The new Medicare payment model is designed for AI, and most of the tech world has no idea

Neil Batlivala has spent seven years building a healthcare company that most of the tech industry has never heard of and serving patients that most of Silicon Valley ignores. But last month, that job put him in the middle of something much bigger.

His company, Pair Team, announced on April 30 that it was accepted into ACCESS, the Medicare program – as one of 150 participants selected by the Centers for Medicare & Medicaid Services to explore what AI-driven medical care could look like on a government scale. The show will go live on July 5.

“The government is creating new AI swim lanes in traditionally controlled industries,” he told me over a Zoom call a few days later. “The best solution wins, which, in a regulated industry like health care – was not the case.”

ACCESS – Improving Chronic Care with Effective, Scalable Solutions – is a 10-year initiative by CMS that is testing a payment model that rewards health outcomes rather than required activities (such as a specific number of admissions). Participating organizations like Group Two receive predictable payments for managing eligible conditions and receive the full amount only when patients achieve measurable health goals, such as lower blood pressure or reduced pain. It includes diabetes, high blood pressure, chronic kidney disease, obesity, depression and anxiety.

That payment structure is real news.

Traditional Medicare reimburses him based on the time spent with the doctor. There is no way to pay for an AI agent who monitors a patient during visits, makes check-in calls, directs house transfers, or makes sure someone takes their medication. ACCESS creates that device for the first time.

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

The first group includes a wide range of participants – AI startup doctors, virtual nutrition therapy providers, connected device companies, and wearable manufacturers like Whoop. Batlivala doubts some of them.

“I’m a big fan of wearables, but for an elderly person with food insecurity, I don’t know how much Whoop will do,” he added of his company, “We’ve been building on this for five-plus years now.”

The couple’s team was started in 2019 with a specific type of patient in mind: people with chronic conditions who faced unstable housing, very little food, or lack of transportation. About a third of Americans fall somewhere in that category.

The company’s premise was that you can’t improve health outcomes without addressing the overall condition of a person’s health. It now employs about 850 medical professionals, runs what it describes as the largest public health practice in California, and, according to Batlivala, makes more than nine figures. It has raised approximately $30 million in funding, backed by Kleiner Perkins, Kraft Ventures, and Next Ventures.

The model has peer-reviewed evidence behind it. The study, co-authored by Team Two researchers and peer-reviewed by the Journal of General Internal Medicine, evaluated the Pair Team-integrated community model, which combines medical, behavioral, and social care for Medicaid members with high rates of homelessness, severe mental illness, and chronic disease and demonstrated strong patient participation and significant reductions in preventable emergencies. Batlivala says one in four hospital visits and one in four ER visits do not occur when a patient is under his company’s care.

But for years, delivering that level of care required teams of people, which limited how fast and cheap it could be. Then nine months ago, the Pair Team deployed an AI voice agent called Flora as a patient-facing interface. Flora is available 24 hours a day, manages meals, directs referrals, and checks to keep patients engaged during clinic visits.

The first call that changed his thinking was with a 67-year-old woman who was living out of her car, managing PTSD and heart failure. He talked to Flora for over an hour. “It was overwhelming and overwhelming,” Batlivala said. “Flora was probably the only ‘person’ he had talked to in weeks about his condition.” Now, hour-long conversations with Flora are routine. “That’s a friend episode,” he said. “And it turns out that’s really an intervention.”

The designers of ACCESS themselves are first-time employees. The program was designed by Abe Sutton, Director of the CMS Innovation Center, and Jacob Shiff, Chief AI and Chief Technology Officer of the CMS Innovation Center. Sutton was previously a venture capitalist at a health startup called Rubicon Founders. Schiff is a former health care innovator. Both joined CMS under the Trump administration and their original backgrounds are evident in program design: outcomes-based payments, direct-to-consumer enrollment, and a deliberate push for competition.

There are real risks. The participants provided unusually sensitive patient data — intimate conversations about housing, illness and mental illness — to federal infrastructure with a documented history of breaches, including exposed Social Security numbers. For vulnerable people ACCESS is designed to help, that is not an impossible 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 its first decade rather than generating projected savings. CMS also pays less per patient per month than many expected, meaning the statistics only apply to organizations that have automated most of their patient interactions.

Batlivala’s response to the return concern is that it’s a feature, not a bug. “If you want to build a model that really encourages the use of AI, the rates of return have to be low,” he told me. “Economics only work if you do small, early AI work.”

Pair Team says it currently has existing relationships that enable it to reach about 500,000 patients, and that it wants to reach one million within three years.

Healthcare investors have been watching this closely. Digital health funding reached its highest Q1 figure since the outbreak of the pandemic this year, with AI companies taking the lion’s share of it. But ACCESS has yet to register outside of the health technology trade media.