The ABIG Update by Santiago O’Neil

TL;DR - Washington can't get out of its own way, but the money is still moving, and organizations without AI guardrails are falling behind. Congress stumbled through another shutdown, while CMS signaled it's done tolerating MA upcoding. AI chatbots prove the #1 technology hazard as governance gaps widen.

AI in Medtech

🤖 Hype Meets Hazard

With AI adoption chugging along, the enthusiasm gap is closing fast. ECRI's annual Top 10 Health Technology Hazards puts AI chatbot misuse at #1 for 2026, citing instances where ChatGPT, Claude, and other LLMs suggested incorrect diagnoses, invented body parts, and gave advice that could cause patient burns. With 40M+ daily users asking ChatGPT health questions and rising care costs pushing more patients toward self-service tools, the safety organization is urging governance committees and clinician training. The problem: most health systems don't have either.

CMS is trying to fill the vacuum. Six months into the administration's Health Tech Ecosystem initiative, more than 600 organizations have signed voluntary pledges with deliverables due by March 31.
The goals? Ambitious: conversational AI for symptom-checking, digital IDs to kill the clipboard, FHIR-based data sharing. The ACCESS Model offers stable payments for tech treating chronic conditions. But it's all voluntary: the administration has explicitly avoided regulation, leaving health systems to figure out guardrails on their own.

Wall Street, meanwhile, is getting skeptical.

Software stocks extended a bruising selloff this week as J.P. Morgan warned clients that AI is "coming for software" and investors reassess whether the productivity gains are real. The nervousness is spilling into healthcare: funding is concentrating in AI-native startups while apps "sprinkled with AI" lose favor, and accreditation programs from URAC and the Consumer Technology Association are gaining traction as buyers demand third-party validation.

The emerging consensus? Governance isn't a compliance checkbox anymore. It's becoming the differentiator between who scales and who stalls.

Government Affairs

🏛️ Again, Really?

Congress narrowly ended a four-day partial government shutdown on Tuesday with a 217-214 vote, funding HHS and most agencies through September. The brief lapse still managed to let telehealth flexibilities and hospital-at-home waivers expire, marking the third time in as many months these programs have faced cliff-edge uncertainty. The bipartisan health package tucked into the bill includes PBM reforms and retroactive extensions of key programs, but the pattern is becoming the story: critical healthcare policy held hostage to unrelated political fights.

There is a bright spot amid the chaos: ACA enrollment hit 23 million for 2026, down 5% from last year's record but well above the 26% nosedive CBO predicted when enhanced subsidies expired. Texas alone added 200,000 enrollees. The catch? Insurers expect real attrition to come later as consumers see their first bills. The administration's answer is Trump's one-page "Great Healthcare Plan," which proposes funneling money into HSAs that most enrollees can't use for premiums. Democrats want a retroactive three-year subsidy extension; Republicans aren't biting. So the exchange market stays in limbo, much like the hospital programs caught in shutdown crossfire.

🔧 Agency Movement: CMS Medicare Director Chris Klomp defended the proposed 2027 MA rate notice after it landed with a thud on Wall Street; a flat 0.09% update instead of the 4-6% increase insurers expected, plus a proposal to exclude unlinked chart review diagnoses that would save Medicare $7.2 billion. Humana dropped 19%. "Is the administration not supportive of Medicare Advantage?" Klomp asked rhetorically.
The answer, apparently, is that regulators are done looking the other way on upcoding — even as they try to keep the program stable enough that seniors don't revolt before midterms.

That tougher posture extends to drug middlemen. The Labor Department proposed a rule requiring PBMs to disclose rebates, spread pricing, and pharmacy clawbacks to employer clients—the most significant federal transparency push in decades. The DOL estimates it could save employers up to $1.1 billion annually. CMS also announced a $50 billion Rural Health Transformation Program with funds flowing to all 50 states. And the No Surprises Act's IDR dispute volume keeps climbing: almost 1.2 million cases in the first half of 2025, up 40%, with a handful of PE-backed provider groups still responsible for the lion's share. The regulatory machinery grinds on, even when Congress can't keep the lights on.


💉 Kar-MAHA: And then there's the politics getting personal. Senator Bill Cassidy, the physician who chairs Senate HELP, is now facing a MAHA-fueled primary challenge for questioning RFK Jr.'s vaccine views during confirmation. Trump endorsed Rep. Julia Letlow over him last month, and Louisiana's MAHA-aligned groups are rallying behind challengers pushing ultraprocessed food bans and tap water de-fluoridation. "Cassidy, within the MAHA movement, is pretty well despised," says a former Kennedy campaign spokesman. The irony: Cassidy ultimately voted to confirm Kennedy anyway, after extracting "assurances" on vaccines that HHS has since ignored. Life, as Cassidy recently told reporters, "is lived forward." Whether his Senate career is remains to be seen.

Market Movements

🔥The Deals Are Back🔥

🔬 Screening Wars: Grail filed for FDA approval of its Galleri multi-cancer early detection test: a blood draw that can spot 50+ cancer types before symptoms appear. The submission draws on 25,000 U.S. participants and the NHS-Galleri trial, the only randomized controlled study of any MCED test in an intended-use population. Approval would be a "major trigger" for Medicare coverage, says Grail's president. But competition is heating up: Abbott's $21 billion acquisition of Exact Sciences, which launched a rival test in September, signals the screening wars are just beginning.

💰 M&A's Second Wind: That Abbott deal was part of a broader surge. Medtech M&A hit $80 billion through November, surpassing the prior three years, with most activity in the second half. Hologic's $18.3 billion go-private, Waters' $17.5 billion BD biosciences acquisition, and Boston Scientific's $14.5 billion Penumbra deal added to the rush. Spinoffs accounted for a third of total value (J&J is shedding orthopedics, Medtronic is offloading diabetes) as conglomerates slim down while acquirers chase high-growth niches.

⚠️ Calm Before the Storm: The deal frenzy contrasts with provider-side quiet. Healthcare bankruptcies fell 21% in 2025 to just 45 filings, down from 57 in 2024 and 79 in 2023. But hospital bankruptcies rose, and Gibbins Advisors warns the respite may be short-lived: Medicaid cuts, rising claim denials, and tariff-driven supply costs all threaten balance sheets this year. "The impact of impending funding cuts is not theoretical," says principal Ronald Winters. "Providers that do not model these scenarios risk being forced into reactive decisions."

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