Medicare’s new payment model is designed specifically for AI, and most of the tech world has no idea about it

Neil Batlivala spent seven years building a healthcare company that most of the tech industry had never heard of, and that serves a patient population that most of Silicon Valley ignores. But in the past month, this work has put him at the center of something much bigger.

His company, Pair Team, announced April 30 that it had been accepted into ACCESS, a Medicare program — as one of 150 participants selected by the Centers for Medicare and Medicaid Services to test what AI-driven medical care could look like at the federal level. The program will go live on July 5.

“The government is working to create common corridors for AI innovation in traditionally regulated industries,” he told me over a Zoom call a few days later. “The best solution wins, but in regulated industries like healthcare – that has not been the case.”

ACCESS — Advancing Chronic Care Through Efficient and Scalable Solutions — is a 10-year CMS program testing a payment model that rewards health outcomes rather than required activities (such as a certain number of check-ins). Participating organizations like Pair Team receive predictable payments for managing eligible conditions and earn the full amount only when patients achieve measurable health goals, such as lower blood pressure or less pain. It covers diabetes, high blood pressure, chronic kidney disease, obesity, depression and anxiety.

This payment structure is real news.

Traditional Medicare costs are reimbursed based on time spent with the doctor. There is no mechanism to pay for an AI agent that monitors a patient between visits, calls to check in, coordinates a housing referral, or makes sure someone gets their medications. ACCESS creates this mechanism for the first time.

“It’s a shift in the payment model,” Batlivala said. “You couldn’t do this before.”

The first group includes a wide range of participants – AI doctor startups, virtual nutritional therapy providers, connected device companies, and wearable device makers like Whoop. Batlivala is skeptical of some of them.

“I’m a big fan of wearables, but for seniors who are food insecure, I don’t know what Whoop is going to be able to do,” he said, adding of his own company, “We’ve been building toward this for over five years now.”

Pair Team launched in 2019 with a specific type of patient in mind: people with chronic conditions who were also dealing with unstable housing, too little food, or lack of transportation. About a third of Americans fall somewhere in this category.

The company’s premise was that you can’t improve health outcomes without addressing the full context of someone’s life. It now employs nearly 850 clinical professionals, manages what it describes as the largest community health workforce in California, and generates revenues in excess of nine figures per Patlivala. It has raised about $30 million, with backing from Kleiner Perkins, Kraft Ventures, and Next Ventures.

The model has peer-reviewed evidence behind it. A study, co-authored by researchers from the Pair Team and reviewed by the Journal of General Internal Medicine, evaluated the Pair Team’s integrated community-based model, which blends medical, behavioral, and social care for Medicaid members experiencing high rates of homelessness, serious mental illness, and chronic disease, and demonstrated strong patient engagement and significant reductions in avoidable emergencies and inpatient utilization. Batlivala says one in four hospital visits and one in two ER visits don’t happen while the patient is in his company’s care.

But for many years, providing this level of care required human teams, which limited the speed and affordability of expansion. Then, about nine months ago, the Pair Team deployed an AI voice agent called Flora as its primary patient-facing interface. Flora is available 24 hours a day, handles reception, coordinates referrals, and does the check-ins that keep patients engaged between clinical visits.

The first call that changed his thinking was to a 67-year-old woman living out of her car, suffering from PTSD and congestive heart failure. I spoke with Flora for over an hour. “It was amazing and frustrating at the same time,” Batlivala told me. “Flora was probably the only ‘person’ I’d talked to in weeks about her situation.” Now, hour-long conversations with Flora had become routine. “This is the companionship piece,” he said. “And it turns out that this was really an intervention.”

ACCESS engineers are former startup operators themselves. The program was designed by Abby Sutton, director of the CMS Innovation Center, and Jacob Schiff, chief artificial intelligence and technology officer at the CMS Innovation Center. Sutton was previously a venture capitalist at a healthcare fund called Rubicon Founders. Schiff is a former healthcare founder. Both joined CMS under the Trump administration and their emerging backgrounds are reflected in the program’s design: outcomes-based payments, direct-to-consumer enrollment, and a deliberate push to compete.

There are real risks. Participants feed highly sensitive patient data — intimate conversations about housing, illnesses, and mental illness — into a federal infrastructure with a documented history of breaches, including exposed Social Security numbers. For the vulnerable populations ACCESS is designed to serve, this is not an impractical concern.

There are financial risks too. The track record of CMS innovation programs is mixed. A 2023 Congressional Budget Office analysis found that the CMS Innovation Center increased federal spending by $5.4 billion during the first decade instead of producing the expected savings. CMS also pays less per patient per month than many respondents expected, meaning the calculations only work with organizations that have fully automated most of their interactions with patients.

Batlivala’s response to the payment issue is that it is a feature, not a bug. “If you want to build a model that really incentivizes the use of AI, reimbursement rates have to be low,” Lee said. “The economy only works if you run a simple AI-first process.”

The Pair Team says it now has partnerships that give it access to nearly 500,000 potential patients, and it wants to reach 1 million patients within three years.

Healthcare investors have been watching this closely. Digital health funding reached its highest first-quarter total since the pandemic this year, with AI companies accounting for the bulk of it. But ACCESS barely registered outside the health tech trade press.