There are plenty of AI startups on the market promising to bolster hospitals’ finances by increasing revenue. But that’s not the case for San Francisco-based Midstream Health.
For most health systems, the key to unlocking dollars isn’t boosting revenue — it’s decreasing costs, said Venkat Mocherla, Midstream’s co-founder and president.
Midstream, founded in 2023, uses AI to clean up and unify hospitals’ fragmented financial and operational data, which help leaders spot savings opportunities and make smarter purchasing decisions, he explained. For instance, the platform could help surface insights that help a hospital capture missed rebates or avoid overpaying for supplies and devices.
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“Nine out of 10 AI companies are revenue cycle [management] companies. We are not an RCM AI business. We think about all the waste that is created outside of the revenue cycle — we believe that American healthcare fundamentally has a cost transformation challenge, not a revenue one,” Mocherla stated.
Hospitals often pay different prices for the same items internally, struggle to collect rebates and lack visibility into off-contract purchasing — all areas Midstream targets, he said.
The company’s platform is being used across health systems including Mount Sinai, CommonSpirit and Houston Methodist. Midstream primarily makes money by taking a cut of the savings it generates, which Mocherla noted aligns the startup’s incentives directly with hospitals’ financial outcomes.
“We get to make money when our health system partners save money,” he declared.
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Not only does Midstream promise its customers a strong ROI, Mocherla noted it also promises “ROE” — return on effort. This means hospitals will start to see savings as a result of their deployment within the first four months, he said.
At Mount Sinai, this quickness was what ultimately drove the decision to adopt the platform, according to CFO Vincent Tammaro. He said his organization was initially introduced to Midstream via an overview of their AI-powered rebate optimization platform.
“Midstream already had this platform in production generating value in other large healthcare systems where they had implemented the technology on a very rapid timeline. The feedback we received from references confirmed Midstream was able to provide ‘speed to value’ for a very practical supply chain AI use case, which was an important consideration in our decision,” Tammaro stated.
In addition to optimizing its rebate earning potential, Midstream’s platform also helps Mount Sinai upgrade contract terms and conditions, verify contract price improvements, and identify and correct invoice discrepancies, he added.
As hospitals continue to face mounting financial pressures, tools that target realistic cost control might start to resonate more than those focused on quixotic revenue growth. Midstream is betting on that, at least — and its customers say the company can deliver fast, tangible savings.
Photo: Eugene Mymrin, Getty Images