Blue Cross study: AI coding added $942M to hospital costs in 2024-2025

AI-assisted documentation and coding added nearly $1 billion to Blue Cross Blue Shield insurers' inpatient costs over two years, according to a study the Blue Cross Blue Shield Association (BCBSA) released on Sept. 24. Between 2024 and 2025, more frequent billing for secondary conditions raised costs by about $653 million, while more intensive care classifications contributed $942 million in total added costs compared with 2023.

How AI changes hospital coding

BCBSA says providers use AI to scan existing patient records for conditions that went undocumented, and deploy ambient scribes, tools that passively listen to a doctor-patient conversation and draft the medical note. When extra conditions are recorded, an inpatient case can be classified as more severe, and insurers pay more for it. The study looked at inpatient billing: cases where patients were admitted to hospitals or other medical facilities.

More diagnoses, not more treatment

BCBSA represents 31 independent Blue Cross Blue Shield companies that cover more than 100 million people, a representative said. Among patients who had major bowel surgery, diagnoses of partial intestinal blockages rose 55% and diagnoses involving an overload of acid in the body rose 33% between the first quarter of 2023 and the fourth quarter of 2025.

"If patients are truly sicker, we'd expect to see more treatment," said Luke Chalker, senior vice president of product and data science at BCBSA. Anemia diagnoses increased, he noted, but blood transfusions, a common treatment for a shortage of healthy red blood cells, did not. "The disconnect between diagnoses and treatment suggests that AI is identifying more billable conditions, not sicker patients," Chalker said. Dr. Razia Hashmi, the association's vice president of clinical affairs, made the same point about the bowel surgery cases.

Hospitals push back

The American Hospital Association said in August that rising coding intensity can also reflect an older, sicker patient population and more accurate documentation of conditions that already existed; hospital case-mix severity rose about 5% between 2019 and 2024, the group said. Insurers such as Centene have similarly said that health systems' use of AI has produced aggressive or inappropriate reimbursement claims.

The dispute extends an argument BCBSA has been building all year. A March analysis of commercial claims estimated that about $663 million in inpatient and at least $1.67 billion in outpatient spending could be tied to more aggressive AI-enabled coding. Reuters reported in March that US healthcare spending on AI reached $1.4 billion in 2025, with health systems accounting for roughly $1 billion.