In the race to modernize healthcare operations, artificial intelligence (AI) has become both a solution and a complication. While AI promises automation and efficiency, it also brings uncertainty especially when it comes to governance. For health plans navigating this space, the challenge isn’t just about identifying which tools work, but determining whether third-party vendors can be trusted to manage AI models & workflows ethically/
The pressure to adopt AI technologies is mounting, especially for health insurers dealing with operational bottlenecks like prior authorization delays and fragmented claims processing. Yet many organizations still find themselves paralyzed at the procurement stage by being unable to confidently assess vendors’ governance structures and unsure how to differentiate a reliable strategic partner from one that introduces risk.
Procurement Bottleneck
Healthcare procurement processes, which are processes of sourcing service or technologies that a healthcare organization needs to operate effectively, were not built with AI in mind. Traditional vendor evaluations prioritize contractual obligations, but AI introduces a different risk profile: one that involves LLM transparency and data ethics which are all issues that require a more evolved framework for review.
The procurement delays come at a time when AI budgets are rapidly expanding. According to the Healthcare AI Adoption Index by Bessemer Venture Partners, 65% of health insurance payers report that their generative AI budgets are growing faster than their general IT budgets. This surge in investment puts pressure on health plans to onboard AI tools responsibly or risk falling behind.1
This is especially true in regulated environments like Medicare, Medicaid, and ACA marketplaces. Health plans must now assess what a tool does and how it does it - whether its outputs can be traced, explained, and corrected. In many cases, compliance and IT teams are left asking: Who owns the model’s decisions? What happens when it changes? And how do we know it won't harm members?
The Core of AI Governance
At its heart, AI governance refers to the frameworks and ethical standards that guide the development and deployment of artificial intelligence systems. It includes questions like:
- Is the AI model trained on representative data?
- Can the logic behind its decisions be audited?
- Who monitors for bias or errors?
- What happens when the model fails?
Vendors that can’t answer these questions clearly should raise red flags.
In a recent report, a forum emphasized that good governance builds trust in AI and pointed to the risks of deploying opaque or misaligned systems in high-stakes settings like healthcare. Trust, after all, is a prerequisite for adoption.
Why Health Plans Struggle
Many health plans are structurally under-equipped to evaluate AI vendors effectively. Here's why:
- Fragmented review processes: Legal, compliance, IT security, and business units often assess vendors in silos, without a unified rubric for AI-specific risks.
- Limited technical fluency: Many internal teams lack the expertise to assess algorithm design, model documentation, or fairness testing.
- Overwhelming vendor claims: AI vendors may overpromise, using buzzwords like “explainable AI” or “HIPAA-compliant” without substantiating those claims with evidence.
- Unclear accountability: Without strong governance frameworks, it becomes difficult to assign responsibility when things go wrong — especially when AI tools are used for decision-making in utilization management or member outreach.
These gaps lead to longer procurement cycles, slower onboarding, and — most dangerously — blind spots in oversight that can cause regulatory fines.
A Framework for Assessment
Health plans need a practical, structured approach for evaluating vendors offering AI-enabled solutions. Below is a five-pillar framework that blends technical scrutiny with organizational alignment:
1. Transparency and Explainability
Vendors should provide clear, comprehensible documentation of their algorithms — not just a high-level summary, but a description of how inputs are processed, how outputs are validated, and whether decision-making pathways can be audited. Black-box models that offer no insight into their inner workings are riskier, especially when deployed in contexts like prior authorizations or care coordination.
2. Model Monitoring and Drift Management
AI systems evolve over time. Vendors should be able to describe:
- How frequently they monitor model performance
- How they detect and correct drift (i.e., when outputs begin to deviate from intended norms)
- What controls are in place to halt or flag model behavior that appears biased or harmful
If a vendor cannot define their change management protocols, onboarding them is a liability.
3. Data Governance and Privacy
Make no assumptions about how vendors handle data. It is important to understand:
- Who owns the data and the model outputs
- If PHI is encrypted in transit and at rest
- How consent is obtained and documented
4. Ethical Risk and Bias Testing
All models are biased in some way. The question is whether vendors have tested for bias across key demographics and built safeguards to minimize harm.
Ethical vendors will share:
- Fairness audit results
- Tools or frameworks used (e.g., AI Fairness 360 or Equalized Odds)
- How outcomes are measured across race, gender, language, and other factors
Health equity is a systems issue. If an AI tool consistently under-prioritizes care for a specific population, that’s not a bug, it’s a governance failure.
5. Governance Integration and Escalation Pathways
Finally, ask: How will our internal teams stay informed if the model changes? What’s the escalation path if something goes wrong?
A reliable partner will:
- Provide regular governance updates
- Offer dashboards or alerts for key metrics
- Include escalation contacts for clinical, technical, and operational concerns
Ideally, governance updates should be integrated into your plan’s broader enterprise risk management (ERM) or compliance review cycles.
Resolution
Effective third-party AI deployment requires alignment across legal, compliance, IT, clinical, and operational teams. Since AI touches nearly every corner of a health plan’s workflow, procurement can’t operate in a silo. Mizzeto helps health plans bridge these gaps through a structured governance model that streamlines vendor assessment, automates risk tiering, and embeds AI risk checks directly into procurement and engineering workflows.
Creating an internal AI Risk Review Board which is a cross-functional group tasked with reviewing third-party AI vendors can help standardize intake and performance monitoring. Mizzeto supports this by deploying centralized templates and policy automation, reducing low-risk approval timelines and eliminating redundant oversight.
Plans should also consider engaging vendors in joint governance sessions, where both sides clarify roles, agree on evaluation metrics, and define accountability measures. Mizzeto makes this seamless by ensuring every vendor model is risk-scored, explainable, and auditable before deployment. Their success in partnering with a Fortune 25 health payer to deploy a multi-tier AI Risk Scoring Model and govern third-party vendor intake demonstrates how strategic oversight can scale — cutting unmanaged deployments by 70% and enabling full lifecycle governance.
In an environment where operational inefficiencies and rising costs are already pressing concerns, responsible AI governance isn’t optional—it’s a differentiator. With the right structure in place, innovation becomes safer, smarter, and ultimately more impactful.
1BVP