Choosing a technology supplier used to be a question of capability and price. Increasingly it is a question of exposure, because in a growing number of industries the supplier’s output ends up being examined by a regulator, and the organisation holding the contract is the one that answers for it.
American healthcare has just run the most expensive version of that lesson available, and the resulting buying framework is worth borrowing regardless of what business you are in.
The market that got its scorecard rewritten
The suppliers in question sell software that reads medical records for American health insurers, extracting the diagnosis codes that determine how much the government pays those insurers to cover more than thirty million older adults.
For over a decade, the buying criteria were straightforward: which system processes the most charts, surfaces the most billable conditions, at the lowest cost per unit. Sensible-sounding metrics, and for years nobody had reason to question them.
Then federal auditors scaled from roughly forty reviewers to around two thousand certified coders and began re-checking the industry’s output on a rolling quarterly cycle. Reviews published this spring found that at three insurance plans, 81 to 91 percent of certain sampled high-risk diagnosis codes lacked adequate supporting documentation. A major insurer settled federal claims for 117.7 million dollars over technology-assisted review programmes that added diagnoses aggressively while almost never removing unsupported ones.
The scorecard inverted almost overnight. The supplier that finds the most becomes, potentially, the supplier that generates the most liability.
The four questions that replaced it
What emerged is a genuinely portable framework, and modern risk adjustment vendor evaluation now leads with four questions any buyer of consequential technology should be asking.
Can they justify a single output, chosen by you? Aggregate accuracy on a sales deck is marketing. Pick one result at random and ask the supplier to show the specific evidence behind it, produced from data they already stored. Suppliers built for scrutiny answer immediately. Others explain why that is difficult.
Does their system correct in both directions? The clearest warning sign in this year’s enforcement actions was one-directional correction: systems that only ever found errors benefiting the customer’s revenue. Any supplier whose output conveniently always favours your short-term interest is a supplier whose output an examiner will eventually find interesting.
Have they been tested adversarially? Not whether they hold certifications, though ask that too, but whether a regulator, auditor, or opposing counsel has actually examined their output, and how that went. Experience shows up as a process. Inexperience shows up as adjectives.
Who holds the evidence if the relationship ends? If the contract terminated tomorrow, could you reconstruct every consequential decision their system made using records you retained? This reads like procurement boilerplate until the day it is the only thing standing between you and an unanswerable audit request.
Why the pattern keeps repeating
The deeper observation is that buyers in every regulated market eventually stop purchasing capability and start purchasing defensibility, and the switch happens fast once it starts. Finance made it after 2008. Data-heavy industries made it after privacy regulation arrived. Healthcare technology made it in roughly eighteen months under audit pressure.
The suppliers who survived each transition were rarely the ones who added compliance features after the enforcement wave. They were the ones who had built for accountability years earlier without knowing precisely when it would matter, and that difference is usually visible well before any regulator appears, to a buyer who knows what to ask.
The organisations now writing nine-figure settlement cheques did not lack sophisticated procurement processes. They simply ran those processes against the wrong scorecard for years, until somebody with subpoena power provided a correction. The updated scorecard is now available to everyone else at no charge, which is the cheapest possible way to acquire an expensive lesson.