LIVE MARKETS-TD Cowen says AI promises hospitals a margin cure 

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TD COWEN SAYS AI PROMISES HOSPITALS A MARGIN CURE

Artificial intelligence can boost US hospital profits by improving billing and cutting administrative work, while larger gains from making clinical staff more productive will take longer to materialize, TD Cowen says.

The brokerage estimated AI could add about 240 basis points to acute-care hospital margins in its base case and as much as 430 basis points if hospitals achieve meaningful gains in clinical labor productivity, a scenario it described as a "holy grail."

Billing and collections offer the clearest near-term opportunity, TD Cowen said. AI can improve medical records and billing codes, capture missed charges, prevent claim denials and detect underpayments, while automation can lower collection costs.

Together with longer-term labor savings, the brokerage estimated AI could lift annual operating earnings by about 8% to 12% at HCA Healthcare HCA.N, Tenet Healthcare THC.N and Universal Health Services UHS.N, all of which it rates "buy."

Hospital operators are already investing in AI to cut costs and improve efficiency. HCA is using the technology as part of a plan targeting about $400 million in savings in 2026, while insurers are also adopting AI to review claims and control payments.

Labor-related gains could take years because hospitals must redesign workflows and turn time saved by doctors and nurses into lasting cost reductions. Larger systems with strong data and centralized operations are likely to benefit first, TD Cowen said.

An AI "arms race" in healthcare is escalating as hospitals seek to improve billing and insurers work to control costs, the brokerage said.

TD Cowen cautioned that insurers and government programs could eventually respond to hospitals' savings by lowering payment rates, making early adoption important.

(Kunal Das)

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