We started doing challenges like this in our hiring process some years ago. Our challenges are open-ended so the time spent on it really is up to the applicant, but you can come up with a good solution in a few hours.
The feedback from candidates (including those we didn't hire) has been extremely good - they much prefer this to puzzles or whiteboard coding sessions.
Note that we give such challenges to candidates after they passed through a phone screen and a first interview with a pair of engineers.
(I have no knowledge of health care in the US - both countries I lived in have free health care)