CMS Finds Medicare AI Contractor Out of Compliance in WA

The Centers for Medicare and Medicaid Services has determined that Virtix Health, the Arizona-based contractor using artificial intelligence to review Medicare claims in Washington state, failed to meet federal compliance standards for processing times.

The agency announced Monday that Virtix must submit a Corrective Action Plan after missing required 72-hour turnaround times for prior authorization and pre-payment determinations under the Wasteful and Inappropriate Service Reduction (WISeR) program. The pilot program, which launched January 1 in Washington and five other states, marks the first time traditional Medicare beneficiaries have faced prior authorization requirements for certain procedures.

Delays and Technical Problems

The non-compliance finding follows weeks of complaints from physicians and hospitals about delayed claim reviews, technical difficulties submitting requests through Virtix's portal, and poor responsiveness from the company. According to CMS, turnaround times averaged around five days during the program's first four months, though the agency reports recent improvement to 1.7 days for prior authorization and just over three days for pre-payment review.

Virtix's compensation structure has drawn particular scrutiny: the company receives payment based on "a share of averted expenditures"—essentially, how many procedures it denies. The WISeR program requires prior authorization for procedures including steroid injections for pain management, cervical fusion, arthroscopic knee surgery, impotence treatment, and certain skin and tissue substitutes.

Washington has more than 1.5 million Medicare enrollees, with just over half in traditional Medicare. Until this year, those beneficiaries faced no prior authorization requirements for most services.

Why It Matters

The compliance failure highlights broader concerns about using AI and profit-driven contractors to gate access to medical care for seniors. Evidence from Medicare Advantage shows that 80% of initially denied claims are overturned on appeal, yet only 11% of patients pursue appeals—creating financial incentives to deny legitimate claims. The WISeR pilot represents the first expansion of this model into traditional Medicare, raising questions about whether cost-cutting measures will compromise care quality for millions of beneficiaries.

Congressional Scrutiny Intensifies

U.S. Rep. Suzan DelBene, a Washington Democrat leading House efforts to repeal WISeR, said the ruling confirms what providers have reported since January. "I've heard stories from patients around the state that care decisions are taking weeks, leaving them in pain and worsening their conditions," DelBene told KUOW, which first reported these details.

DelBene and more than two dozen House members submitted a letter Monday to CMS Administrator Mehmet Oz requesting data on appeals and denials during the pilot's first six months. She criticized the lack of transparency, noting the compliance ruling addresses only processing timelines, not denial rates or appeal outcomes.

"This program is one big black box right now," DelBene said, adding that WISeR represents "a Trojan horse for privatizing Medicare."

CMS audited Virtix across five areas—clinical determinations, communications, portal functionality, customer service, and timeliness—after receiving complaints about operational delays. The agency will now hold biweekly meetings with Virtix to monitor performance improvements.

Virtix Health did not respond to requests for comment.

This story was first reported by KUOW.