Former Mayo doctor's Bloomington startup helping hospitals with complicated prior authorization process

Insurance companies have made it so difficult to obtain prior authorization for health care procedures that some hospitals have started using artificial intelligence to crack the code.

Insurers are increasingly requiring patients and hospitals to obtain prior approval before getting an expensive procedure or drug as a way to cut down on the massive amount of waste in the system. But the ever-evolving prior authorization rules also make it more difficult to obtain legitimate medical care, delaying surgery dates and injecting uncertainty into whether hospitals will be paid for medically necessary care.

A startup company called Verata Health, based in Bloomington, is among a handful of companies nationally offering proprietary artificial-intelligence systems that scan patients' voluminous medical records to pinpoint the 10 or so documents insurance companies need to see before agreeing to cover a patient's care. The field is still young, and companies like Verata are focusing early efforts on the biggest "pain points" in the system, like authorizations for medical procedures, imaging and drug approvals.

Verata was founded in 2017 by former Mayo Clinic physician Dr. Jeremy Friese, a radiologist with an MBA who grew frustrated after seeing firsthand the unreasonable amount of time clinicians spend on paperwork instead of patient care.

"The reason that Verata exists [is] because my patients were getting delayed care, and some of my patients weren't able to get care — they were denied care because of this hassle," Friese said.

3M Co., which has an $800 million health information systems division, is an early investor in the company. Verata declined to reveal its other investors.

Verata's system is embedded inside a hospital or clinic's electronic medical record system, and it eliminates the need to fax paperwork to insurance companies for the specific types of prior authorizations the AI is designed to handle. Although Friese said Verata is on a mission to make the fax machine obsolete, the fax machine itself isn't the problem. The underlying problem is waste.

A meta-analysis, funded by the insurer Humana and published in the journal JAMA in October, concluded that roughly 25% of all health care spending — at least $760 billion a year — is "waste." (Hospitals said some of this disputed care is legitimate. For example, it's not fair to call a test "waste" just because it didn't lead to a diagnosis, and sometimes it is appropriate to deliver care in the most expensive settings.)

One common strategy to cut waste from the health care system is for insurers to require hospitals and clinics to justify the need for patient care objectively, using documents from their medical records, in a process called "prior authorization." Patients lacking prior authorization may face the entire hospital bill themselves, and the hospital may end up writing off the entire cost, thus creating strong financial incentive not to provide unjustified care.

But that means clinicians have to scan massive medical records and listen to fax machine chirps instead of working at the bedside. Hospitals and clinics juggle prior authorization requirements for hundreds of different insurers, and they change over time. Sometimes a bureaucratic appeals process kicks in requiring a practicing surgeon to debate medical necessity in a phone call with another doctor who works for the insurer.

Earlier this year the 102-year-old Minnesota Hospital Association, which represents more than 100 not-for-profit hospitals, clinics and health systems, publicly feuded with the state's largest and oldest insurer, Blue Cross Blue Shield of Minnesota, because of what the hospitals said were draconian new prior authorization rules imposed by a Blues contractor called eviCore.

In interviews this summer, Minnesota Blue Cross CEO Dr. Craig Samitt said the insurer was applying evidence-based guidelines to ensure care is efficient and delivered with as little variation as possible, especially high-cost, high-utilization procedures. Matt Anderson, the Minnesota Hospital Association's interim CEO, said it was obvious that prior authorization requirements are designed to help insurers avoid paying for care, including medically necessary care.

In the meantime, Verata Health has been conducting informational sessions with hospitals around the state, pitching its artificial-intelligence offerings around prior review of medical procedures, imaging and prescriptions. The company said its services reduce the amount of bad debt written off by hospitals, while shortening how long it takes to obtain prior authorization for care. The startup declined to reveal its revenue, customer base or pricing options.

The Minnesota Hospital Association has been helping to spread the word about Verata, though it is not an investor. Other companies around the country also offer AI tech to automate prior authorization processes, like North Carolina's Digitize.Ai and San Jose's Infinx Healthcare.

Such companies sit at the intersection of technology and health care — a crossroads of strong interest to entrepreneurs and investors. As such, it can be difficult to keep tabs on exactly which firms are offering what new technology, Anderson said.

"At the end of the day what is most important, and the underlying objective, is that people get medically necessary care with as little delay [as possible], and without denial," Anderson said. "We don't think prior authorization is going away, but I think there are a lot of questions as to whether it can be done more efficiently."