This Dirt Cheap Healthcare Stock Could Be a Hidden Artificial Intelligence (AI) Opportunity (Hint: It's Not Eli Lilly)

Artificial intelligence (AI) has the potential to transform several different areas of the healthcare industry

When it comes to healthcare stocks, investors have focused a lot of attention lately on Eli Lilly and Novo Nordisk and the potential of their blockbuster weight management treatments, including Mounjaro, Zepbound, Ozempic, and Wegovy

Both companies are also looking into the potential that artificial intelligence (AI) can bring to their operations -- and for good reason

One of the obvious applications that AI has for healthcare is facilitating pharmaceutical companies in clinical trials and drug discovery

While such use cases are exciting, I see another pocket of the healthcare industry that could be positively disrupted by AI: insurance

Back in April, UnitedHealth greatly disappointed investors after the company published revised financial guidance that indicated a lower-than-expected earnings outlook for the remainder of the year

Management blamed the lower fitability on two primary factors

First, utilization rates in the company's Medicare Advantage gram exceeded internal forecasts, taking a toll on the company's cost structure

Second, reimbursements in the company's pharmacy benefits management (PBM) platform, Optum Rx, were negatively impacted by reductions in Medicare funding as well as changes to some of the patient demographic files in this segment of the

In short order, the stock price plunged and has shown no indications of recovery, so far

But before you go writing UnitedHealth off as a broken, let's examine how AI has the potential to help the health insurance industry and how UnitedHealth specifically could implement this nology to imve the over time

AI has the potential to transform the The underlying issue surrounding UnitedHealth's challenges right now has to do with forecasting

There isn't anything fundamentally broken with the

Rather, unforeseen changes in the macroeconomic environment led to a different reality than what management had previously modeled -- ultimately leading to higher costs and compressed fit margins

By using machine learning, UnitedHealth could train AI models on claims data and subsequently integrate these s into electronic health records (EHR) to help predict more accurate utilization trends

More efficient data s could help UnitedHealth hone its pricing strategy and better plan for cost spikes

In addition, AI has the ability to build predictive models that can more accurately assess patient risk files

In theory, this has the potential to analyze more granular detail around various segments of patient data as it relates to engagement rates and risk files

This could help imve reimbursement forecasts for the Optum

Lastly, natural language cessing (NLP) can also be used to create scenario models by simulating how a could be impacted based on changes in the regulatory landscape

An example of a company that specializes in this area of AI training is FiscalNote

This could help UnitedHealth plan more strategically as it pertains to budgeting decisions during periods of political uncertainty

Is UnitedHealth Group stock a buy right now

While s of UnitedHealth trade at a slight premium to other large health insurers based on forward earnings multiples, the bigger takeaway from the trends below is that the stock price is hovering near a five-year low

Whether UnitedHealth transitions into an AI-powered service remains to be seen

Investors with a long-run time horizon might want to consider holding on to their s, though, as the ideas explored above showcase how AI has the potential to become a game-changing advancement for the health insurance industry over time

Looked at a different way, UnitedHealth could transform its over the next several years by making cognizant investments in this nology

Nevertheless, the stock appears dirt cheap right now, and I think patient investors will be rewarded as the company turns things around over the next couple of quarters

Editor's note: This article has been corrected

UnitedHealth's pharmacy benefit manager is called Optum Rx

Fiscal Note is a transcription service used by The Motley Fool

Adam Spatacco has positions in Eli Lilly and Novo Nordisk

The Motley Fool recommends Novo Nordisk and UnitedHealth Group

The Motley Fool has a disclosure policy.