A bill aimed at ensuring artificial intelligence does not drive up healthcare costs advanced Tuesday in the Senate. Supporters say the bill is needed to prevent AI technology from being used to inflate medical charges, while still allowing its use to improve efficiency for doctors and hospitals.
House Bill 565, Limit Use of AI Medicaid/Commercial Insurance, would prohibit artificial intelligence from being used as the sole basis to deny a utilization review determination. It also targets AI systems used in healthcare billing, coding, and documentation that are designed to promote upcoding, or billing for a higher level of service, severity, or risk than the clinical record supports.
Sen. Amy Galey, R-Alamance, told the Senate Judiciary Committee the legislation is intended to address concerns that some AI-driven billing systems are producing higher charges without corresponding changes in care.
“There is an indication, based on billing developments in the last three to four years, that some providers in the country are using billing systems that are designed to increase the billing,” Galey said.
Galey said the bill is aimed at the software itself, not individual physicians or coders.
“The issue is that the code itself appears to have a bias written into it, which enhances or elevates the charge,” Galey said. “The root of the problem is not the person who is doing the backside of the coding. The issue is the algorithm itself. And it has been written in such a way to enhance the billing.”
Under the bill, AI developers and healthcare providers would be prohibited from intentionally designing, using, or modifying billing, coding, or documentation systems to promote upcoding. Violations would be treated as unfair and deceptive trade practices, with the aim of deterring manipulation of charges through AI.
She said insurers may have access to large datasets showing anomalies across hospitals or states, putting them in a better position than individual patients to identify questionable trends. But she said any review of proprietary code could be done under seal to protect intellectual property.
“We do not want to stifle any kind of efficiencies that can come in healthcare from adopting artificial intelligence,” Galey said.
Still, several senators raised questions about whether the bill fully addresses the risks of AI on both sides of the healthcare system.
Sen. Benton Sawrey, R-Johnston, said lawmakers need to examine AI use by providers and insurers, particularly when patient outcomes and costs are at stake.
“I think it’s important that we have this discussion holistically on both sides of the equation, both the provider side and the payor side,” Sawrey said.
Sawrey noted that AI has grown rapidly in healthcare over the past decade.
“AI is going to have a substantial disruptive impact on all parts of healthcare,” Sawrey said.
The bill also drew concern from Sen. Michael Lee, R-New Hanover, who said AI can offer real benefits in medical coding when used properly. Lee said his mother handled coding for his father’s medical practice and understood the difference between finding the right code and upcoding.
“It seems that the benefits of what is provided by AI could be substantial in creating efficiencies. I think we might need to look at it a little bit more holistically,” Lee said, adding later that “we might need to massage this issue a little bit more.”
Because the Senate version makes significant changes to the bill, if HB 565 passes the Senate, it must return to the House for concurrence. The House will then decide whether to accept the Senate’s amendments or propose further changes.
The original House bill, which passed second reading on April 30 in a 110-1 vote, focused on a different subject before the Senate replaced it with the current language regulating artificial intelligence in healthcare billing and insurance decisions.