Jan 12, 2023

How Investing in AI Can Address the Crisis in Healthcare Administration

Michael Sable

edicine is a uniquely human profession—a combination of science, technology, art, empathy, and above all compassion. But all too often medical professionals are burdened by the weight of bureaucracy in the highly fragmented world of the American healthcare system. Indeed, of the nearly $4 trillion spent on healthcare annually in the United States, administrative spending is about one-quarter of the total expenditure. 

This is an amazing amount of overhead that generates a tremendous administrative burden for medical professionals. For example, activities that have nothing to do with patient care consume over half of a nurse’s workload and nearly a fifth of physician activities. Fortunately, artificial intelligence is emerging as a powerful technological tool to help alleviate this administrative burden when it is becoming a professional and financial crisis in the healthcare industry. 

The venture capital markets have taken notice as the healthcare AI sector in the US is expected to balloon from $5 billion in investments in 2020 to over $45 billion by 2026. Indeed, in the first quarter of 2021, US VCs invested $2.5 billion in 111 healthcare AI startups which represents a 140% year-over-year increase.

In the United States, finding a way to leverage advanced technologies like artificial intelligence to alleviate the administrative burden on medical professionals is important because healthcare is such a huge component of the American economy. In 2020, US healthcare spending increased by 9.7% to $4.1 trillion or 19.7% of GDP. The healthcare information technology market is projected to triple to $441 billion by 2025. 

The American healthcare system is profoundly fragmented with healthcare claims and billing being very complex processes due to a large number of communication and transaction points involving multiple stakeholders. For example, filing a healthcare claim requires confirmation with payers as to the validity of the medical necessity of a procedure before physicians are authorized to provide the service; physicians and patients must submit a claim to payers; payers need to review the claim and oftentimes contact providers for further details; payments have to be made through multiple clearinghouses; and occasionally, appeals by providers over disagreements regarding payment must be adjudicated. 

The entire process is time-consuming, complex, and becoming draining as it detracts from their core mission of working with patients. There are now a whole host of non-patient-related administrative activities that medical professionals are required to be involved in that detract time and energy which could be better spent on serving their patients.

Administrative Activities in the US Health Care System

Function                               Types of Activities

Record Keeping                             Writing and inputting chart notes

Transaction-related                                 Billing, claims processing, filling prescriptions, ordering tests

Benefits management                               Insurance product design, verification of benefits

Sales/marketing                                        Producing, selling, or purchasing competitive products in the marketplace

Fraud detection                                      Identification of billing irregularities

Regulatory/compliance                              Activities to comply with government and nongovernmental regulations and accreditation, i.e.                                                                       licensing, HIPAA compliance, OSHA, JCAHO, NCQA

Surprisingly, even in this digital age, accurate chart notes are a major administrative bottleneck in the medical profession. According to a report by the Institute of Medicine (IOM), 1.5 million injuries occur each year because medical professionals and pharmacists misread sloppy handwriting. These handwriting errors involving prescription medications kill up to 7,000 Americans each year. Also, the medical profession is one of the most highly regulated in the world. 

For example, due to the need to comply with the privacy mandates intrinsic to the Health Insurance Portability and Accountability Act (HIPAA), healthcare organizations must be very careful. They are also constrained by the fact that most (70%) of the actors in the healthcare market are technology novices so the adoption of AI and related technologies has been slow. Violations of HIPAA have cost organizations over $75 million in fines since 2016. To avoid these penalties and maintain their licenses, doctors must pay careful attention to the regulatory stipulations of governmental bodies. 

Artificial intelligence applications deployed through cloud infrastructure have the potential to revolutionize healthcare. A few of the best use cases for venture investment include:

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The value that can be generated through the deployment of AI-related healthcare applications is enormous. Immediate priorities for most healthcare providers include enhancing the efficiency of back-office operations in the cumbersome, fragmented US healthcare bureaucracy. To alleviate this administrative burden and foster efficient administrative workflow, healthcare workers need access to services that can help them to understand how to effectively harness AI technologies such as voice-to-text transcription which eliminates time-consuming activities including writing chart notes, filling prescriptions, and ordering tests. Savings realized could be as high as $18 billion by 2026.

Likewise using AI to enhance fraud detection could result in $17 billion in savings by 2026. Although medical professionals particularly nurses are often on the frontlines of flagging fraud, this is primarily a back-office activity as fraud detection traditionally relies on a combination of computerized/rules-based and manual reviews of medical claims. It is important to have sound mechanisms of fraud detection for financial reasons but also because hospitals and medical professionals may be legally liable if they are delinquent in not acting to prevent it when federal funds such as Medicaid are used to finance medical procedures. Here is an example of how AI can improve the aforementioned medical claims/billing process:


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The key AI technology is in the self-learning algorithms that like all AI applications leverage massive amounts of cloud-hosted data to detect patterns and then provide a customized response in real-time at a far faster rate than any human ever could.

The administrative burden on medical professionals has become a serious bottleneck to employee satisfaction within the healthcare industry. Surveyed medical professionals consistently indicate in many different studies across specialties that the time and energy that they must devote to administrative tasks are not only a drain on their time but also on their emotions. The prevailing mantra is: “This isn’t why I went into medicine.” 

Ironically, the problem has been worsened by the electronic health records (EHR) that are now used by approximately 90% of physicians. EHR were originally envisioned as a way to streamline and enhance data sharing but have become a tremendous time-sink. Physicians in outpatient settings spend about 27% of their day on direct clinical face time with patients but 49% on EHRs and desk work with many also working up to two hours every evening on EHR-related tasks. Moreover, the increasing emphasis on quality metrics that physicians must document has resulted in more administrative work for medical professionals. 

Yet another administrative bottleneck is that treatments and medications typically require prior authorizations from payers which takes up even more time and energy. According to a 2020 American Medical Association survey, 86% indicated that the administrative burden of prior authorizations was “high or extremely high.” To quantify, according to the Medical Economics Physician Report, prior authorizations consumed, on average, more than 16 hours per week of the time of medical professionals and their staff. 

The overall result is that across the healthcare industry, this administrative burden is linked to rising physician burnout rates. A 2021 survey by the Physicians Foundation indicated that 56% of independent physicians and 66% of primary care physicians reported frequent burnout symptoms. The impact of physician burnout is immense as it is estimated to cost the US healthcare system $4.6 billion annually and it is also regarded as a significant contributing factor to the anticipated shortage of 139K doctors by 2033.


A number of AI-enabled solutions have emerged to help alleviate the administrative burden on medical professionals. As noted earlier, EHRs have become a ubiquitous tool with the market. Although they have contributed to an increase in the administrative burden on physicians and nurses. By using artificial intelligence to make EHRs more user-friendly, the true value of this technology can be unlocked. 

A leading example of an AI-enabled EHR product is offered by DeepScribe, which has raised $30 in a Series A funding led by Index Ventures. DeepScribe is a HIPAA-compliant software application that doctors can conveniently use on their existing devices to record information garnered through doctor-patient conversations and produce comprehensive clinical documentation using AI and advanced deep learning that is accurate, compliant, and secure with the EHR. To maximize accuracy, each transcription is read by a medical student who acts as a failsafe to bridge the gap between the AI and the EHR. 

These students can leverage their knowledge and experience to flag inaccuracies or tell if a medication name or diagnosis has been misspelled or swapped. The AI software has an interoperability advantage in that it can integrate with the EHRs of multiple companies including those offered by Athena Health, Claimpower and Elation amongst others. According to DeepScribe, the impact on alleviating the administrative burden on medical professionals and ensuring efficient compliance with the 2009 HITECH act that required doctors to maintain digital documentation of all patient interactions and appointments is profound as it saves doctors about 3 hours of work per day on average while generating more accurate results.

Artificial intelligence can also enhance the efficiency of administration and back office operations in healthcare by helping to prevent claim denials. According to a study by the Kaiser Family Foundation, insurers deny about 18% of in-network medical claims which results in time-consuming and costly peer reviews and appeals. Sift Healthcare, which has received over $16 million in venture financing from Alios Ventures and First Trust Capital Partners is using artificial intelligence and machine learning to address this problem. Artificial intelligence can have a powerful impact in this sector because it is so very data intensive as 86% of collectable denial dollars can be found in 25% of claims; the 10% of patients least likely to pay their bills account for more than 50% of outstanding patient bills and also pay less than 5% of their bills; and 40% of total patient payment write-off dollars can be found in 10% of accounts. 

Sift leverages historical payments data and model based-monitoring to identify billing patterns that require payer-specific claim edits to reduce the risk of future denials by using artificial intelligence to optimize payments and drive revenue strategy. The company’s products currently include AI-Driven Denials Management, Patient Payments Intelligence, Payments Intelligence Platform, and Rev/Track.

Prior authorization is another administrative bottleneck that can be alleviated through artificial intelligence. There is a need in the market for AI-enabled software that automate prior authorization processes so as to allow payers to receive prior authorization requests directly from providers electronically. 

Such solutions would simplify all of the steps associated with prior authorizations ranging from determination to request submission to status checking. Banjo Health, a startup that has received $5 million in Series A financing from Epsilon Health Investors, Spark Growth Ventures and Tau Ventures is developing a decision support platform that uses AI to customize the platform to specific prior authorization criteria so as to make prior authorization more efficient. 

By being integrated with EHRs, the company can draw from medical notes to drive accurate decisions while reducing the administrative burden on both the payer and the provider’s staff. The company’s vision is to produce a smart solution that makes refined, compliant prior authorization decisions automatically that iteratively become more intelligent with each decision so as to reduce the turnaround time from days to hours while generating answers for patients faster.


Alleviating the administrative burden on medical professionals and the other stakeholders in America’s complex healthcare system is an absolute sine qua none to address its increasing financial and human costs. It is also an enormous venture capital investment opportunity since healthcare represents about 20% of US GDP. Fortunately, artificial intelligence technology is rapidly maturing to the point where it can have a substantial impact on this problem. Billing, EHRs, claims denials, prior authorization and fraud detection can all be dramatically improved through the use of artificial intelligence applications so venture investment is flowing to AI healthcare startups in these areas. 

However, it should be noted that artificial intelligence has not yet matured to the point that it can be fully automated. In a life or death industry like healthcare, some level of human involvement is greatly preferred by regulators. According to Jodi Daniel, the former head of the Office of Policy in the Office of the National Coordinator for Health Information Technology: “If you look at (FDA) oversight of clinical decision support tools, they treat tools that have a physician intermediary or clinician intermediary very differently than those that are fully automated.” 

Still, the impact of a tool that is over 90% accurate but only requires human involvement to maximize its utility is sufficiently profound that it can greatly alleviate the administrative burden on medical professionals while unlocking enormous cost, efficiency, and medical advantages. This means that ROIs on VC investments will likely be strong. The history of AI is that as computational power and the amount of data available for analysis increases, the utility and accuracy of the artificial intelligence system will rise exponentially. The future is bright.

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