* AI could save insurers $970 million per $10 billion

revenue, McKinsey estimates

* Report finds AI-enabled coding inflates inpatient and

outpatient spending

* Companies eye savings as they deploy AI

* Providers so far spending more on AI than payers,

survey by venture capital firm finds

By Sriparna Roy and Sneha S K

March 12 (Reuters) - Artificial intelligence is being

deployed on both sides of the tug-of-war between U.S. healthcare

systems that want to be paid more for medical procedures and

insurers who want proof the services were necessary, and experts

are having a hard time predicting a winner.

Centene ( CNC ), an insurer focused on the Medicaid program

for low-income people, recently raised the issue, saying

hospitals were aggressively or even improperly using revenue

software to trigger reimbursement.

"There have been some of these pockets where folks coming

into the emergency department with a fever, all of a sudden all

have sepsis," Centene ( CNC ) CEO Sarah London said at a September

investor conference, referring to a life-threatening condition

that triggers a host of medical interventions.

A Blue Cross Blue Shield analysis of its commercial hospital

claims found that roughly $663 million in inpatient spending and

at least $1.67 billion in outpatient spending may be tied to

more aggressive, AI-enabled coding practices nationwide.

"We are seeing more AI tools used at different points in the

care and billing process, and when those tools operate

independently, they can unintentionally lead to friction," said

Razia Hashmi, vice president of clinical affairs at Blue Cross

Blue Shield Association.

AIM TO DRIVE DOWN COSTS

In recent months, some health insurers have increased

reliance on AI to help catch treatments and bills they say are

unwarranted, even as hospitals use AI tools to document those

medical services with codes that boost reimbursement, a review

of company statements and interviews with a dozen experts and

analysts found.

The U.S. spends more on healthcare than any other nation at

about 18% of its gross domestic product.

Both sides hope AI will drive down costs. Consultancy firm

McKinsey estimates that for every $10 billion in revenue, AI

could save insurers $970 million through claims management,

medical prior authorization requests and by guiding clinical

care.

AI tools are already leading to hospital care savings and

they could amount to as much as $900 billion by 2050, Morgan

Stanley said in a September research note.

"The idea of (AI) bot versus bot is intrinsically a

situation where no one's going to win," said Christina Silcox,

research director of digital health at Duke-Margolis Institute

for Health Policy.

COMPANIES PLAN SAVINGS

Several analysts, including TD Cowen's Ryan Langston and

Whit Mayo of Leerink Partners, said insurers and hospitals could

save money by using AI, but they did not provide estimates.

Companies are also using AI widely for administrative tasks.

So far, hospitals have spent more, according to Menlo

Ventures, an early-stage venture capital firm that invests in AI

and healthcare technology.

Healthcare AI spending reached $1.4 billion in 2025, nearly

triple 2024 levels, Menlo said, based on its survey of 700

industry executives. Of that, health systems accounted for

roughly $1 billion, or 75% of that total, and outpatient

providers shelled out another $280 million, while payers

contributed about $50 million.

UnitedHealth Group ( UNH ) has said AI could save it nearly

$1 billion in 2026.

The company said it hopes to invest nearly $1.5 billion in

AI this year and at least as much in 2027. Its UnitedHealthcare

insurance unit has primarily focused its AI spending on the

consumer experience, including guiding patients to higher

quality care, executives have said.

Smaller rival Humana recently estimated its AI

investments will generate more than $100 million in savings over

a few years. The company declined to comment on specifics.

A spokesperson for CVS Health ( CVS ) said its Aetna health

insurance business is investing in AI that can help improve

clinical care and that it was partnering with providers to

ensure patients get appropriate care.

Cigna ( CI ) and Elevance did not respond to

questions about AI strategy between hospitals and payers.

THE AI BATTLE OVER PAYMENT

While insurers say hospital coding and billing practices are

contributing to rising medical costs and squeezing profit

margins, hospitals say they need AI to fight back against

insurers.

HCA Healthcare ( HCA ), the largest publicly traded U.S.

hospital chain, said in January it expects about $400 million in

2026 cost savings from AI initiatives. The company has been

using AI to automate revenue management and for doctors'

clinical paperwork. It did not respond to a request for comment.

HCA Chief Financial Officer Michael Marks had previously

described its use of AI tools as a response "to the growing

denial and underpayment activities from the payers."

AI tools are helping to accurately represent medical

services rendered, allowing more precise reimbursement from

payers, said Providence, a chain of 51 hospitals located across

seven states, including California and Texas.

Providence Chief Health Information Officer Maulin Shah said

both sides will need to adapt to the changes artificial

intelligence is already causing.

"It's going to require adjustments in the relationship

between the payers and the providers to understand this new

reality," Shah said. "Unfortunately, what we're seeing is AI

fighting AI."