Wade’s Health Law Highlights for February 18, 2025

AI in Healthcare

• A new American Medical Association survey reveals that physician acceptance of AI in healthcare has increased, with 35% now showing enthusiasm compared to 30% in 2023. The adoption rate of AI tools among physicians has jumped from 38% to 66% between 2023 and 2024. The survey, conducted from August 2023 to November 2024, found that 57% of physicians view AI’s potential to reduce administrative tasks as a key benefit. Physicians prioritize data privacy (87%), feedback channels (88%), and EHR integration (84%) for AI implementation.
• Colorado’s new Artificial Intelligence Act will take effect on February 1, 2026, requiring healthcare providers to prevent algorithmic discrimination in AI systems that make consequential decisions about patient care. The law mandates that organizations using high-risk AI systems implement risk management policies, conduct impact assessments, and provide transparency about AI usage to patients. Healthcare providers must notify individuals before AI makes consequential decisions and allow appeals for adverse outcomes, while the Colorado Attorney General holds exclusive enforcement authority. Organizations with fewer than 50 employees who don’t train their own AI models are exempt from many compliance requirements, though the law’s reach extends to any business serving Colorado residents.

Antitrust

• President Trump’s return to the White House signals a shift in antitrust enforcement approach for private equity firms. The administration has appointed Andrew Ferguson as FTC chair and nominated Gail Slater to lead the DOJ’s antitrust division, replacing Lina Khan and Jonathan Kanter respectively. The Trump administration is expected to be more accepting of negotiated settlements and divestitures involving private equity, moving away from the Biden administration’s stricter stance on merger enforcement and roll-up acquisitions. While antitrust scrutiny will continue, particularly in Big Tech and healthcare sectors, new HSR premerger notification rules taking effect in February 2025 will require closer monitoring of interlocking directorates. PE firms must maintain compliance protocols for board appointments as the new HSR form enhances the ability to detect potential violations of Section 8 of the Clayton Act.
• States are taking a more active role in healthcare antitrust enforcement through state-level transaction notification regimes known as “Baby HSRs” or “Mini HSRs.” These state regulations impose requirements on healthcare transactions that may fall below federal HSR Act thresholds, with states implementing additional scrutiny for private equity involvement in healthcare deals. States cite concerns that profit motives could reduce quality of care as justification for increased oversight of private equity transactions. The regulations vary by state, with some imposing more stringent requirements than federal rules, and many states continue to implement or expand their healthcare transaction approval processes.

Biometric Data

• Three states in the U.S. – Illinois, Texas, and Washington – have established laws to regulate biometric data collection and usage. Illinois’ BIPA stands as the strictest law, requiring written notice, explicit consent, and public data retention schedules, while allowing individuals to file lawsuits for violations. Texas’ CUBI and Washington’s statute mandate notice requirements and data protection measures but do not permit private lawsuits. Organizations must comply with these regulations when collecting biometric data such as facial features, voice patterns, and fingerprints, while implementing security measures to protect this information.

Drugs & Devices

• A Texas judge ordered Dr. Maggie Carpenter to pay over $100,000 in penalties for prescribing abortion pills via telemedicine to a woman near Dallas. New York Governor Kathy Hochul rejected Louisiana’s request to extradite Carpenter, who faces criminal charges in Louisiana for prescribing abortion pills to a minor. The Texas ruling includes an injunction preventing Carpenter from prescribing abortion medication to Texas residents, while Louisiana’s case marks the first criminal charges against a doctor for prescribing abortion pills across state lines. Both cases will test New York’s shield law, which protects doctors who prescribe abortion medication to states where abortion is restricted.
• Texas convenience stores are selling synthesized Kratom products containing 7-Hydroxymitragynine, a substance that acts like opioids in the brain. While natural Kratom has been used traditionally in Southeast Asia, companies are now creating concentrated pills that are 97% pure 7-OH, far exceeding the 2% limit set by Texas law. The Texas Kratom Consumer Protection Act outlaws these synthetic versions, but state officials are not enforcing the regulations. The Global Kratom Coalition reports 24 million Americans use Kratom, though the synthesized versions sold in stores can lead to addiction and withdrawal symptoms.
• The FDA has published final guidance on communications about unapproved uses of approved medical products on January 6, 2025. The guidance defines SIUU communications as firm-initiated exchanges with healthcare providers about scientific information on unapproved uses, requiring specific disclosures and source publications. The document clarifies what constitutes “scientifically sound” studies, removes requirements for plain language, and provides new rules about separating promotional from scientific communications. The guidance also addresses “calls to value,” prohibiting communications that pre-judge product benefits while allowing those that present scientific information for clinical decision-making. The FDA maintains core policies while requiring firms to update their internal procedures to align with the new guidance.
• The FDA has issued its first guidance on using artificial intelligence models in drug development and regulatory submissions, with a public comment period open through April 7. The guidance introduces a seven-step risk-based framework for assessing AI model credibility, covering nonclinical, clinical, postmarketing, and manufacturing phases while excluding drug discovery and operational efficiencies. FDA recommends implementing life cycle maintenance plans to monitor AI models’ ongoing performance and ensure they remain suitable for their context of use. The guidance emphasizes early engagement with FDA through various programs like the Center for Clinical Trial Innovation and the Complex Innovative Trial Design Meeting Program. President Trump signed an executive order on January 23 to remove barriers to AI leadership, rescinding previous Biden administration restrictions on AI development.

Fraud & Abuse

• Healthcare fraud schemes are increasingly using AI to generate false claims and clone medical records, with losses representing 3% of total healthcare expenditures, amounting to $144 billion annually based on 2023’s $4.8 trillion U.S. health spending. Healthcare organizations are implementing both supervised and unsupervised machine learning models to detect fraud patterns and suspicious billing behaviors. The technology helps special investigation units identify emerging fraud schemes more quickly than traditional rules-based systems. Health plans are advised to use AI as a complement to human expertise while implementing strategies such as cross-plan data analysis and verification of member tips.
• The Department of Justice charged 193 defendants, including 76 medical professionals, in health-care fraud schemes totaling $2.75 billion in intended losses and $1.6 billion in actual losses during the 2024 National Health Care Fraud Enforcement Action. The fraud cases involved wound grafts, unlawful prescriptions, telemedicine schemes, and laboratory fraud, with Medicare Advantage insurers allegedly overcharging CMS by $83 billion in 2024. The DOJ plans to continue prioritizing enforcement of opioid-related crimes, unnecessary services, substandard care, and Covid-19 fraud cases. Despite potential changes under the Trump administration, health-care fraud enforcement will likely remain a priority due to its revenue generation for the government. In response, physicians are increasingly moving to cash-based practices to avoid regulatory burdens, though those accepting federal plans must maintain compliance systems and seek legal counsel for business arrangements.

Pharma

• The Department of Health and Human Services has postponed the effective date of modifications to NCPDP Retail Pharmacy Standards and Medicaid Pharmacy Subrogation Standard to April 14, 2025. The delay follows President Trump’s January 20 memorandum calling for a regulatory freeze pending review, with Acting Secretary Dorothy A. Fink citing the need to review questions of fact, law, and policy. The final rule updates standards for electronic healthcare transactions, including claims, eligibility, authorization, and benefits coordination. The postponement will affect the compliance timeline, pushing the full compliance date beyond February 2028, and allows time to correct an error in the transition period calculation that was originally set to begin August 11, 2027, but should have been June 11, 2027. The HHS has waived notice and comment requirements, making the delay effective immediately upon Federal Register publication.

Private Equity

• A report released by federal agencies analyzing over 2,000 public comments reveals concerns about healthcare industry consolidation and private equity investment. The report identifies issues including higher prices from provider consolidation, quality reductions in PE-backed transactions, and PE firms controlling up to 50% of physician practices in some metropolitan areas. Studies show PE acquisitions correlate with safety issues and reduced quality in healthcare facilities, while physicians report concerns about understaffing and restricted referrals. In response, Massachusetts passed legislation in 2025 granting new powers to review healthcare transactions involving PE firms, though the federal agencies’ continued focus on PE may shift under the Trump administration.
• Private equity firms were connected to 56% of large corporate bankruptcies across industries in 2024, with healthcare showing a particularly high rate. Of eight major healthcare bankruptcies with liabilities over $500 million, seven involved companies with private equity ownership history. The healthcare sector’s 21% rate of private equity-related bankruptcies exceeded the broader economy’s 11% rate and matched 2023 levels. The Private Equity Stakeholder Project reports these bankruptcies can result in healthcare facility closures and disrupted patient care. Valentina Dabos from PESP emphasizes these trends raise concerns for policymakers, investors, and consumers.
• Healthcare mergers and acquisitions are expected to increase in 2025 as inflation eases and interest rates decline. Private equity transactions with physician practices typically involve a combination of cash payment and rollover equity through management services organizations, with rollover equity potentially comprising up to 40% of deal value. While orthopedic and spine surgery groups have historically resisted private equity investment due to their profitable ancillary services, this resistance is weakening except among mega-groups. Transaction success requires broad stakeholder support, experienced advisors, regulatory compliance, and careful structuring of tax treatment and indemnification terms. Generational differences often emerge in these deals, as older physicians typically receive larger portions of purchase price while younger doctors face career-long relationships with financial investors.
• The Senate Budget Committee and HHS released reports in January 2025 examining private equity ownership in healthcare. The reports identified concerns including reduced care quality, facility closures, higher costs, understaffing, and lack of ownership transparency. HHS proposed new oversight measures including expanded transparency requirements, lower merger reporting thresholds, and increased enforcement against hospital consolidation. The reports recommend PE firms maintain compliance through monitoring regulations, documenting quality metrics, and implementing strong compliance programs. The impact of these potential changes under the Trump administration remains uncertain.

Telehealth

• Healthcare technology trends in 2025 include a shift in telehealth usage to focus on behavioral health and specialist care. Hospitals are expanding AI applications through dedicated centers and AI scribes, while implementing LiDAR sensors and wearable devices for patient monitoring. Remote patient monitoring and hospital-at-home programs continue to grow as medical centers face staffing challenges. Cybersecurity remains critical after ransomware attacks doubled in 2024, affecting over 1,000 U.S. hospitals and prompting healthcare organizations to strengthen their security measures and vendor oversight. AI tools are being developed to detect network breaches and automate tasks like appointment scheduling and medical billing.