USA – CALIFORNIA Trends and Developments Contributed by: Lowell Brown and Douglas Grimm, ArentFox Schiff LLP
Regulating the role of AI The Physicians Make Decisions Act directly limits the ability of healthcare service plans and disability insur - ers to use AI for utilisation review and management functions. The statute prohibits health plans from denying, delay - ing, or modifying healthcare services based solely on artificial intelligence algorithms. The law explicitly mandates that human judgment must remain central to coverage decisions, with clear documentation of the decision-making process. Any determination of medical necessity, leading to an approval, modification, delay, or denial of care, must be reviewed and decided by a licensed physician or qualified healthcare professional with expertise in the specific clinical issues involved. This ensures that AI tools serve as aids, not replacements, for clinical judg - ment and decision-making. AI tools used in utilisation review must base their decisions on the enrollee’s medical or clinical history, individual clinical circumstances, and other relevant clinical information, rather than relying solely on group datasets. Healthcare organisations must maintain an auditable record of how individual patient data is weighted against population data in AI decision- making processes. The law requires that AI tools, including their underly - ing algorithms, be open to inspection for audit or com - pliance reviews by regulatory bodies like the California Department of Managed Health Care (DMHC). The DMHC is tasked with overseeing the enforce - ment of SB 1120, including auditing denial rates and ensuring transparency in AI-driven utilisation review processes. The law also imposes strict deadlines for authorisation requests, with administrative penalties for non-compliance. These measures are intended to prevent inappropriate denials of benefits and ensure patients receive timely access to medically necessary services.
ing on whether the communication is written (physi - cal, digital, or continuous online interactions), audio, or video. The communication must also provide clear instruc - tions on how a patient can contact a human health - care provider, an employee of the facility, or other appropriate person. These disclosure requirements do not apply if the AI- generated communication is read and reviewed by a human licensed or certified healthcare provider before being sent. This provision aims to strike a balance between transparency and the efficiency benefits of AI. In what might have been rightly seen in years past as the basis for a science fiction movie, California is also addressing AI’s potential ability to impersonate healthcare professionals. Proposed legislation, such as Assembly Bill 489 (AB 489), seeks to explicitly pro - hibit AI and generative AI systems from misrepresent - ing themselves as titled healthcare professionals. This bill grants state boards the authority to pursue legal recourse against developers and deployers of AI sys - tems that impersonate healthcare workers, reinforcing the principle that only licensed human professionals can provide medical advice or care. The California Attorney General’s legal advisories fur - ther underscore the importance of patient transpar - ency. The advisories state that healthcare providers are required to notify patients when AI technologies are used in diagnostic or treatment decisions, foster - ing trust and enabling informed patient choices. Reimbursement and Coverage Considerations for AI-Powered Healthcare Services The integration of AI into healthcare services introduc - es new complexities for reimbursement and coverage, particularly concerning the role of AI in utilisation man - agement. California has taken steps to regulate this area, aiming to ensure that AI tools enhance, rather than impede, patient access to medically necessary care.
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