On March 27, 2019, the Centers for Medicare & Medicaid Services (CMS) announced a $1.65 million competition to accelerate development of AI solutions in health care. The Artificial Intelligence (AI) Health Outcomes challenge seeks innovative, AI-driven solutions that can predict unplanned hospital and skilled nursing facility (SNF) admissions and adverse events.

The challenge is a 1-year, three stage competition; the Launch State is open to the public and seeks to attract a wide range of ideas and solutions.

Stage 1 will be comprised of 20 participants and will focus on the development of algorithms that predict health outcomes using Medicare fee-for-service data as well as strategies for building clinician trust in the solutions. 5 participants will be awarded $80,000 and will advance to Stage 2.

Stage 2 will ask for finalists to refine their algorithm and run a number of analyses on more than 5 years of CMS claims data to demonstrate proof-of-concept. The grand prize winner will be awarded up to $1 million.

Economists have debated the use of prize systems for technological innovation. While some argue that the use of medical prize funds will lower prices and widen the availability of research results, others are skeptical of claims regarding the role of prize funds in inducing technological innovation. CMS is in a unique position to offer prizes for innovative solutions; as the country’s single largest payer for health care, it may be the one of the best entities to evaluate the efficacy of the proposals and can offer innovators with the data needed to develop their algorithms