American news media are again reporting that the AI bubble is about to burst, OpenAI’s ChatGPT is soaring to a record 200 million monthly users, and the new Dutch coalition program aims to halve administrative time in healthcare using AI. The coverage is mixed: is AI overhyped, or does it actually provide practical solutions that make people’s work easier?
While technological advancements often lead to more efficient work and increased productivity, there are sectors where their impact is less obvious. The healthcare sector is a good example. Despite innovations, healthcare continues to struggle with rising costs and increasing workloads, while productivity gains seem limited. This can largely be explained by an economic principle known as Baumol’s cost disease.
Cost versus care
Baumol’s cost disease is a phenomenon identified in the 1960s by economist William Baumol. It describes how in certain sectors, particularly the service sector, labor costs continue to rise without a proportional increase in productivity. This is because these sectors rely on human labor that is difficult to automate. In sectors like manufacturing, machines and technology can be used to increase productivity, thereby lowering the cost per unit. However, this is much more challenging in sectors like healthcare, where personal interaction and human skills are crucial.
In the healthcare sector, Baumol’s cost disease manifests more strongly than in many other sectors because healthcare remains largely dependent on human labor. A nurse caring for a patient or a doctor making a diagnosis cannot simply be replaced by machines. This means that personnel costs continue to rise, while productivity increases more slowly.
AI can alleviate symptoms
AI offers promising solutions for the healthcare sector, especially in administrative tasks and predictive analytics. While doctors and nurses still face high workloads and rising costs, AI can alleviate administrative burdens and provide faster diagnostic insights. In other sectors, such as technology and manufacturing, AI has already led to significant productivity increases by automating routine tasks and reducing errors. This technological advancement has made companies more efficient and competitive, which contrasts sharply with the limited productivity growth in healthcare, where the human component remains crucial.
Nevertheless, there are opportunities to effectively utilize AI in healthcare and cure Baumol’s disease. By automating routine processes, healthcare providers can focus on the human and complex aspects of their work, such as patient contact and decision-making. For this transition to be successful, more is needed than just technological innovation: training for healthcare professionals, policy measures, subsidies, strategies to broadly apply AI and a clear approach to making the change truly land with healthcare professionals, can ensure that AI contributes to productivity gains and better healthcare outcomes.
The new Dutch government program recognizes the challenges of the healthcare sector, particularly in terms of rising costs and a growing shortage of healthcare workers. In this context, artificial intelligence (AI) is seen as a potential solution for increasing administrative pressure and staff shortages. One of the cabinet’s key objectives is to halve administrative time in healthcare by 2030. This is made possible by AI technologies such as automatic summaries of patient records and generated draft letters for both medical professionals and patients. A pilot study showed that AI can reduce the administration time for summarizing medical records from seven minutes to just 16 seconds.
Balancing technology and human care
The use of AI is seen as a revolutionary step that will not only alleviate administrative burdens but also free up more time for direct patient care. This fits within the broader framework of the cabinet to stimulate technological innovations and promote productivity increases in healthcare without the need for more healthcare personnel. By structurally integrating such AI solutions into daily healthcare processes, the cabinet expects to reduce the pressure on healthcare workers while simultaneously improving the quality of care.
AI is a powerful tool to transform the healthcare sector and potentially cure Baumol’s disease. By automating administrative tasks and relieving the workload on healthcare providers, AI creates space for healthcare professionals to focus on what really matters: patient care. This development can help alleviate the healthcare crisis caused by rising costs and staff shortages. As writer Joanna Maciejewska aptly notes: “I want AI to do my laundry and dishes so that I can do art and writing, not for AI to do my art and writing so that I can do my laundry and dishes.” This emphasizes the goal of AI: not to replace human care, but to enhance it by taking over repetitive tasks. With the right implementation, AI can play an essential role in restoring balance in the healthcare sector. It can help prevent system overload, while keeping the human aspect of care central.
Author: Giel van Weezel
Bas Leerink
Managing Director Healthcare
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