The ABIG Update by Santiago O’Neil

TL;DR - Healthcare technology is scaling rapidly through massive M&A deals and AI infrastructure buildouts, while political battles over fraud investigations, nursing education funding, and Medicare Advantage market exits are creating widespread disruption for patients and providers.

AI in Medtech

🔬 Scaling Fast, Integrating Hard

The consolidation is happening fast and the checks are getting bigger. Labcorp is expanding its PathAI collaboration to roll out digital pathology across its U.S. network, a direct response to Quest's $100 million PathAI lab acquisition in Memphis. Meanwhile, RadNet just dropped €230 million to acquire Paris-based Gleamer. The broader numbers tell the story: digital pathology market hit $2.01 billion in 2026 and is projected to reach $3.2 billion by 2031, while AI in pathology specifically is growing at 26% annually. But scaling the technology and scaling the adoption are two different problems. Fewer than 15% of U.S. healthcare organizations have actually selected a digital pathology vendor, and those that have are discovering integration is non-negotiable. Hospitals expect AI to function seamlessly within image management systems rather than forcing pathologists into separate platforms.

The market is splitting between pathology-native vendors like Proscia and PathAI, who are winning satisfaction scores, and traditional radiology players like Sectra and Philips, who bring enterprise scale but struggle with workflow specificity. Even hardware remains a chokepoint: Leica dominates clinical scanners with reliable performance, while Roche customers report significant reliability issues disrupting high-volume workflows.

The pattern emerging isn't just about AI getting better, it's about AI becoming infrastructure. By 2026, digital pathology is being deployed less like a standalone lab upgrade and more like core enterprise infrastructure, with cloud deployment becoming the practical default for scale, security, and governance. RadNet CEO Howard Berger is positioning his AI portfolio to connect entire provider networks across physician groups, urgent care, and emergency rooms on the same platform.

The winners won't be the companies with the best algorithms, but those who can make AI disappear into the daily workflow while the diagnostics get faster, more consistent, and ultimately more profitable.

Articles Worth Your Time

• The Doctors Are Not Alright

• State Medicaid budgets face $664B cut due to ‘Big Beautiful Bill’: study

• CMS receives record comments on controversial Medicare Advantage payment proposal

• CMS Is Cracking Down on Medicare Advantage Provider Directories—and the Implications Are Bigger Than Many Realize

• Trump administration targets DME suppliers in fraud crackdown

Government Affairs

🗣️ State of the Union (And Its Followup)

Trump's State of the Union was notably light on healthcare, spending just under four minutes on the topic during his 107-minute address. But what he did announce was significant: Vice President JD Vance would spearhead a national "war on fraud", with particular focus on Minnesota's Somali immigrant population and alleged child care fraud.
The followup came fast: a six-month moratorium on Medicare enrollment for certain DME suppliers and $259.5 million in Minnesota Medicaid funding deferred pending investigation. The administration also launched the "CRUSH" initiative (Comprehensive Regulations to Uncover Suspicious Healthcare) with public comment due by March 30th.

🔮 Looking Ahead —> 2026 Midterms

Democrats are gearing up to make healthcare their primary midterm weapon, with Senate Minority Leader Chuck Schumer outlining a strategy focused on affordability and ACA subsidies. The math is stark: without subsidy renewal, marketplace premiums will jump 75% on average and 90% in rural areas, affecting 24 million people. Trump's team knows healthcare is traditionally toxic for Republicans but believes they have no choice except to go on offense with drug pricing wins like TrumpRx and most-favored-nation policies. The challenge is that retail drug spending represents just 9% of total healthcare costs, while hospitals consume the largest share. Republicans hope to shift focus away from the Big Beautiful Bill's $1 trillion in health cuts, but Democrats are already planning aggressive oversight if they flip control of Congress, with subpoena power to investigate vaccine policy changes, Medicaid cuts, and industry dealings.

💊 In Other News

• The 340B drug discount program remains in perpetual motion, with HHS now on its third attempt at a rebate model after courts killed the first two. The latest proposal would force hospitals to pay full price upfront and wait for manufacturer rebates later, potentially costing safety-net hospitals hundreds of millions in cash flow disruption.

• Meanwhile, bipartisan lawmakers are pressuring the Trump administration to reverse its decision excluding nursing from "professional degree" status under the One Big Beautiful Bill. The change cuts graduate nursing loan limits from $200,000 to $100,000 lifetime, potentially deepening workforce shortages. Connecticut lawmakers called it "insulting" to exclude a profession that's been considered professional "since Florence Nightingale." The Department of Education's response? This isn't a "value judgment" about nursing, just an "internal definition" for loan purposes.

Market Movements

💰 Following the Money

MedTech M&A activity strengthened in 2026 with Boston Scientific's $14.5 billion Penumbra acquisition leading a series of major deals including Danaher's purchase of patient monitoring firm Masimo. Major divestitures from BD, Medtronic, and J&J are also reshaping portfolios.

Intuitive Surgical completed its €319 million acquisition of da Vinci distribution operations across Southern Europe, adding 250 employees and taking direct control of over 470 installed systems. The deal reflects companies moving away from third-party distributors toward direct operations.

Medicare Advantage markets are experiencing significant disruption. Forced disenrollments rose from 1% historically to 10% in 2026, affecting 2.9 million enrollees as insurers exited unprofitable markets. Vermont saw 92% of beneficiaries lose coverage, while states like Idaho and Wyoming had disenrollment rates above 40%.

UnitedHealthcare reduced membership while Humana pursued growth, trading profitability for market share and cutting expected earnings per share by half despite adding over 1 million enrollees. Private equity firms are expanding their role, while Duke-Margolis's new Health Value ROI framework aims to align investor returns with measurable health outcomes.

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