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The Arizona-based company using artificial intelligence to review certain Medicare requests in Washington state under a controversial six-year pilot program has been found out of compliance by the federal government.

The Centers for Medicare and Medicaid Services announced Monday that Virtix Health was required to submit a Corrective Action Plan because it was not responding quickly enough to Medicare claims for procedures covered by the Wasteful and Inappropriate Service Reduction (WISeR) program, which went into effect in Washington and five other states Jan. 1.

The decision follows reports of weeks-long waits for Medicare claims reviews and criticism by doctors and hospitals about technical problems submitting claims with Virtix, as well as a lack of responsiveness from the company, which is compensated based on "a share of averted expenditures" — or how many procedures it denies.

“The administration is finally acknowledging what providers and health care leaders have been telling them since WISeR began in January — this program is needlessly delaying care for seniors in Washington," U.S. Rep. Suzan DelBene, a Washington Democrat who has been leading efforts in the House to have the program repealed, told KUOW. "I’ve heard stories from patients around the state that care decisions are taking weeks, leaving them in pain and worsening their conditions."

Washington state has more than 1.5 million Medicare enrollees, just over half of whom are enrolled in traditional Medicare. Until this year, those Medicare users have not been required to get prior authorization for most services. In contrast, people who enroll in the privately run Medicare Advantage are required to get prior authorization for care, but they generally pay lower premiums.

The use of AI to review traditional Medicare claims has come under scrutiny because Medicare Advantage prior authorization data shows a large percentage of those claims are initially denied. The vast majority of the denials (80%) are overturned on appeal (80%). But few patients appeal those initial denials (11%), even though their claim would likely be approved if they did. That means the private companies managing WISeR, such as Virtix, are incentivized to deny claims regardless of their merit.

The Centers for Medicare and Medicaid Services’s non-compliance ruling means Virtix will have to complete a plan "outlining the root causes of the identified performance issues, the specific operational and process improvements that will be implemented, implementation timelines, and mechanisms for ongoing monitoring and quality assurance," according to the agency.

Virtix was found out of compliance in meeting the required 72-hour turnaround times to issue prior authorization and pre-payment determinations for WISeR procedures. Those procedures include steroid injections for pain management, cervical fusion, arthroscopic knee surgery, diagnosis and treatment of impotence, and certain skin and tissue substitutes.

Centers for Medicare and Medicaid Services said Virtix was audited in five areas total — clinical determinations, communications, portal functionality, customer service, and timeliness — after complaints about "operational delays."

Federal officials will hold meetings every two weeks with Virtix to review its performance, assess its progress, and evaluate its efforts to improve turnaround time.

Virtix Health did not respond to a request for comment. The Centers for Medicare and Medicaid Services’s statement said that while prior authorization turnaround times were around five days for the first four months of the program, they have since improved to 1.7 days for prior authorization and just over three days for pre-payment review.

While she welcomed the agency's ruling against Virtix, DelBene said lawmakers remain largely in the dark about the WISeR program and its impact on people who rely on Medicare for care in Washington state.

"This update is only about the timeline for approvals," she said. "It doesn’t give us any transparency into how much care is being denied or how many people are appealing decisions. This program is one big black box right now."

In hopes of gaining more transparency about WISeR, DelBene and more than two dozen House members submitted a letter Monday to Centers for Medicare and Medicaid Services Administrator Mehmet Oz requesting data on appeals and denials during the first six months of the pilot program.

DelBene said, in addition to denying needed care to Washington seniors, the WISeR program is the first step by the Trump administration to make publicly run traditional Medicare more like privately run Medicare Advantage.

"Make no mistake," she said, "in addition to hurting patients, WISeR is also a Trojan horse for privatizing Medicare."

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