OF DIGITAL INTEREST

Executive briefing: Strategic inflection points in digital health & health tech

by McDermott Will & Emery | Nov 24, 2025 | Artificial Intelligence, Data Privacy, Digital Health, Telehealth

The digital health and health tech sectors are undergoing a period of accelerated transformation amidst a fragmented regulatory landscape. Companies are looking within and to peers to determine how to pursue innovation while balancing financial and regulatory risks in this challenging landscape, while investors are waiting for leaders to emerge. This briefing outlines four critical inflection points that are redefining the market.

1. AI in Healthcare: Building Trust and Embracing Risk Amidst Regulatory Uncertainty

Inflection Point: With no clear federal legal framework for AI in healthcare, organizations must work with internal and external stakeholders to build trust and understanding of the technology while proactively managing risk to drive adoption.

Addressing Knowledge Gaps: Many patients lack the context to evaluate AI-driven decisions. Public-facing materials and clinician communication are key to bridging this gap. Empowering patients to engage with their own medical data – the information AI uses – establishes transparency and can build trust in AI-assisted care.

Progress, Not Perfection: The question isn’t whether AI is perfect—it’s whether it’s better than current alternatives. Humans also make mistakes, but human error is more acceptable to the public than AI error. Framing AI as a tool for enhancement, not replacement, helps build trust. Communicating success stories to overcome negative perceptions in the court of public opinion is an important step in advancing AI within healthcare.

Risk Without Regulation: The absence of federal AI regulation requires healthcare organizations to build internal frameworks for risk quantification and mitigation.

Human-in-the-Loop Models as a De-Risking Strategy: At this time, AI is most often being deployed as clinical decision support—not as a replacement for clinicians. These models must be pressure-tested by competent humans to avoid hallucinations and ensure accountability. From a legal standpoint, the source of error—human or machine—doesn’t change the risk. What matters is whether the output was pressure-tested by a qualified reviewer.

Investor Insight: Back companies that treat AI governance as a strategic asset, not just a compliance checkbox. The strongest players combine defensible frameworks, clear accountability, and alignment with emerging federal and state guidance with real-world evidence and proven use cases. Models that embed meaningful human oversight, anchored by the pedigree and expertise of the individuals in that loop, reduce both clinical and regulatory risk. That combination makes them far more investable and better positioned for long-term adoption.

2. Payment Model Volatility: Navigating the Cash-Pay Surge and Reimbursement Gaps

Inflection Point: The traditional reimbursement ecosystem is now one of many paths for digital health companies.

Cash-Pay Expansion: We see continued growth in cash-pay models given challenges with health plan coverage and consumer preferences to leverage virtual models for certain treatments, such as weight loss.

Reimbursement Realities: Many digital health companies are opting out [...]

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Trending in Telehealth: September 2025

by Amanda Enyeart and Brigit Dunne | Oct 13, 2025 | Telehealth

Trending in Telehealth highlights monthly state legislative and regulatory developments that impact healthcare providers, telehealth and digital health companies, pharmacists, and technology companies that deliver and facilitate the delivery of virtual care.

Trending in September:

Telehealth disciplinary guidelines
Telepharmacy
Behavioral health

A CLOSER LOOK

Proposed legislation & rulemaking:

The Florida Board of Nursing proposed rules would update its disciplinary guidelines for telehealth registrants to identify additional violations subject to disciplinary actions. The proposed rules address violations such as failing to remit funds owed to the state Medicaid program following a final order, judgment, stipulation, or settlement and failing to comply with statutory requirements for refunding overpayments to patients. Disciplinary actions for these violations range from a minimum of license denial or suspension with a corrective action plan, to a maximum penalty of license revocation.
The Louisiana Addictive Disorder Regulatory Authority (ADRA) proposed to adopt and enact LAC 46:LXXX § 2101 to align with the Louisiana Telehealth Access Act. This rule would allow ADRA-licensed professionals to provide addiction counseling, prevention services, and compulsive gambling counseling via telehealth to clients physically located in Louisiana during sessions.
Maine’s Board of Licensure in Medicine proposed to update the rules for physician licensure, registration, notification, and continuing medical education. This revision would update the definition of telehealth to include audio-only technology when necessary and appropriate under the circumstances and if in compliance with the applicable standard of care.
The New Jersey Board of Medical Examiners proposed a new rule to allow physicians to authorize medical cannabis use via telemedicine, when the use of telemedicine or telehealth is consistent with the standard of care. The physician may require in-office consultations if additional consultations are necessary.
The Ohio Board of Pharmacy proposed a new rule that would allow a pharmacy licensed as a terminal distributor of dangerous drugs to dispense drugs and provide patient counseling and other pharmacist care through a telepharmacy system.
The Wisconsin Pharmacy Examining Board accepted comments for an economic impact analysis prior to holding a public hearing on a proposed rule that would allow pharmacies to receive prescription orders through a HIPAA-compliant secure texting platform.

Finalized legislation & rulemaking activity:

California enrolled several bills in September that cover areas such as Medi-Cal improvements, scope of practice for tele-veterinary services, and pilot programs:
- SB 530 passed both chambers and reinforces patient choice by requiring managed care plans to offer in-person services (even when telehealth meets access standards) if the patient prefers face-to-face care.
- AB 260 passed both chambers and shields healthcare professionals and facilities in California from civil or criminal actions or disciplinary or other administrative proceedings (e.g., licensure denial, suspension, or revocation) solely related to the provision of medication abortions out-of-state, regardless of federal actions or legal conditions in other states.
- AB 1503 passed both chambers. This bill prohibits any [...]
  
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Trending in Telehealth: August 2025

by Amanda Enyeart, Jayda Greco and Jae Hyun Lee | Sep 5, 2025 | Telehealth

Trending in Telehealth highlights monthly state legislative and regulatory developments that impact the healthcare providers, telehealth and digital health companies, pharmacists and technology companies that deliver and facilitate the delivery of virtual care.

Trending in August:

Telehealth expansion
Teledentistry
Veterinary telemedicine
Mental and behavioral health

A CLOSER LOOK

Proposed Legislation & Rulemaking

California was active in the telehealth space in August, proposing several bills covering areas such as Medi-Cal improvements, scope of practice for tele-veterinary services, and pilot programs:
- California’s Telehealth for All Act of 2025, AB 688, passed both chambers. The bill would enhance the use of telehealth services within the Medi-Cal program by requiring analyses and reporting on telehealth utilization and access every two years.
- California AB 1502 passed one chamber and would clarify scope of practice, recordkeeping, and supervision requirements for veterinarians using telemedicine.
- California SB 775 passed one chamber and would extend certain operations of the Board of Psychology and the Board of Behavioral Sciences to January 1, 2030. It would extend a provision that includes contact via two-way, real-time videoconferencing in the definition of “face-to-face contact” for the purpose of direct supervisor contact. This provision was previously set to expire on January 1, 2026.
- California SB 669 passed one chamber and would establish a five-year pilot for rural hospitals more than 60 minutes away from full maternity services to offer standby perinatal care starting in 2025. Participating hospitals would have to meet specific requirements, including having telemedicine policies for real-time perinatal and neonatal consultations.
- California SB 660 passed one chamber and would expand oversight of the California Health and Human Services Data Exchange Framework by the Department of Health Care Access and Information. The bill would mandate the establishment of a data sharing system among healthcare entities and government agencies by January 1, 2026, to enhance health information exchange. A new CalHHS Data Exchange Board, consisting of 14 members, would be created to ensure compliance with the data sharing framework. The bill also seeks to designate qualified health information organizations as intermediaries.
- California SB 338 passed one chamber and aims to establish a pilot program to expand access to health services for farmworkers in rural areas through virtual health hubs. These hubs, featuring essential telemedicine infrastructure such as Wi-Fi and exam rooms, would be funded by grants to community-based organizations with a history of serving medically underserved communities. The program would specifically target Latino farmworker communities to address issues such as diabetes, high blood pressure, and access to healthcare, which are exacerbated by factors such as language barriers and low-income levels. Implementation would depend on grant recipients fulfilling financial criteria, and the program would be evaluated via a report submitted to the legislature based on data collected from the health hubs.
- California AB 341 passed one chamber and would require the Department of Developmental Services to contract with a public [...]
  
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Trending in Telehealth: June 2025

by Stacey Callaghan, Amanda Enyeart and Abby Higgins | Jul 23, 2025 | Telehealth

Trending in June:

Out-of-state licensure

Expansion of services

Prescription standard changes

A CLOSER LOOK

Proposed Legislation & Rulemaking:

California was active in the telehealth space in June.

- California lawmakers proposed three bills related to use of telehealth in connection with the Medi-Cal program. The California Senate proposed SB 530 to extend Medi-Cal’s existing time and distance standards to ensure timely access to various healthcare services, including telehealth. California also proposed the Telehealth for All Act of 2025, AB 688, to enhance use of telehealth services within the Medi-Cal program by requiring regular analyses and reporting on telehealth utilization and access every two years. California proposed AB 260 to establish protections around abortion access by allowing telehealth providers who offer reproductive health services to enroll as Medi-Cal providers.

- California proposed SB 508 to allow out-of-state physicians to provide telehealth services to certain “eligible patients” in California. Previously, eligible patients were limited to those that had an immediately life-threatening disease or condition, or who had been diagnosed with any stage of cancer. If passed, SB 508 would revise the definition of eligible patient to include patients whose immediately life-threatening disease or condition is in remission if the patient is continuing care with the out-of-state physician.

- The California Assembly passed AB 1503, which proposes changes to the pharmacy regulations. These changes would amend previous language requiring a provider to perform a “good faith prior examination” before issuing a dangerous drug or device to an “appropriate prior examination,” and would require a pharmacy or outsourcing facility to notify the California State Board of Pharmacy that it receives prescriptions from a telehealth platform, unless an exception applies.

Colorado published notice of proposed rulemaking to include remote patient monitoring as a reimbursable service separate from the per visit encounter rate for Rural Health Clincs. This is in response to Senate Bill 24-168, which passed in 2024 and instructed the Department of Health Care Policy and Financing to conduct stakeholder meetings on options for remote monitoring with rural providers. Written comments will be accepted through August 6, 2025.

Delaware proposed SB 101, which would reconcile a conflict between the in-person examination requirement for prescribing controlled substances under [...]

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Partnering with Legal at the Critical AI/Healthcare Crossroads

by McDermott Will & Schulte | Jun 25, 2025 | Artificial Intelligence

The intersection of AI and healthcare is outpacing the development of laws and regulations governing the technology. Even in the early days of AI transformation, this is creating uncertainty for healthcare organizations. Leveraging existing frameworks and creating a culture of collaborative compliance can help organizations navigate these challenges without stifling innovation.

Sumaya Noush, partner at McDermott Will & Emery, and Megan Harkins, Compliance and Regulatory Counsel at Innovaccer, discussed the role of legal teams in healthcare AI innovation in a podcast recorded at Becker’s 15th Annual Meeting.

Top Takeaways

AI is rapidly advancing in healthcare. It can help identify diseases, predict patient risk, and improve workflows. However, the legal system is having a hard time keeping up with it.
The lack of regulation in AI can lead to novel and unpredictable legal challenges, including lawsuits that apply old rules to new technologies.
Cross-border AI legal guidance is more unified and can serve as a gold standard for AI companies and healthcare organizations leveraging AI in any jurisdiction.
Compliance by design, where legal and compliance considerations are integrated from the start, can help organizations navigate the regulatory minefield while maintaining their innovative edge.
AI in healthcare will probably stay in a state of regulatory uncertainty for a while. Case law development is important for future regulation.

Making Innovation Actionable

“Flexibility within a framework” and legal-business collaboration is essential to navigate change in a highly regulated industry like healthcare.

In today’s fast-moving, tech-driven world, effective lawyers – both in-house and outside counsel – function as strategic business partners to turn creative ideas into workable, real-world solutions that exist on the right side of the law. To do this effectively and create a defensible record, it is important for compliance, legal, and business stakeholders to collaborate proactively and to ensure that innovation is guided by a clear understanding of legal requirements and ethical standards.

Lack of AI regulations in healthcare is leading to a “wild West” situation, but organizations can find guidance in existing standards and frameworks.

The gap in AI law can make it hard for healthcare organizations to adopt the new technologies, especially in the United States, where laws are often more fragmented than in other countries. US-regulated organizations can look to the EU as a bellwether for where AI oversight in the US may go. In the meantime, working within old-school healthcare regulations and operating from the place that what is true for humans and healthcare entities is still true for the AI tools that are then embedded to support the practices, provides a compliant path forward for US health industry players. That means applying existing laws and frameworks like HIPAA, recording and consent laws, IP law, and others, to novel technologies to data use cases. Voluntary commitment to industry standards like NIST and ISO 42001 can provide a structured, compliance-driven approach to AI management.

Dig deeper and listen to the full podcast here