Blue Cross Says AI Billing Tools Added $942 Million in Hospital Costs. Hospitals Say Patients Got Sicker.

The Blue Cross Blue Shield Association says hospitals billed its member insurers $653 million more than the 2023 baseline would predict, after classifying 55,158 additional inpatient stays as medically complex between 2023 and 2025. That figure comes from an analysis BCBSA published this month, not a projection or a survey. It worked out to an average of $11,800 in extra reimbursement per case, and BCBSA puts the total added cost of rising coding intensity across the Blue System at about $942 million over the two-year period.

What changed, according to the analysis, was not the number of surgeries or procedures hospitals performed. It was the number of secondary diagnoses added to each claim, conditions like low sodium, acidosis, or mild anemia that can be identified from a single lab value. Adding one of those to a chart can shift a claim into a higher-paying diagnosis-related group even when nothing about the patient's treatment changes. BCBSA ties the pattern to hospitals adopting AI-assisted revenue cycle software that scans charts and lab results for anything billable. The share of Blue System inpatient claims coded as complex rose from about 37 percent in early 2023 to roughly 40 percent by late 2025.

A close look at bowel surgery

BCBSA singled out major bowel procedures, a group of surgeries used mainly to treat colon cancer and diverticular disease, for a more detailed review. Between 2023 and 2025, the share of these cases billed at the highest complexity tier rose from 20.2 percent to 22.7 percent, while the share billed as non-complex fell from 36.6 percent to 32.8 percent. BCBSA attributes $60.8 million in added cost to that single procedure group alone.

To test whether that shift reflected sicker patients or more aggressive documentation, the analysis compared diagnosis rates against actual treatment. Hospitals in the top quarter for coding growth diagnosed anemia in bowel surgery patients at a rate of 13.7 percent, against 9.9 percent at other hospitals, a 38 percent gap. But their transfusion rate for those same anemia patients ran lower, not higher: 16.9 percent, compared with 19.3 percent at other facilities. The same high-coding hospitals also reported lower ICU utilization overall, 11.5 percent versus 13.2 percent, despite classifying about three-quarters of their bowel cases as complex against roughly two-thirds elsewhere.

“The disconnect between diagnoses and treatment suggests that AI is identifying more billable conditions, not sicker patients.”

Hospitals dispute the reading

The American Hospital Association, the trade group representing hospitals, rejects the idea that coding software rather than patient health is driving the increase. In a fact sheet on coding intensity, the AHA says hospital case mix index, a standard measure of how sick patients are, rose about 5 percent between 2019 and 2024, and it attributes 19 percent of hospital expense growth over that period to caring for sicker, more complex patients. The AHA points to an aging population, more chronic disease, and the shift of lower-acuity care into outpatient settings as reasons claims would look more complex without any change in coding behavior.

The AHA also argues insurers have coding integrity problems of their own. It cites a 2025 Medicare Payment Advisory Commission finding that upcoding by Medicare Advantage plans contributed to $40 billion in Medicare overpayments, and it notes that Aetna settled a Justice Department lawsuit over upcoding allegations in March 2026, while Massachusetts sued a major commercial payer in May 2026 over what the state called potentially fraudulent upcoding practices. Separately, the AHA has criticized insurers for automated downcoding programs that it says cut reimbursement for medically necessary care without a clinician reviewing the chart.