There are many AI startups in the market that promise to strengthen hospital finances by increasing their revenue. But that’s not the case for the San Francisco-based company. Intermediate health.
For most health systems, the key to unlocking dollars is not increasing revenue, but reducing costs, said Venkat Mocherla, co-founder and president of Midstream.
Midstream, founded in 2023, uses AI to clean and unify hospitals’ fragmented financial and operational data, helping executives spot savings opportunities and make smarter purchasing decisions, he said. For example, the platform could help surface information that would help a hospital capture missed discounts or avoid overpaying for supplies and devices.
“Nine out of 10 AI companies are in revenue cycle [management] businesses. We are not an RCM AI company. We think about all the waste created outside of the revenue cycle – we think American health care fundamentally faces a cost transformation challenge, not a revenue one,” Mocherla said.
Hospitals often pay different prices for the same items internally, have difficulty collecting rebates and lack visibility into off-contract purchases — all areas Midstream targets, he said.
The company’s platform is used across healthcare systems, including Mount Sinai, Common Spirit And Houston Methodist. Midstream primarily makes money by reducing the savings it generates, which Mocherla says directly aligns the startup’s incentives with hospitals’ bottom lines.
“We make money when our health system partners save money,” he said.
Not only does Midstream promise its customers a strong return on investment, Mocherla noted that it also promises “ROE” – a return on effort. That means hospitals will start seeing savings from their deployment in the first four months, he said.
At Mount Sinai, it was this speed that ultimately drove the decision to adopt the platform, according to CFO Vincent Tammaro. He said his organization was initially introduced to Midstream via a preview of their AI-based discount optimization platform.
“Midstream already had this platform in production, driving value at other large health systems where they had implemented the technology in very rapid time frames. The feedback we received from benchmarks confirmed that Midstream was able to deliver ‘rapid value’ for a very practical supply chain AI use case, which was an important factor in our decision,” Tammaro said.
In addition to optimizing its discount potential, Midstream’s platform also helps Mount Sinai improve contract terms and conditions, verify contract price improvements and identify and correct invoice discrepancies, he added.
As hospitals continue to face growing financial pressurestools targeting realistic cost control may begin to resonate more than those focused on quixotic revenue growth. Midstream is banking on that at least — and its customers say the company can deliver quick, tangible savings.
Photo: Eugène Mymrin, Getty Images