Prior Authorization Is Having a Moment. Our Two Bets to Address a Broken Process.

Prior authorization has long been one of the most broken parts of the US healthcare system. Providers spend hundreds of hours a week on it. Patients delay or abandon care because of it. Health plans are notorious for requiring it and spend billions administering it. And despite bipartisan frustration spanning decades, meaningful reform from regulators has moved at a glacial pace.

That is starting to change, and quickly.

In mid-May, CMS Administrator Mehmet Oz announced a coalition of 29 major healthcare organizations (insurers, hospitals, and health records companies) coming together to streamline the prior authorization process. He was direct about the problem and the urgency: “It’s way past time to axe the fax, kill the clipboard, and put patients over paperwork.” Major health systems, including Cleveland Clinic and Bon Secours Mercy Health, are among those committing to change. Health insurers have already cut pre-treatment claim reviews by 11% in the past year following earlier pledges to reform (read more here). Medicare is piloting AI-powered pre-treatment reviews in several states through the WISeR program and congressional support for limiting prior authorizations in Medicare Advantage is growing.

The momentum is unmistakable. Prior authorization has become a shared villain in an otherwise fractious policy environment, and the regulatory, industry, and market forces are all pointing in the same direction. We’ve heard some of this in times past, but this time it really does feel different. At .406 Ventures, we have watched this sentiment build for years, and we have made two bets that we believe will enable much-needed changes for the industry as a whole.

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The Problem, Plainly Stated

As maligned as prior authorization has become, it came about for sensible reasons: it is a logical mechanism for health plans to ensure that treatments are medically necessary and cost-effective. Our experience with Health Dialog (.406 Fund I investment) taught us that up to a third of all medical treatment in the US is unnecessary (research here). In its purest application, prior authorization should both save money and protect patients from unnecessary procedures.

In practice, it has become something different. Prior authorizations have grown into an administrative quagmire, and the downstream costs are substantial, including worsened health outcomes, sometimes even requiring emergency interventions, along with significant administrative overhead for both payers and providers.

Health plans spend meaningfully to administer prior authorization programs, which implies they generate value in cost containment. The most sophisticated payers are not looking to eliminate prior authorization wholesale; they are looking to make it smarter, more efficient, and less adversarial. That perspective matters enormously for how we think about the opportunity.

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Two Bets, One Thesis

Our two portfolio companies, Humata Health (Humata) and Claren Health (Claren), represent two distinct and complementary approaches to the same underlying challenge of better managing unnecessary healthcare utilization.

Humata: Making the Existing System Work Better

Humata is solving for the world as it is. Prior authorization exists, it has its place, it is not going away entirely, and both the providers submitting requests and the health plans reviewing them are drowning in manual work. Humata’s AI-powered platform automates the end-to-end prior authorization workflow, from identifying whether a prior authorization is required, to assembling the requisite clinical documentation, to submitting, tracking, and responding to requests.

The platform serves both sides of the transaction, allowing providers who need to submit prior authorization requests, and health plans who need to adjudicate them to fully automate the process.  This bilateral positioning is unique and supports the goal of achieving 90% touchless prior authorizations, which would be a sea-change from where the industry operates today. Early customers, including leading health systems, academic medical centers, and regional health plans are reporting material reductions in administrative time and faster approvals.

The timing for solutions like Humata could not be better. As Dr. Oz’s coalition commits to electronic prior authorization and the industry moves toward interoperability mandates and API-based workflows, Humata is building the infrastructure that makes this possible. The regulatory tailwind is accelerating adoption and as volume scales, AI solutions get smarter, building increasingly valuable skills and insights from the data.

Claren: Platforming the Patient

Claren is building a solution for the world as it should be. The company was founded around the fundamental belief that for most healthcare decisions, the only gate for authorization should be a well-informed patient working in consultation with their doctor.

The concept is not new.  Research on Shared Decision Making (“SDM”) in healthcare has shown that when a population of patients is genuinely engaged in their treatment options and presented with unbiased information about outcomes, risks, alternatives, and costs, that population will, on average, choose treatments that are less invasive and lower cost than a traditionally managed population, including populations with strict prior authorization rules.  These results are not driven by pressure to accept worse care or patients making “poor decisions” for their long-term health. Rather, SDM populations have demonstrably better outcomes and report higher satisfaction.

Claren is building the infrastructure to enable and document this process at scale, with the goal of allowing health plans to waive prior authorization for patients who go through a certified shared decision-making process. This flips the incentive structure entirely. Instead of a payer review process that creates friction and delays care, SDM-oriented patient engagement will create better alignment and improve care.

SDM won’t apply to every medical decision, but it has proven to work well in orthopedics, cardiology, oncology, and other high-cost specialties. What has been missing is the scalable infrastructure to operationalize it across health systems, and the commercial arrangements with payers to formalize the prior authorization waiver (i.e., gold carding). That is what Claren is building. The commercial logic for payers is direct: replacing a costly, adversarial review process with a certified SDM pathway reduces administrative overhead and improves member satisfaction — both things payers will pay for.

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Why These Two Bets, Together

Prior authorization is not just one thing. It applies across hundreds of treatment categories, each with different clinical complexity, cost profiles, and evidence bases. For some procedures (high-volume, well-documented, protocol and/or metrics-driven), the answer is speed and automation. Humata will be the right solution. For other areas, where patient preference, quality of life, and clinical uncertainty make the decision genuinely individualized, the answer is SDM. Claren will be the right solution.

The US healthcare system needs both.

There is also a strategic observation worth noting: the Dr. Oz coalition and the broader policy movement are focused on process reform, making prior authorization faster and more digital. That is squarely in Humata’s wheelhouse. But the deeper fundamental questions about whether prior authorization is even the right mechanism for certain treatment decisions, is where Claren is building. If SDM gains traction as a legitimate alternative to payer review, it could represent a structural shift in how large categories of care are managed. That is a larger prize, with a longer timeline, but potentially a transformational outcome.

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What We Are Watching

For Humata, the next 12 months are about demonstrating that AI-driven automation can deliver on the touchless approval promise at scale. The coalition dynamics are favorable, with providers and payers increasingly aligned on the need for electronic, interoperable prior authorization workflows; Humata is positioned to be the infrastructure layer for that transition. We are watching adoption velocity among health plans since bilateral coverage is what unlocks the full network effect.

For Claren, the critical milestones are the commercial arrangements with payers that formalize the prior authorization waiver and the clinical documentation that demonstrates the model produces the expected outcomes. The thesis is intellectually compelling; the work now is translating it into contracts and data.

For the sector overall, the signal we are watching most closely is whether the current policy moment produces durable structural change or proves to be another wave of attention that recedes without meaningful improvement. The history of prior authorization in US healthcare is littered with moments of consensus that did not translate into action. This moment feels different, more specific, more operationally grounded, with clearer industry commitment, but we are appropriately humble about the pace of change in healthcare.

When Dr. Oz says that by next January there will be situations where a prior authorization gets done and the patient will not know it even happened — that will be Humata at work. When there are no hard and fast rules and patients are well informed and have freedom to make healthcare decisions that feel authentic to them — that will be Claren.

We think both visions are achievable, necessary, and the policy environment is finally moving in the right direction.