Medicare’s new payment model is built for AI, and most of the tech world has no idea

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

His company, Couple teamannounced on April 30 that it had been done accepted inside ACCESSa Medicare program – as one of 150 participants chosen by the Centers for Medicare & Medicaid Services to test what AI-driven medical care could look like on a federal scale. The program goes live on July 5.

“The government is creating swim lanes for AI innovation in traditionally regulated industries,” he told me on a Zoom call a few days later. “The best solution wins, which is not the case in regulated sectors such as healthcare.”

ACCESS – Advancing Chronic Care with Effective, 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 qualifying conditions and earn the full amount only when patients meet measurable health goals, such as lower blood pressure or less pain. It includes diabetes, hypertension, chronic kidney disease, obesity, depression and anxiety.

That payment structure is the real news.

Traditional Medicare reimburses based on the time you spend with a doctor. There is no mechanism to pay for an AI agent to monitor a patient between visits, call to check in, coordinate a referral to a home, or arrange for someone to pick up their medications. ACCESS creates that mechanism for the first time.

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

The first cohort includes a wide range of participants: AI physician 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 a senior struggling with food insecurity, I don’t know how much Whoop will be able to do,” he said, adding of his own company, “We’ve been working towards this for over five years.”

Pair Team launched in 2019 with a specific type of patient in mind: people with chronic conditions who were also dealing with unstable housing, insufficient food or a 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 full context of a person’s life. It now employs approximately 850 clinical professionals, manages what it describes as the largest healthcare workforce in California, and generates more than nine-figure revenues, according to Batlivala. It has raised about $30 million along the way, including from Kleiner Perkins, Kraft Ventures and Next Ventures.

There is peer-reviewed evidence behind the model. A study co-authored by Pair Team researchers and peer-reviewed by the Journal of General Internal Medicineevaluated Pair Team’s community-integrated model, which combines medical, behavioral, and social care for Medicaid members with high rates of homelessness, serious mental illness, and chronic diseases, and it showed strong patient engagement and significant reductions in avoidable emergency and inpatient use. Batlivala says one in four hospital visits and one in two emergency room visits do not occur while a patient is in his company’s care.

But for years, delivering that level of care required human teams, limiting speed and low-cost scalability. Then, about nine months ago, Pair Team deployed a voice AI agent called Flora as the primary patient-facing interface. Flora is available 24 hours a day, handles intake, coordinates referrals and does check-ins to keep patients involved between clinical visits.

The first phone call that changed his thinking was to a 67-year-old woman who lived out of her car and suffered from PTSD and congestive heart failure. She spoke with Flora for over an hour. “It was both incredible and depressing,” Batlivala told me. “Flora was probably the only ‘person’ she had talked to about her situation in weeks.” Now hours of conversations with Flora are routine. “That’s the companion piece,” he said. “And it turns out this is really an intervention.”

The architects of ACCESS are former startup operators themselves. The program was designed 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 a healthcare fund called Rubicon Founders. Shiff is a former healthcare founder. Both joined CMS under the Trump administration, and their startup backgrounds are reflected in the program’s design: outcomes-based payments, direct-to-consumer enrollment and a single-minded push for competition.

There are real risks. Participants feed extremely sensitive patient data—intimate conversations about housing and illnesses and mental illness—into a federal infrastructure with a documented history of breaches, including publicized social security numbers. ACCESS is designed to serve vulnerable populations, which is not impractical care.

There are also financial risks. 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 instead of realizing expected savings. CMS also pays less per patient per month than many participants expected, meaning the calculation only works for organizations that have fully automated most of their patient interactions.

Batlivala’s response to the refund concerns is that it is a feature and not a bug. “If you want to build a model that really drives the use of AI, reimbursement rates have to be low,” he told me. “The economics only work if you run a lean, AI-first operation.”

Pair Team says it currently has partnerships that give it access to around 500,000 potential patients, and it aims to reach one million within three years.

Healthcare investors are watching all of this closely. Digital health financing has reached its peak highest Q1 total since the pandemic this year, with AI companies accounting for the majority of it. ACCESS, meanwhile, has barely registered outside the health technology trade press.