Payers, Providers Can Curb The AI Arms Race In Revenue Cycle

Payers and providers have spent years investing in technology and staff to boost their side of the revenue cycle equation. While the initial benefits of these outlays have been substantial, tactics to gain maximum value have increased tension and often resulted in abrasive experiences for providers and patients, threatening to add excess dysfunction to the system overall. Instead of continuing this arms race, the industry should work collaboratively to find an offramp and steer towards a reimbursement environment that benefits everyone, including patients.

The emergence of generative artificial intelligence (AI) has accelerated the ability for providers to improve their revenue cycle management (RCM) activities and increase revenues. We are seeing investments push the envelope at nearly every point across RCM, including:

• Agentic AI that verifies eligibility, resolves alerts, and escalates issues to staff when needed
• Automating aspects of the prior authorization process to gather and submit appropriate clinical documentation for each payer’s process and policies
• Ambient listening solutions that automate and optimize chart documentation and coding during patient visits
• Patient billing and payments collection tailored to patient channel preferences and personalized engagement
• Alerts that identify revenue leakage hidden in underpayments and automate claim re-submission

The reach of these types of tools is likely to proliferate across the provider market as private capital continues to feed RCM innovation by acquiring and scaling offerings, and as solutions in general become more widely available. We estimate that the ambient listening segment, for instance, will have a compound annual growth rate of 30% or more over the next seven years.

Payer investments are not keeping pace

Payer investments in recent years have centered on reacting to provider utilization and billing behaviors. Responses range from bots to respond to provider inquiries and machine learning to identify pockets of suspicious billing behavior to applying generative AI to reduce time and unit costs associated with documentation reviews to validate payments, medical appropriateness, and more.

However, these capabilities are no longer enough to keep pace with providers and are likely to exacerbate tensions. Many payers have noticed increased appeals, independent dispute resolution, and inquiry volumes as providers have automated research and document generation. Payers with more mature analytical capabilities are noticing less obvious impacts across their payment integrity and utilization management functions, including an increased prevalence of highly weighted DRGs and case-mix indices as providers improve documentation, declining claim review yields due to better coding, and escalating acuity during office visits.

Finding areas for payers and providers to partner

While payers need to continue investing in capabilities in the short term to mitigate impacts from provider advances, they should start planning for more sustainable, collaborative approaches for the medium- and long-term. The future is about deescalating the AI-arms race and leveraging a combination of different approaches in concert that each lead to greater collaboration with the network, including:

• Technology improvement: accelerate interoperability with key providers, generative and agentic-AI initiatives to eliminate friction and enable new models for aligning on reimbursement levels like determining patient acuity
• Policy simplification: eliminate sources of market discordance or undue payer/provider administrative effort to avoid waste where provider performance has improved
• Contractual changes: revisit provider payment models with key portions of the network and accelerate path to payments that simplify administrative processes, reduce need for alignment on every transaction, and create incentives for greater AI supervision and joint governance

These solutions are not one size fits all. Near-term improvements are still needed across the reimbursement value-chain as payers grapple with rising medical and administrative cost trends. But now more than ever, a more transformative lens is needed to advance new processes that fundamentally reduce the amount of administrative burden throughout the RCM value chain including for both payer and provider stakeholders. This requires greater collaboration among stakeholders — better alignment on reimbursement policy in areas with little substantive disagreement, use of technology to prevent escalation at the outset vs. automating it across the process — and reducing friction by reimagining reimbursement through payment innovation, governance, policy simplification, and interoperability.