Every dollar health systems invest in AI has to serve one of two goals: securing a larger share of today's healthcare dollars or transforming how care gets delivered over time. This is healthcare's first fundamental AI dilemma in 2025: prioritizing shorter-term value capture or longer-term value creation?
The case for value capture: need immediate wins in the ‘AI arms race’ with payers
The revenue cycle arms race is accelerating. One survey found that final denial rates for inpatient care surged 51% between 2021 and 2023. Denials have increased as payers deploy more sophisticated AI tools. It’s debatable whether payers’ tools are accurate — UnitedHealth was accused of using an AI model with a 90% error rate to deny MA claims — but their impact is undeniable.
Health systems are deploying their own AI tools and seeing dramatic results:
One THMA member boosted revenue by $15 million in year one using AI-powered CDI.
Emory Healthcare cut appeals letter writing time by 90%, with 75% of AI-drafted appeals succeeding.
Health systems can achieve some of these gains fast, but there's a catch. Because payers are also deploying AI to advance their own bottom line, early gains may not last. The health system that saw a $15 million boost in first-year CDI revenue, for instance, saw the gains drop to $7 million in year two as payers adapted.
The case for value creation: transforming healthcare sees compounding gains over time
Some health systems are making a longer-term bet: focusing their discretionary investments on transforming care delivery. They’re trying to use AI to provide better/more efficient/new care instead of battling with payers over current spending.
The early results are compelling. For instance, physicians at Texas Health Resources who use DAX CoPilot to automate their clinical documentation are saving more than five hours weekly. At WellSpan Health, AI virtual assistants are handling routine patient outreach and education around colonoscopies that once consumed valuable nursing hours.
Unlike revenue cycle gains, which evaporate as payers adapt, operational improvements compound over time: staff get better at working with AI tools, patients get better care, and benefits multiply.
How you can choose between value capture or value creation
While health systems will need to do some value capture and some value creation, trying to do both can risk muddling your message and confusing your staff. You need a clear strategic emphasis.
Consider prioritizing value capture if you're under immediate financial pressure and need rapid ROI, or if you’ve seen sharp recent increases in your denial rates (which might suggest that your payers are already beating you in the AI “arms race”). In that case:
Identify the “pain points” in your revenue cycle (for example, prior authorizations or CDI) and choose AI partners who target those specific areas.
If in doubt, start with appeals letter automation, which typically shows the fastest returns.
Use today’s “value capture” efforts to build the AI governance and technology infrastructure that will be required for tomorrow’s “value creation” efforts.
On the other hand, consider prioritizing value creation if you have short-term financial breathing room and your payer mix makes you less vulnerable to AI-driven denials. This path also makes sense if your organization is already excited about AI's potential, since you'll need broad buy-in for transformational efforts. In that case:
Focus first on proven use cases where other systems have already demonstrated lasting impact (e.g., clinical documentation and patient flow optimization)
Build AI literacy across your organization deliberately because transformation requires staff who understand both the potential and limitations of AI tools
As you demonstrate success with initial projects, measure both financial and operational impacts to justify continued investment in transformation over short-term revenue gains
When posed the “value creation vs. value capture” dilemma at THMA’s Trustee Summit, 82% of health system CEOs and board chairs favored value creation. Compare that to CIOs and COOs, who are more evenly split between the approaches.
The gap suggests that while healthcare’s top leaders envision AI primarily as a transformative force, the immediate pressures of revenue capture are harder to ignore on the ground.
What to consider:
Specific revenue cycle processes causing the most revenue loss need AI defense first
Choosing value creation means explaining to your board why you're accepting short-term revenue losses for long-term transformation
Determine how to create an organization-wide understanding of your strategic choice and its implications
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