for hospitals. The technology didn’t make patients sicker or treatments better. It just found more ways to charge more money for the exact same care.
Medical coding — the process of translating diagnoses, procedures, and services into standardized alphanumeric codes — has long been a complex but crucial element of healthcare billing. These codes determine how much hospitals and physicians receive from insurers and government programs like Medicare and Medicaid. Even subtle differences in how conditions are documented can shift a claim into a higher-paying category, a practice known as “upcoding” when done inappropriately. The introduction of sophisticated AI systems has dramatically accelerated hospitals’ ability to identify and apply codes that maximize revenue, according to the BCBSA research.
“If patients are truly sicker, we’d expect to see more treatment. For example, we’re seeing significantly more anemia diagnoses at these hospitals without a corresponding increase in transfusions.”
BCBSA Senior Vice President Luke Chalker said the pattern reveals the scam: “The disconnect between diagnoses and treatment suggests that AI is identifying more billable conditions, not sicker patients.”
This divergence between documentation and treatment is particularly striking because it contradicts the normal relationship between diagnosis and care. In traditional medical practice, identifying a condition typically leads to intervention — whether medication, procedures, or monitoring. When diagnoses surge without corresponding treatment increases, it suggests the documentation is serving billing purposes rather than clinical ones.
The analysis shows hospitals’ AI tools documented a sudden surge in patients with “complex conditions” between 2023 and 2025. Secondary diagnoses that shifted claims into higher-reimbursement categories accounted for about $650 million of the increased costs.
Those diagnoses — like anemia after bowel surgery — sounded medical but rarely triggered actual treatment. The AI just knew how to code them in ways that unlocked bigger checks from insurers.
Secondary diagnoses are conditions that coexist with the primary reason for hospitalization. While legitimately documenting these conditions can provide a more complete picture of a patient’s health status, they also frequently trigger higher payment rates under Medicare’s diagnosis-related group system and similar private insurance reimbursement models. The BCBSA analysis suggests AI systems are identifying these secondary conditions with unprecedented thoroughness — not necessarily because clinical documentation has improved, but because the software is optimized to capture every billable nuance.
The Blue Cross/Blue Shield Association says that AI is already driving *up* healthcare costs, as hospitals use the technology to find instances where they can bill more for the same level of care. https://t.co/af1SzA7D8vpic.twitter.com/mstup0IfpP
— Joe Weisenthal (@TheStalwart) September 27, 2026
BCBSA Senior Vice President David Merritt warned the AI billing inflation “underscores the urgent need to better understand these AI tools and the role they may play in exacerbating the affordability crisis.”
Translation: hospitals are using AI to game the system while families can’t afford care.
The timing of these revelations is particularly significant as healthcare affordability continues to dominate household budgets and political debates. American families already face the highest healthcare costs in the developed world, with insurance premiums, deductibles, and out-of-pocket expenses consuming an ever-larger share of income. The revelation that AI systems may be systematically inflating bills without improving care adds a new dimension to long-standing concerns about waste and profiteering in the healthcare system.
Healthcare experts previously told the Daily Caller News Foundation that certain AI tools would contribute to rising costs. The new BCBSA data confirms it — AI is driving premiums and out-of-pocket expenses higher for families, employers, and taxpayers.
The $942 million identified in the analysis represents costs that ultimately flow through to patients via higher insurance premiums, increased deductibles and copayments, and elevated tax-funded spending on Medicare and Medicaid. Employers offering health benefits also bear the burden through higher insurance costs, potentially constraining wage growth and hiring. The ripple effects extend throughout the economy as healthcare spending — already approaching 20 percent of U.S. gross domestic product — continues its upward trajectory.
Unaffordable healthcare remains a defining issue heading into November’s midterms. An NBC News poll released in September found voters trust Democrats over Republicans on healthcare by 22 percentage points.
