The new Medicare payment system is designed for AI, and most of the techs don’t know it

Neil Batlivala has spent seven years building a healthcare company that most of the technology companies have never heard of and that serves many patients in Silicon Valley. But last month, this job put him in front of something much bigger.

his company, Pair Teamannounced on April 30 that it was acceptance to AVAILABLEThe Medicare program – as one of 150 people selected by the Centers for Medicare & Medicaid Services to test what AI-driven health care could look like at the federal level. The app will be available on July 5.

“The government is creating a pipeline to create AI capabilities in industries that are already controlled,” he told me on Zoom a few days later. “The best answer wins, which, in a regulated industry like health care — it wasn’t.”

ACCESS – Improving Chronic Care with Effective, Affordable Solutions – is CMS’ 10-year program to test a payment system that results in health outcomes rather than performance (such as the number of checkups). Participating organizations like Pair Team receive a fixed amount for managing eligible conditions and receive full funding only when patients meet measurable health goals, such as lower blood pressure or less pain. It affects diabetes, hypertension, kidney disease, obesity, depression, and anxiety.

Those pay structures are real issues.

Traditional Medicare reimburses based on the length of time spent with a doctor. There is no way to pay for an AI assistant who monitors a patient between visits, calls for checkups, arranges home deliveries, or makes sure someone takes their medication. ACCESS creates the system for the first time.

“It’s a change in payment models,” Batlivala said. “You couldn’t do this before.”

The first round looks at a variety of participants — AI startups, health food providers, connected device companies, and wearable manufacturers like Whoop. Batlivala doubts some of them.

“I’m a big fan of clothing, but for an adult who is struggling with food insecurity, I don’t know how much Whoop can do,” he said, adding his company, “We’ve been planning this for five plus years.

Pair Team was founded in 2019 by a specific type of mental patient: people who manage chronic illnesses who also experience unstable housing, limited food, or lack of transportation. About a third of Americans fall somewhere in that category.

The company’s goal was that you cannot change health outcomes without addressing all aspects of a person’s life. It now employs about 850 medical professionals, runs what it describes as California’s health care provider, and, according to Batlivala, earns more than nine percent of its revenue. It has raised nearly $30 million, backed by Kleiner Perkins, Kraft Ventures, and Next Ventures.

The model has peer-reviewed evidence behind it. Research, written by Pair Team researchers and peer reviewed Journal of General Internal Medicineevaluated the Pair Team model, which integrates medical, behavioral, and social services for Medicaid populations with severe homelessness, severe mental illness, and chronic illness and demonstrated strong patient engagement and significant reductions in avoidable emergencies and patient utilization. Batlivala says one in four hospital visits and one in two ER visits do not occur while the patient is in his company’s care.

But for years, providing that care required teams of people, which hindered speed and cost. Then, about nine months ago, Pair Team deployed an AI voice assistant named Flora as its patient-facing interface. Flora is available 24 hours a day, running errands, coordinating referrals, and keeping patients occupied between medical visits.

The first call that changed his mind was with a 67-year-old woman living in her car, managing PTSD and congestive heart failure. Flora spoke for an hour. “It was surprising and disappointing,” Batlivala said. “Flora was probably the only ‘person’ he talked to for weeks about his problem.” Now, an hour-long conversation with Flora is routine. “That’s the supporting part,” he said. “And it’s clear that I’m doing something.”

The builders of ACCESS are former founders. The program was developed by Abe Sutton, Director of the CMS Innovation Center, and Jacob Shiff, Chief AI and Technology Officer of the CMS Innovation Center. Sutton was previously a venture capitalist at the health care fund Rubicon Founders. Shiff is a former medical inventor. Both joined CMS under the Trump administration and their initiatives are reflected in the program’s design: outcome-based payments, direct-to-consumer enrollment, and a deliberate push for competition.

There are real dangers. Students are feeding patient information — intimate conversations about housing and illness and mental illness — in a state with a broken record, including showed Social Security numbers. For people at risk, ACCESS is designed to be a help, not an insurmountable problem.

There are also financial risks. The history of CMS innovation programs is mixed. A 2023 Congressional Budget Office analysis found that the CMS Innovation Center increased government spending by $5.4 billion in its first decade instead of generating the expected revenue. CMS is also paying less per patient per month than many expected, which means the math only works for organizations that have developed their own interactions with patients.

Batlivala’s answer to the return problem is that it’s a feature, not a bug. “If you want to build a model that encourages the use of AI, the return on investment has to be low,” he told me. “The economy only works if you’re doing lean, AI-first work.”

Pair Team says it currently has a contract that gives it access to about 500,000 patients, and that it aims to reach one million within three years.

Healthcare providers have been watching this closely. The Digital Health Fund has come into its own The lowest price for Q1 shares Since the pandemic this year, the AI ​​industry has taken a lot of it. But ACCESS has never registered outside of the medical trade press.