In the last two weeks, a CMS payment proposal, three lawsuits, a Senate vote and a nurses’ rally all landed on the same theme: outside vendors and AI tools embedded in patient care are drawing pushback from regulators, courts and the workforce at once.
1. CMS moves to cut vendors out of remote monitoring
CMS’s proposed 2027 physician fee schedule, released July 14, would bar Medicare payment for remote patient monitoring services delivered by third-party vendors. Under the proposal, RPM and remote therapeutic monitoring could only be billed when clinical staff employed by the treating practice, not a contracted vendor, furnish the service. The rule would also limit RPM to established patients and require a separately billable initiating visit.
Telehealth trade groups pushed back fast. Christopher Adamec, executive director of the Alliance for Connected Care, said the proposal “ends RPM, both high quality and low quality,” warning that vendor-run programs are often what keep monitoring accessible for smaller and rural organizations. Comments are open through Sept. 14, with most provisions set to take effect Jan. 1, 2027.
2. AI chatbots are drawing personal-injury and state lawsuits
Three separate legal actions this month accuse consumer AI tools of practicing medicine without a license:
A California man, Scott Winters, sued OpenAI and Sam Altman after ChatGPT-4o allegedly told him his symptoms were “not something dangerous” and discouraged him from seeking care; he was hospitalized in the ICU the next day with a pulmonary embolism. The suit seeks damages plus a pause on ChatGPT Health pending independent safety audits.
The parents of a 19-year-old who died of an overdose sued OpenAI separately, alleging ChatGPT instructed him on mixing Xanax with kratom, and are seeking to halt ChatGPT Health until it’s proven safe.
Pennsylvania sued Character.AI, alleging its chatbots impersonated licensed medical professionals, including one that gave itself an invalid Pennsylvania psychiatry license number. The state calls it the first enforcement action of its kind by a governor’s office.
3. Prior-authorization’s AI vendors face their own scrutiny
CMS’ WISeR model, an AI-assisted prior authorization pilot for traditional Medicare running in six states through 2031, survived a 46-50 Senate vote July 16 to advance a repeal resolution.
Critics, including Sen. Ron Wyden, D-Ore., object to a structure where for-profit vendors are paid based on a share of “averted expenditures,” which they argue rewards denials. CMS has separately ordered a corrective action plan for one of the AI vendors operating inside the pilot. CMS Administrator Mehmet Oz, MD, said the model roots out waste and that clinicians retain final say over denials; House Democrats are pushing a competing effort to defund it in the fiscal 2027 spending bill.
4. Nurses are turning from staffing fights to vendor contracts
Organized nursing pushback against AI — running since 2024 through contract fights and marches — hit two new fronts this month. In Maine, the Maine State Nurses Association rallied July 23 demanding MaineHealth cancel its Palantir contract over the company’s ties to immigration enforcement. MaineHealth said the tool is used only to challenge improper insurance denials and doesn’t touch clinical decisions. It’s the same objection that led NYC Health + Hospitals to end its own $4 million Palantir contract, effective October 2026.
Separately, the American Medical Association’s push to create billing codes for autonomous AI (“clinically meaningful algorithmic analyses”) has drawn objections from nurse leaders who note RNs still have no standalone CPT code of their own — meaning AI could get a direct Medicare payment pathway nurses have never had. And at Mayo Clinic, a former research operations director filed a whistleblower retaliation suit alleging the health system concealed a 67% error rate in an internal AI assistant study and bypassed institutional review board review on an AI-linked cardiac device procedure.
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