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Medical claim management: how AI is solving healthcare’s multibillion-dollar problem

Healthcare claim management has traditionally been ineffective: slow, error-prone, and costly. Now, artificial intelligence (AI) is fixing the issues. With smart automation, predictive analytics, and intelligent software tools, AI is driving faster reimbursement, reducing mistakes, and improving financial health of care delivery.
AI in healthcare claims processing and management
AI in healthcare claims processing and management

    Managing healthcare claims continues to be one of the most intricate and expensive administrative functions. In the U.S. alone, providers collectively spent over $25.7 billion on claim adjudication in 2023. This was a 23 % increase over the previous year with denial rates hovering around 15%. Meanwhile, administrative overhead accounts for about 25% of total U.S. healthcare spending, which is roughly double the rate seen in other developed countries.

    These figures reflect more than just financial strain—they highlight deep-seated inefficiencies. Manual workflows, data inaccuracies, outdated coding, and time-consuming denial management in medical billing all contribute to delayed reimbursements, stale cash flow, and frustrated staff and patients.

    This difficult reality creates an opportunity for AI. AI offers a way to overhaul claim operations through intelligent document processing, automated coding, and fraud detection. Leveraging AI speeds up processing. It also increases first-pass acceptance rates. It tightens compliance. It cracks down on fraud. And it improves transparency for patients. The result is a smarter, more reliable claims ecosystem for payers, providers, and patients.

    Current challenges of healthcare claim management

    Let’s map the modern claim management workflow:

    • Claim creation: Providers gather relevant clinical notes and patient/payer information.
    • Submission and validation: Claims are submitted electronically but are often flagged for missing or incorrect information.
    • Adjudication: The payer evaluates the claim and either approves or denies it.
    • Payment processing: Approved claims lead to reimbursement; others go into denial management.
    • Denial handling and appeals: Denied claims undergo rework, appeals, and resubmission.

    Despite being labeled “modern” and driven by digital tools, this process is still riddled with friction:

    • Data inconsistency: Nearly 45% of denials result from missing or inaccurate data, with frequent rule changes exacerbating the issue.
    • Coding errors: ICD-10/CPT coding mistakes result in up to 10% of revenue loss and a 125% spike in coding-related denials year-over-year.
    • Claim denials and rework: Initial denial rates hover between 11% and 20%, and around 38% of providers report denials on at least 10% of their claims.
    • Prolonged cycles: In 2023, manual claim inquiries cost U.S. providers approximately $12.5 billion, with each inquiry taking an average of 24 minutes. These delays hinder reimbursements and cash flow.
    • Fraudulent claims: Fraud accounts for an estimated 3%–10% of U.S. healthcare expenditures, resulting in billions of dollars in annual costs.

    To put this into perspective: nearly $25 billion is spent each year on claim processing inefficiencies. In 2024, about 11.8% of claims faced initial denials, up from 11.5% in 2023.

    First submission claim denial rate in healthcare
    First submission claim denial rate in healthcare
    First submission claim denial rate in healthcare

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    AI capabilities redefining claim management approaches

    Historically, healthcare claim management relied on a patchwork of manual reviews, static business rules, and disjointed systems. AI is fundamentally changing this outdated routine. From data capture to denial resolution, AI tools are not only streamlining processes but also making them smarter, faster, and significantly more reliable. Below, we break down where these capabilities are making the biggest impact.

    Intelligent document processing (IDP)

    Claim management begins with a lot of paperwork. AI-powered optical character recognition (OCR), combined with natural language processing (NLP), now allows systems to automatically extract relevant information from scanned medical records, electronic health record (EHR) notes, insurance forms, and explanation of benefits (EOB) documents. IDP accelerates claim initiation and improves data accuracy, eliminating manual data entry and reducing transcription errors. Providers have reported noticeable reductions in claim preparation time, with some experiencing processing speeds that are 60%–70% faster than manual workflows.

    Automated coding assistance

    One of the most prevalent and costly factors behind claim denials is coding errors. AI-driven coding assistants analyze clinical documentation in real time, suggesting appropriate ICD-10, CPT, and DRG codes based on the content of physician notes, diagnostic reports, and operative summaries. These tools reduce the burden on human coders and minimize miscoding incidents, leading to higher first-pass acceptance rates and lower rework volumes. In some healthcare systems, AI-assisted coding has cut denial rates related to coding mistakes by nearly 30%.

    Real‑world examples

    Example A: Document processing supercharge at Omega Healthcare

    Omega Healthcare, a leading medical revenue cycle management provider with over 30,000 employees and nearly 250 million annual transactions, needed a more scalable solution to handle growing volumes of clinical documentation. To address this, the company adopted UiPath’s AI-driven Document Understanding platform, featuring OCR and NLP to extract and organize data from disparate healthcare documents. Here are the key outcomes:

    1. 15,000 manual hours eliminated per month
    2. 40% reduction in documentation turnaround time
    3. 99.5% data accuracy maintained
    4. 2x staff productivity boost, enabling focus on complex tasks like coding validation and denial prevention

    Example B: Major U.S. insurer achieved lightning‑fast claim adjudication

    A top-tier U.S. insurer serving over 3 million members integrated Appian’s low-code platform with AI technologies provided by Brillio to modernize its claim adjudication process. Prior systems were hindered by fragmented workflows and time-consuming manual reviews. The solution combined OCR, intelligent form processing, sentiment analysis, and machine learning (ML) models to triage and prioritize claims based on predicted outcomes. Here’s what they achieved:

    1. 65% faster claim resolution
    2. 80% reduction in manual input
    3. 30% decrease in processing errors
    4. almost 50% drop in claims-related admin costs, freeing resources for patient engagement and compliance

    Example C: Fraud detection saves Personify Health millions

    In an effort to combat rising fraud and waste, Personify Health partnered with Health at Scale, the Massachusetts Institute of Technology (MIT), and the University of Michigan to deploy an advanced, real-time claims screening platform. The system was designed to detect irregular billing patterns and provider behavior. It could analyze vast datasets across regions, services, and time frames with high precision, flagging problematic claims before payment. The results are as follows:

    1. $11.8 million in unnecessary payouts avoided over eight months
    2. 54% of flagged claims resulted in reduced payments
    3. $3,916 average savings per flagged case
    4. Protected payer finances and system integrity by targeting fraud without burdening legitimate providers

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    Conclusion

    F.A.Q. about AI in medical claim management

    • AI in claim management involves using AI technologies like ML and NLP to automate and improve the efficiency and accuracy of claim processing.

    • Some of the key benefits of implementing AI in RCM include streamlined claim processing, improved accuracy, reduced costs, better decision-making, and enhanced customer experience. AI can also help detect and prevent fraud through pattern recognition and real-time alerts.

    • Healthcare systems like RCM handle a vast amount of sensitive data, referred to as protected health information (PHI), which should remain protected and secure. When implementing AI-powered RCM, companies should follow industry standards, regulations, and best practices for encryption, secure data storage, strict access controls, data anonymization, continuous monitoring and auditing, and compliance frameworks.

    • While AI has the potential to significantly improve claim processing, it also comes with risks and limitations, including potential bias or inaccuracies stemming from training data, lack of transparency, regulatory and compliance concerns, and difficulties integrating AI with legacy systems.

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