At the start of the year, Medicare launched an artificial intelligence-enabled prior authorization program for certain medical services in six states, including Washington.

The program has since sparked controversy as patients and doctors reported significant delays and denials, leaving many in pain while they waited out lengthy appeals processes.

In response to a lawsuit, the Centers for Medicare and Medicaid Services released last week documents that shine a light on how the program has been working in its early months.

In Washington, the program's denial rate was 53% in its first three months, the documents show.

Known as the Wasteful and Inappropriate Service Reduction program — or WISeR — the initiative was introduced by CMS as a way to curtail unnecessary medical procedures and save money for Medicare, the public health insurance program for people over 65. Previously, traditional Medicare did not require prior authorization for most services.

The newly released documents include participation agreements, program guides, status reports and feedback from doctors, and were obtained by the Electronic Frontier Foundation, a nonprofit that advocates for the protection of civil liberties in technology. Earlier this year, EFF sued the federal government to obtain the records.

It's important for the public to have access to this information and to see how private AI companies are shaping access to healthcare," said Lena Cohen, a staff technologist at EFF.

Controversial business model

The documents outline how the federal government is paying for the program.

To run WISeR, CMS contracted with third-party tech companies to approve or deny requests for certain medical services using "enhanced technology," such as AI and machine learning. Contractors receive a portion of the money they save Medicare.

The documents indicate that CMS pays contractors 25% of the amount that a service has historically cost in a given geographic region, minus some adjustments. For instance, CMS reduces payments slightly to reflect claims that would have been denied even in the absence of the WISeR pilot program.

Contractors may also get up to 10% of their pay docked if they perform poorly, such as by responding to requests too slowly or making inaccurate determinations, according to a WISeR participant guide.

Doctors and hospitals have expressed concerns that the program motivates contractors to turn down medically necessary care to earn more payments. As it turns out, CMS' own staff raised similar worries over a year ago, long before the program was rolled out.

"The participants are paid based on the claims denied," wrote the agency's actuarial staff, in a memo included in the recently released documents. "As a result, model participants will have an incentive to deny as many claims as possible."

'It is staggering'

Last year, CMS actuaries projected that the WISeR program would reduce claims by between 10% and 22.5%, mostly through denials.

The denial rate in Washington was far higher during the program's rollout.

The WISeR contractor in Washington is a healthcare tech company called Virtix Health. Through the end of March, Virtix made over 6,000 prior authorization decisions; 53% of them were denied, according to a status report sent to CMS at the end of March.

"It is staggering," wrote Rep. Suzan DelBene, D-Medina, who has sponsored legislation to terminate the program, in an email to The Seattle Times. "These new documents underscore that the perverse business model for WISeR companies relies on denying care and banking on patients giving up before they appeal."

Virtix said that its denial rate has fallen since March. "The affirmation rate has trended more positively toward a rate closer to 70%, a company spokesperson wrote in an email.

Based on available records, it's unclear how many of Virtix's denials were later overturned.

CMS did not respond to questions or a request to comment.

It's unclear how the contractor's early denial rate compares with most of the other states participating in the WISeR program. But it's overwhelmingly higher than at least one.

In Arizona, a different WISeR contractor made 14,300 prior authorizations in the same time. It denied less than 20% of requests.

Earlier this year, CMS found Virtix to be noncompliant with the program's 72-hour decision turnaround time, requiring the contractor to develop a corrective action plan.

The WISeR pilot program is slated to run through 2031. It includes services such as steroid injections for pain management, incontinence control devices and nerve stimulators, among others. CMS has indicated that it may add more services to the program’s scope between now and the end of the pilot. It may then expand the program to other states.

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