The Centers for Medicare & Medicaid Services (CMS) recently announced the launch of the Wasteful and Inappropriate Service Reduction (WISeR) Model – a six-year pilot program designed to reduce Medicare spending on select “wasteful (low-value) services shown to have little to no clinical value.” The WISeR Model will run from January 1, 2026, through December 31, 2031, and will combine technologies, such as artificial intelligence (AI) and machine learning (ML), with clinical review to evaluate services CMS believes are vulnerable to overuse, fraud, and abuse, including skin and tissue substitutes, electrical nerve stimulator implants, and knee arthroscopy for knee osteoarthritis.

In general, the WISeR Model seeks to identify any fraud, waste, and abuse resulting from claims for payment for services that do not meet coverage requirements, but were paid for because such claims did not require prior authorization. To accomplish this, CMS will utilize technology companies with expertise in managing the prior authorization process for other payers (e.g., Medicare Advantage plans).

This is interesting, considering that only days before CMS unveiled the WISeR Model,  the U.S. Department of Health and Human Services (HHS) Secretary Robert F. Kennedy, Jr. and CMS Administrator Dr. Mehmet Oz called for efforts to reform a “broken authorization system” and held a roundtable asking for insurers to pledge to streamline prior authorization processes in response to widespread concerns that current systems “delay or deny care to patients.” In other words, it appears that the WISeR Model will rely on the technology companies currently utilized through a system HHS believes to be “broken.”

The WISeR Model raises important questions around how it will address ongoing provider and patient concerns, presenting the potential to inadvertently replicate existing inefficiencies and frustrations under the guise of technological innovation.

Background and Overview of the WISeR Model

Medicare’s fee-for-service payment structure (Original Medicare) pays health care providers based on the volume of services provided – a system that CMS believes may incentivize medically unnecessary treatments, diagnostic tests, or other care. In particular, the WISeR Model targets the specific subset of items and services listed above because CMS suggests they may have little to no clinical benefit for certain patients and have historically shown limited clinical benefit or higher risk of waste.  

Unlike previous CMS models, WISeR Model participants will be technology companies with expertise managing the prior authorization process for other payers using enhanced technology like artificial intelligence (AI). Participants will apply their technology to help medical reviewers assess a set of items and services chosen by CMS that may (1) pose concerns related to patient safety if delivered inappropriately; (2) have existing publicly available coverage criteria; and (3) may involve prior reports of fraud, waste, and abuse. Participants will also be required to utilize clinicians to help validate determinations made by the technology.

Providers and suppliers for Original Medicare beneficiaries in select states—New Jersey, Ohio, Oklahoma, Texas, Arizona, and Washington—across specific Medicare Administrative Contractor (MAC) jurisdictions will have two options:

• Submit prior authorization requests for WISeR-covered services – either directly to the WISeR Model participant or through their MAC, or
• Undergo post-service, pre-payment medical review for claims without prior authorization.

Once a prior authorization request or claim is submitted, the WISeR Model participant will evaluate whether the service meets Medicare’s coverage, coding, and payment requirements. For a “non-affirmed” prior authorization request, where a future service was determined to not meet the applicable Medicare requirements, the provider or supplier has unlimited opportunities to resubmit a request. A non-affirmed decision does not prevent the delivery of the service and submission of a claim. The provider or supplier retains the right to appeal the determination through the existing Medicare appeals process.

The application period for participants closed on July 25, 2025. The WISeR Model will officially launch on January 1, 2026, and the performance period will end five years later on December 31, 2031.

Although the WISeR Model aims to identify and prevent fraud and abuse while making coverage processes more efficient, the methods it uses to achieve these goals raise significant concerns for both providers and patients who need care.

Transparency in AI-Based Claims Determinations

The WISeR Model seeks to implement technologies to accomplish its stated goals to combat fraud and abuse and increase efficiencies. But the acceptable use of those technologies has been called into question by recent legal and regulatory developments.

Courts are beginning to scrutinize how payors use automated tools to make medical necessity determinations. For example, as detailed in Reed Smith’s recent client alert on developments in managed care organization (MCO) litigation, the U.S. District Court for the Eastern District of California allowed key claims to proceed in a putative class action against a national insurer that allegedly relied on an algorithm to issue blanket coverage denials without individualized clinical review. The court held that, despite the involvement of clinicians, the alleged use of automation – without adequate human oversight – could constitute a breach of fiduciary duty under the Employee Retirement Income Security Act (ERISA). This case is one of several recent challenges across the country, and it underscores the risks that arise when automated tools are used in ways that may conflict with plan terms or statutory requirements.

Separately, relators in Doe v. eviCore Healthcare MSI, LLC, alleged that eviCore’s use of flawed AI systems to process prior authorization requests amounted to furnishing “worthless services” to Medicare Advantage and Medicaid managed care plans. Relators claimed that the flawed systems approved requests based on defective criteria and without manual review, ultimately causing insurers to bill federal healthcare programs for medically unnecessary services. While the Second Circuit affirmed dismissal of the allegations for failing to sufficiently meet pleading standards, it expressly declined to address the viability of the “worthless services” theory under the False Claims Act (FCA). This leaves the door open for future FCA claims based on flawed AI decision-making, with potentially astronomical damages and penalties.

In addition, a few states, including Illinois and California, have enacted legislation clarifying how and to what extent payors can use automated decision-making tools to analyze medical necessity in utilization reviews affecting members. Notably, CMS did not select either Illinois or California for the initial launch of the WISeR Model.

These developments raise important questions for the WISeR Model, which will rely heavily on the use of the types of technologies that are being questioned by courts. While CMS emphasizes in its materials that decisions under the WISeR Model will incorporate “clinical review,” it remains unclear how the process will work in practice and whether it will meet growing expectations around transparency and individualized assessment in the use of AI-driven claims tools. Notably, CMS officials provided no further clarification as to the nature and extent of clinical review that participants will be required to incorporate during CMS’s July 17, 2025, WISeR Model Office Hour. What level of human review will be mandated as part of “clinical review,” and will it comply with the standards emerging from litigation and legislation? What transparency will exist for industry stakeholders seeking to understand or challenge a denial?

As some observers have noted, because the program involves the disbursement of government funds, providers and patients arguably have a right to full transparency around denial logic. This creates potential tension where algorithmic details are withheld for claims made under a taxpayer-funded entitlement program.

Burden and Cost to Providers

The WISeR Model will require certain providers who submit claims for payment through Original Medicare to obtain prior authorization for specific services or to undergo a potentially burdensome post-service review. Either process is likely to impose significant burdens and costs on providers. Currently, the WISeR Model does not seem to address how providers are expected to manage or absorb these additional burdens and costs. This omission is particularly confusing given that, during the recent HHS roundtable on prior authorization reform, U.S. Senator Roger Marshall, M.D., acknowledged the challenges and expenses that prior authorization systems create for providers and commended efforts to find solutions. Despite this recent recognition of the issue, the WISeR Model now appears to overlook the very burdens and costs it had previously acknowledged.

Relatedly, CMS has offered no insight into the timing costs that will be associated with the WISeR Model. Despite acknowledging that the WISeR Model will now require providers and suppliers to seek prior authorizations for services that historically did not require prior authorization approval for claims from Original Medicare, CMS either cannot or will not disclose the timelines through which providers and suppliers can expect prior authorization decisions by the Model participants to be made. Instead, during the WISeR Model Office hour, agency officials stated that they “expect” timelines not to be “any slower than the standard timeline” for existing prior authorization services. Such ambiguous declarations do little to assuage concerns about transparency, delays, and the sufficiency of human oversight in AI-assisted decisions.

In addition, health insurers have recently committed to enhancing transparency and communication around authorization decisions and appeals, as well as expanding real-time responses to minimize delays. They have also pledged to standardize electronic prior authorization submissions through FHIR-based APIs to reduce provider burden. It remains unclear whether the WISeR Model’s technology partners will be required to meet similar standards, raising concerns about the potential for fragmented processes that could increase complexity for providers navigating different systems.

While some providers may welcome the opportunity to receive prior determination before furnishing services, others could experience increased administrative burdens managing appeals and patient expectations. A non-affirmation could not only delay payment but may also upend a patient’s understanding of what care they will receive, placing providers in a challenging communication position. Despite widespread calls to streamline prior authorization processes, the WISeR Model may inadvertently increase burdens on providers.

WISeR Model Incentives and Performance Measures

The technology companies participating in the WISeR Model will be compensated based on a demonstrated reduction in spending by providing them with a percentage of the savings to CMS in the participant’s region that can be directly attributed to the participant’s review. Participant payments will be adjusted according to performance measures in three key areas:

• Process quality (e.g., volume of requests processed, number of upheld non-payment decisions)
• Provider and beneficiary experience (e.g., timeliness and clarity of decisions)
• Clinical quality outcomes (e.g., use of alternative therapies, evidence of urgent clinical need)

While this performance-based approach aims to promote efficiency and better care decisions, it also raises important implications. First, process quality measures may incentivize faster throughput and denials. Without careful safeguards, there is a risk that an emphasis on processing volume and upheld denials could inadvertently encourage overly stringent review practices or administrative shortcuts that could frustrate providers and delay care.

CMS addressed concerns that participants will be incentivized to issue non-affirmations for prior authorizations during its July 17 Office Hour. Specifically, CMS explained it will attempt to combat improper incentives through a two-pronged approach: first, participant payments will be adjusted based on the accuracy and timeliness of their determinations; and second, CMS will implement a monitoring and auditing framework to identify and address inappropriate denial patterns. If necessary, CMS may take remedial actions, including removing participants who deny claims inappropriately or inaccurately. While these guardrails suggest an intent to balance savings with accountability, the practical and logistical issues associated with these guardrails are readily apparent. For example, CMS claims it will adjust payments to participants based on accuracy and timeliness. But who is determining whether a prior authorization decision is accurate?

In addition, the focus on provider and beneficiary experience could fall short of alleviating provider burden or patient frustration if there are not strong requirements for clear, timely communication and appeal processes.

Finally, linking compensation to clinical quality outcomes reflects an effort to balance cost with patient-centered care. Yet, measuring these outcomes reliably, especially for services flagged as wasteful, may be challenging, and the incentives could unintentionally discourage providers from delivering care that falls outside narrowly defined metrics. While the WISeR Model aims to promote efficiency and quality, its incentive structure also introduces potential pitfalls that warrant close attention.

Looking Ahead: Implications of the WISeR Model for Providers and Suppliers

The WISeR Model underscores the federal government’s prior declaration that curbing health care fraud is this administration’s top priority, as evidenced by both the creation of a joint false claims act working group between HHS and the Department of Justice (DOJ), (which we covered in a blog post here) and the crreationof a white collar crime enforcement mission statement from the DOJ’s Criminal Division (which we discussed here).

By focusing on a narrow subset of services, the WISeR Model reflects a more surgical approach to utilization management that concentrates on procedures identified as high-risk based on historical patterns of inappropriate use.

While providers and suppliers will interface with the prior authorization or post-payment review process, manufacturers with products related to affected services are notably outside the scope of participation. It is unclear if they will have any visibility into how the technology vendors’ AI systems operate, nor a clear path to challenge how determinations are made.

The WISeR Model also introduces uncertainty into the reimbursement landscape. Because determinations will be made by third-party vendors using proprietary tools, manufacturers may face challenges advising customers on coverage expectations. As a result, the WISeR Model may complicate conversations between manufacturers and providers who rely on predictable Medicare reimbursement.

Given the negative connotation associated with the select services under review, manufacturers may want to proactively revisit their health care economics and reimbursement support materials to ensure they contain current, accurate, and objective coding, coverage, and reimbursement information.

With implementation less than six months away, stakeholders are also raising questions about the sufficiency of guidance and preparation time. Several of the procedures targeted by the WISeR Model are governed by vague or outdated coverage policies, raising uncertainty about how determinations will be made in practice.

Reed Smith will continue to follow developments related to the WISeR Model and its implementation. If you have any questions about this or other Medicare program integrity initiatives, please feel free to contact the authors of this post or the health care lawyers at Reed Smith.