Artificial Intelligence

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The rapid advancement of artificial intelligence (“AI”) has spurred remarkable innovation for the healthcare industry, while also resulting in swiftly emerging regulatory frameworks. On October 13, 2025, Governor Gavin Newsom signed into law California Senate Bill 243 (“SB 243”) – the first law in the nation to address the “human interface” of AI chatbots, especially those used by minors, by establishing strict requirements around transparency, safety, and behavioral integrity. Healthcare providers, technology companies, and digital platform operators must now anticipate and prepare for a regulatory landscape that establishes meaningful obligations around AI’s emotional and psychological impact on users. SB 243 will take effect on January 1, 2026.Continue Reading California SB 243: Setting New Standards for Regulating and Ensuring Integrity of AI Companion Chatbots

The Centers for Medicare and Medicaid Services (“CMS”) recently announced the first six participating states in the Wasteful and Inappropriate Service Reduction (“WISeR”) Model that will begin on January 1, 2026: Arizona, New Jersey, Ohio, Oklahoma, Texas, and Washington.[1] As its hallmark objective, the Model aims to refine prior authorization processes for traditional fee-for-service Medicare through the use of enhanced technologies, such as artificial intelligence (“AI”), to reduce the performance of, and payment for, services that are deemed to be “low value.” Model participants will receive a percentage of the savings associated with avoided “wasteful, inappropriate care” as a result of their reviews.Continue Reading New WISeR Model Aims to Leverage AI Technology to Reduce Costs and Inefficiencies

In early August, Illinois enacted the Wellness and Oversight for Psychological Resources Act (HB 1806, or the “Act”), making it the first state to pass a law regulating the use of AI[1] in the delivery of therapy and psychotherapy services. The Act, which took immediate effect, imposes guardrails on the use of AI to provide decision-making therapeutic support services, but permits the use of AI for administrative and supplementary tasks, subject to certain consent requirements. This blog post summarizes the Act and addresses its potential implications for the use of agentic AI by Illinois therapy providers.Continue Reading Illinois Becomes the First State to Regulate the Use of AI Mental Health Therapy Services

California continues to lead the nation in artificial intelligence (“AI”) regulation with the recent enactment of Senate Bill (“SB”) 53—the Transparency in Frontier Artificial Intelligence Act (“TFAIA” or the “Act”)[1]. Signed by Governor Gavin Newsom earlier this fall, the TFAIA takes effect January 1, 2026, and establishes significant oversight, accountability, and reporting requirements for advanced developers at the cutting edge of artificial intelligence. This law sets a framework for transparency and public safety, and is expected to set a nationwide precedent for future AI legislation to come.Continue Reading California Enacts SB 53: A Defining Step in Responsible AI Governance for Frontier AI Developers

Healthcare organizations of every shape and size are rapidly expanding their use of artificial intelligence solutions from high-risk applications like clinical decision-support interventions, ambient listening, and charting to lower-risk administrative activities like automated patient communications and scheduling. While adoption is widespread and increasing in depth and breadth across the industry, not every healthcare organization has established governance around AI or a monitoring process for exploration and adoption of new tools – including those contemplating a sale of assets or equity. For buyers in healthcare mergers and acquisitions today, AI diligence needs to be a focus, given the potential risk of compliance and class action concerns related to high-risk AI solutions, particularly those that have any interaction with protected health information (“PHI”) regulated under the Health Insurance Portability and Accountability Act, as amended and pursuant to its implementing regulations (collectively, “HIPAA”).Continue Reading AI Due Diligence in Healthcare Transactions

At the end of June, Texas enacted the “Texas Responsible Artificial Intelligence Governance Act” (the “Act”), adding to the patchwork of growing AI laws. This summary addresses the Act’s most significant provisions.Continue Reading Texas Enacts Responsible AI Governance Act Adding to Patchwork of AI Laws

On June 10th, Sheppard Mullin partner Carolyn Metnick and associate Esperance Becton, in collaboration with Marsh McLennan, presented the CLE webinar, “Navigating Healthcare Risks in a Rapidly Evolving Patient and Provider Centered AI Landscape.” The session addressed the growing legal, operational, and ethical risks of AI adoption in healthcare, emphasizing the importance of thoughtful governance and risk mitigation. Key discussion points included regulatory compliance, implementation strategies, liability trends, Marsh’s generative AI risk framework, and insurance considerations.Continue Reading Key Insights from Sheppard Mullin and Marsh McLennan’s Webinar on Navigating Healthcare Risks in a Rapidly Evolving AI Landscape

Congress is weighing a sweeping proposal that could significantly reshape how artificial intelligence (AI) is regulated across the United States. At the end of May, the United States House of Representatives passed, by a vote of 215-214, the One Big Beautiful Bill Act (OBBBA), a budget reconciliation bill with a provision imposing a 10-year moratorium on the enforcement of most state and local laws that target AI systems. If enacted, OBBBA would pause the enforcement of existing state AI laws and regulations and take precedence over emerging AI legislation in state legislatures across the country.Continue Reading The One Big Beautiful Bill Act’s Proposed Moratorium on State AI Legislation: What Healthcare Organizations Should Know

In a recent decision with important implications for artificial intelligence (AI) driven innovation, the Patent Trial and Appeal Board (PTAB) denied a patent for an AI-based medical tool.[1] The refusal was not because the invention was not new or inventive. Rather, the refusal was because the invention did not meet a fundamental rule of U.S. patent law. In Ex parte Michalek, the PTAB specifically acknowledged that the patent claims at issue recited new information about the nexus between certain biomarkers and the development of lung cancer as facilitated by machine learning. In fact, prior to appeal, the applicant had successfully refuted all arguments raised by the patent examiner that the invention was not new or nonobvious. That said, based on U.S. Patent Office guidance and a related example from that guidance, the PTAB still determined the claims were flawed based on the legal principle of subject matter eligibility. Although the facts in this decision concern medical health innovation, the decision is helpful to inform patent strategy for AI-enabled inventions across various disciplines and industries.Continue Reading PTAB Rejects AI-Driven Medical Patent – Not for Novelty, But Eligibility

Utah is one of a handful of states that has been a leader in its regulation of AI. Utah’s Artificial Intelligence Policy Act[i] (“UAIPA”) was enacted in 2024 and requires disclosures relating to consumer interaction with generative AI with heightened requirements on regulated professions, including licensed healthcare professionals.Continue Reading Utah Enacts AI Amendments Targeted at Mental Health Chatbots and Generative AI

As we stride further into 2025, the pharmacy industry faces a landscape teeming with challenges and opportunities. From tackling drug price transparency to juggling implementation of artificial intelligence, the industry is being transformed before our eyes. The journey ahead is anything but straightforward, with solutions ranging from bold, large-scale changes to more nuanced, focused innovations. Let’s delve into the high-level, dynamic trends shaping the pharmacy world today.Continue Reading Navigating the Evolving Pharmacy Landscape in 2025: Challenges, Opportunities and Innovations