Tony Bennett once crooned about leaving his heart in San Francisco and \u2014 some 63 years later \u2014 R1 has decided to make the city the heart of its artificial intelligence lab\u2019s operations.\u00a0<\/p>\n
R1 \u2014 a healthcare revenue management company that provides services for hospitals, health care systems and physicians \u2014 just leased 12,453 square feet at San Francisco\u2019s 140 New Montgomery to serve as its new AI lab\u2019s headquarters, Commercial Observer can first report.\u00a0<\/p>\n
SEE ALSO: Mediterranean Eatery Motek Takes Over Greenwich Village Figaro Space<\/a><\/p>\n The lab, R37<\/a>, was launched in March by R1 and joint venture partner Palantir Technologies with a goal of quickly scaling health care revenue solutions. R1 \u2014 which was taken private by TowerBrook and CD&R<\/a> last year \u2014 is already a significant player in the health care administration space, while Palantir is a leader in AI systems.\u00a0<\/p>\n Starting in the second quarter of 2026, R37 will fully occupy the seventh floor of Pembroke\u2019s 140 New Montgomery for seven and a half years. With room for 70 employees, its space will include 15 private offices, 56 desks and six conference rooms.\u00a0<\/p>\n Earlier this month, R1 launched its <\/a>Phare Operating System, the healthcare industry\u2019s first AI-driven revenue operating system, and R37\u2019s new HQ builds on \u2014and creates a physical space for \u2014 that building momentum. <\/p>\n \u201cWe believe that the current trajectory of spend in health care and its revenue cycle is unsustainable, and so as the company transitioned from what was previously a public entity to a private one, part of that thesis was that we can leverage technology to meaningfully disrupt the cost curve of health care and start to make it more affordable by addressing the economics of processing in the revenue cycle,\u201d Chris Hartemayer, executive vice president of enterprise operations for R1, told CO.\u00a0<\/p>\n \u201cComing out of that transaction, which closed in December of last year, we embarked on that journey, and we started by picking an enterprise-wide, AI-native partnership with Palantir and infusing that partnership with top talent from our engineering group as well as our operations group in a dedicated, focused environment \u2014 which we called our R37 lab,\u201d Hartemayer said.\u00a0<\/p>\n As the lab got underway, R1 and Palantir knew they had to invest not only in its technology platform but also the talent to support it. That meant a significant operating base.\u00a0<\/p>\n \u201cThe reason for acquiring office space in San Francisco came about from us asking how we\u2019d support that growth that we knew that we were going to embark upon,\u201d Hartemayer said. \u201cThat question is also about how we serve our existing customers, because we want to be able to deliver this new agentic solution to who we serve \u2014 which is over 95 of the top 100 health systems in the U.S., and over $80 billion in outpatient service revenue that we serve on an end-to-end basis.\u201d\u00a0<\/p>\n R1 is headquartered in Chicago and also has a large footprint in Salt Lake City, but when it came to a home for R37 there was a standout choice. \u201cTo Chris\u2019s point, we wanted to tap into the tech talent in our focus on AI services and, through other acquisitions that the company has done through the years, we also already have an employee base in the Bay Area,\u201d said Corey Perman, R1\u2019s executive vice president and chief risk and compliance officer.\u00a0<\/p>\n The firm also recently made an \u2014 undisclosed \u2014 acquisition in New York, meaning it will soon have tech-focused bases on both coasts.\u00a0<\/p>\n \u201cWe felt it was really important to add those assets in San Francisco and New York to make sure that we were attracting the highest-caliber AI researchers and AI engineers to supplement our growth,\u201d Hartemeyer said.<\/p>\n The 26-story building, South of Market district building at 140 New Montgomery was erected in 1925 as the headquarters for the Pacific Telephone and Telegraph Company. It fittingly earned the nickname of the \u201cTelephone Building\u201d and, at 435 feet, was the tallest building in San Francisco for a time. (Today, that crown has been taken by the city\u2019s SalesForce Tower, which rises 1,070 feet.) Its amenities include a cafe, a bar, a restaurant and a spa.\u00a0<\/p>\n Perman, Hartemayer and their colleagues spent time looking at a number of buildings in San Francisco\u2019s financial district as well as other parts of the city that have continued to rebound and grow post-COVID, but 140 New Montgomery was one around which they quickly coalesced.\u00a0<\/p>\n First, there was the building\u2019s history, but \u201cit also had all the contemporary features a modern workforce wants, and the space that lends itself to the way we want to work collaboratively, in a tech-focused way,\u201d Perman said. \u201cWe\u2019re in the process of designing and building out areas where developers, engineers and tech-focused teams can sit in open spaces and work together, but also the conference rooms, executive meeting rooms, private offices and all of that. It\u2019s a building that has bicycle facilities and, importantly, is also close to public transportation. We\u2019re very excited about it.\u201d\u00a0<\/p>\n When employees move in to the space next year they\u2019ll get to work on revolutionizing procedures ranging from patient admitting to insurance billing and collections, and everything in between.\u00a0<\/p>\n It also comes at a time where San Francisco is on a clear upward swing \u2014 in no small part due to demand from AI-powered firms<\/a> like R1.\u00a0<\/p>\n \u00a0\u201cWhat we\u2019ve seen and heard from our partners we\u2019ve been working with on our real estate efforts is that the occupancy rates are picking up in the area we\u2019ll be in and the business district more generally, and the rate at which employees are coming into offices is picking up again too, particularly over the last 18 months,\u201d Perman said. \u201cSo you\u2019ve got to return-to-office vibrancy on top of companies taking more space or building out their own spaces. So, there\u2019s definitely an upward trajectory in everything we\u2019re experiencing and hearing about in San Francisco.\u201d\u00a0<\/p>\n