SmarterDx is a clinical AI company that discovers, delivers, and drives better quality, revenue, and care. The company uses AI to understand each patient’s journey, helping hospitals close their revenue integrity differential gap. Pulse 2.0 interviewed SmarterDx CEO and co-founder Michael Gao, MD, to learn more about the company.
Dr. Michael Gao’s Background
What is Gao’s background? Dr. Gao said:
“Prior to co-founding SmarterDx in 2020, I was Medical Director for Transformation at New York-Presbyterian, where I led applied AI development, implementation, and strategy for the health system. That’s where I first discovered just how much revenue hospitals were leaving on the table due to documentation and coding gaps. I’m a hospitalist and have held faculty positions at the Icahn School of Medicine at Mount Sinai and Weill Cornell Medicine. I completed my internship and residency in internal medicine at New York-Presbyterian, where I also was a Silverman Fellow in Healthcare Innovation. I earned my MD from the University of Michigan Medical School and BS from the University of California Los Angeles.”
Formation Of SmarterDx
How did the idea for the company come together? Dr. Gao shared:
“When I was a medical student, I started a free clinic for uninsured patients. In some ways it was a huge success. I think we provided care for around 1,000 patients in our first year. In other ways, that was a drop in the bucket relative to the 40 million uninsured patients nationwide. In response, we built another nonprofit that used technology to help social workers find “open slots” at nearby clinics whose doctors were willing to donate some time. Since then, I’ve always looked for ways to use technology to help people solve healthcare problems at scale.”
“At NewYork-Presbyterian, we had five or six different vendors, from software to services, helping with documentation improvement and coding. Despite all this investment, when physicians on our quality review team looked through select charts manually, there was always more opportunity on the table. But physicians are expensive! Hospitals can only afford to have them look at a small slice of charts. So the question I asked was: How is it that today’s technology still ‘leaks’ those findings, and what can be built that could help hospitals review all documentation in all charts?”
“In response, I convinced some of the smartest people I know – Dr. Josh Geleris, who’s also a physician but has done engineering and data science work for the DoD, Nathan Perilo, who led quant engineering globally at Citibank, and others – to create SmarterDx.”
“SmarterDx builds technology that improves the accuracy, quality, and value of healthcare information to uncover every opportunity for hospitals, which typically run on razor-thin margins and are ranked on quality scores. With our shared data science background, we knew AI could successfully mimic clinical reasoning to link data and diagnosis.”
Favorite Memory
What has been your favorite memory working for the company so far? Dr. Gao reflected:
“We’ve found lots of missed revenue for our hospital partners. We’ve boosted mortality and readmission quality metrics for our hospital partners. But we don’t do that by ourselves, and at the end of the day, it’s still all about working with people and making them successful. My favorite memory is reading our KLAS Emerging Solutions Spotlight report and seeing CDI Directors and Chief Quality Officers and VPs of Revenue Cycle say that our team was wonderful to work with.”
Core Products
What are the company’s core products and features? Dr. Gao explained:
“SmarterDx discovers, delivers and drives better quality, revenue and care. Risk-free and easy-to-implement, our complementary AI automates clinical reasoning at scale, closing the documentation integrity ‘differential’ gap with the most accurate and complete patient story. SmarterDx is the ultimate hospital pre-bill safety net, ingesting more than 30,000 data points per chart to deliver a guaranteed 5:1 ROI, and frequently results in millions in net new revenue.”
Challenges Faced
What challenges has Gao faced in building the company? Dr. Gao acknowledged:
“One of the most significant challenges for healthcare IT companies is navigating the complexity of healthcare data – from accessing and processing the data to leveraging it effectively.”
“Patient records comprise a wide range of structured and unstructured information from various sources, such as clinical notes, lab results, and imaging studies. To tackle this challenge, we’ve made substantial investments in AI capabilities throughout our entire process, from initial data transformation to final inference steps. This approach allows us to work with essentially “raw data” provided by our hospital customers, eliminating the need for them to spend time and resources cleaning and mapping the data themselves.”
“Additionally, we’ve made seamless integration with hospitals’ existing EHR systems and workflows a top priority. We recognize that implementing new technology can be disruptive for already busy revenue cycle teams. To address this, we’ve engineered our platform to operate smoothly in the background, delivering actionable insights without disrupting established physician query or coding processes. Our aim is to be a true partner to hospitals, assisting them in enhancing their documentation and coding practices with minimal friction.”
Evolution Of SmarterDx’s Technology
How has SmarterDx’s technology evolved since launching? Dr. Gao noted:
“When we began, our focus was presenting coding opportunities to CDI specialists for review and validation. Once the diagnoses were found, these individuals still had to manually compose a query to the patient’s physician presenting the case for adding the diagnosis for their approval. Now, our platform employs generative AI to auto-compose these queries with the relevant details from the patient’s record. Removing that manual step gives them significant time back in their day and also eliminates opportunities for human error.”
Significant Milestones
What have been some of the company’s most significant milestones? Dr. Gao cited:
“Our primary focus is our customers, so our milestones are always centered around their success. Our earliest milestone was thus the first successful deployment – and I vividly remember when the Chief Quality Officer told us we “knocked it out of the park” after an internal presentation to their CFO and their board. Then, our next milestone was when one of our customers agreed to publicly speak about their experience and how we helped them do their job more successfully.”
“Since then, we’ve celebrated numerous other milestones as we’ve grown and expanded our customer base. A more recent highlight was being recognized in the KLAS Emerging Solutions Spotlight report, which showed that 100% of our customers are ‘highly satisfied’ due to the immediate positive outcomes they’ve achieved with SmarterDx, such as improved revenue, Case Mix Index, and risk adjustment. That collective response just underscored to me that our team is doing all the right things.”
Customer Success Stories
After asking Gao about customer success stories, Dr. Gao highlighted:
“One particularly impressive story comes from our partnership with a large Midwestern health system. The CDI director there had implemented a comprehensive approach to ensure her team was accurately capturing every patient’s clinical story. They weren’t just concurrently reviewing nearly every chart; they had multiple layers of technology, external auditing services, and internal processes, including Second Level DRG review, DRG mismatch review, mortality review, and more.”
“When we initially connected, the director was enthusiastic about the potential for AI to enhance her team’s efficiency. However, given the numerous promises made by various vendors, she maintained a healthy skepticism about whether AI could truly assist with the sophisticated, nuanced clinical reasoning necessary for success.”
“We’re thrilled to report that the results exceeded everyone’s expectations, significantly contributing to her organization’s margin without requiring any additional FTEs.”
“For us, her story exemplifies our mission. In an increasingly complex world – with CCs, MCCs, quality measures, social determinants of health, growing payer pushback, and patients presenting with more severe conditions – we view AI not as a replacement for human expertise but as a tool that empowers CDI professionals to make an even greater impact.”
Revenue
After asking Gao about the company’s revenue information, Dr. Gao revealed:
“We have commercial contracts with 14 health systems and have grown 600% year-over-year.”
Total Addressable Market
What total addressable market (TAM) size is the company pursuing? Gao assessed:
“Our estimate for the current product is about $1.5 billion to $2 billion TAM.”
Differentiation From The Competition
What differentiates the company from its competition? Dr. Gao affirmed:
“There are more errors of omission than commission in clinical documentation – for example, a diagnosis that seems to be missing or incomplete based on the supporting data. So, while we look for under- and over-documentation, the net effect is that a tiny percentage of errors amounts to millions of dollars in missing revenue for most hospitals. SmarterDx can readily surface these opportunities for hospitals.”
“Our technology puts hospitals and healthcare systems on a more equal footing with insurers who have invested heavily in AI technology that allows them to review claims for any discrepancy or error that would let them deny, reduce payment for, or return a claim. And it allows them to represent the complexity of their patients for quality measures like mortality and readmission.”
“In addition to enabling more comprehensive documentation, our clinically validated results and real-time reporting provide an audit trail that helps health systems improve upstream processes and more accurately record their care quality, which can improve reimbursements and ratings. We think this will be even more critical as language models get implemented for documentation purposes and the risk of hallucinations increases. We want hospital data to truly reflect the diversity, complexity, and severity of the patients and diagnoses treated at the facility.”
Future Company Goals
What are some of SmarterDx’s future goals? Dr. Gao concluded:
“SmarterDx today is providing a lifeline for health systems struggling to remain viable and provide quality care in the most challenging financial environment the industry has seen yet. Our goal is to continue developing technologies that enable provider organizations to tell complete patient stories, strengthen their revenue cycle process, and better serve their communities.”
