Physician in the Loop

Klomp sets condition on WISeR expansion; Connecticut bars AI-only denials on state plans; Sword buys Headspace; payers covering 165 million pledge ACCESS payment model

Show Notes

Klomp sets condition on WISeR expansion; Connecticut bars AI-only denials on state plans; Sword buys Headspace; payers covering 165 million pledge ACCESS payment model

The voices on this episode are generated, and so is the script, from the day's post at Physician in the Loop. Every fact in the post links to its source.

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Chris Klomp, nominated to be deputy secretary of the Department of Health and Human Services (HHS), told senators Wednesday that Medicare's WISeR AI prior-authorization pilot "must be done appropriately, or it should not expand." The statement came at his confirmation hearing before the Senate Health, Education, Labor and Pensions Committee, where Sen. Patty Murray questioned him on the program's records. Murray said the Washington state contractor denied more requests than it approved in its first three months, that the vendors are paid on the number of claims they deny, and that a Centers for Medicare & Medicaid Services (CMS) Office of the Actuary memo said participants would have an incentive to deny as many claims as possible. Klomp first said his understanding was that contractors are not paid by denial volume, then said there are penalties for inappropriate denials and that the CMS Innovation Center monitors them, before making the statement on expansion. Murray said she will do everything she can to stop the planned expansion into oncology. If confirmed, Klomp would run the department day to day. The hearing came one week after the Electronic Frontier Foundation (EFF) reported on about 1,000 pages of WISeR records.

In Connecticut, Comptroller Sean Scanlon announced five rules for the state employee and municipal health plans: no adverse determination may be made solely by an AI; AI may not be the sole basis for downcoding or a payment reduction; AI's material involvement in a benefit decision must be disclosed; members' data may not be used to train other models; and AI systems must undergo validation audits, with governance procedures disclosed to his office. The policy covers more than 270,000 people, and Scanlon said he will ask the legislature to extend it to every state-regulated plan in 2027. Downcoding was the practice two dozen revenue cycle leaders told Becker's Hospital Review on Tuesday they fear most.

Elsewhere, Sword Health agreed to buy Headspace for about one-tenth of Headspace's 2021 valuation. European Commission President Ursula von der Leyen, a physician, told the European Parliament that AI must empower doctors and not replace them, and promised a health initiative in November. Researchers at Harvard's Chan School and the University of Pennsylvania counted how often the company that built a digital health tool also ran its trial, and how that affected the results. In California, AB 1979 awaited action with 13 days left, and the Food and Drug Administration (FDA) press page listed nothing new since Tuesday's drug-development pilot.

In this episode

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Nora: This is Physician in the Loop, the daily briefing on AI in medicine. I'm Nora Davis.

James: And I'm James Hudson. It's Thursday, September 17th, 2026.

Nora: The nominee to run HHS day to day told a Senate hearing yesterday that Medicare's AI prior-authorization pilot, WISeR, must be done appropriately, or it should not expand.

James: That is a real hedge from someone who'd be overseeing it.

Nora: And Senator Patty Murray wasn't letting it go easily. Here's what I've got today: the Klomp hearing on WISeR, and Sword Health's purchase of Headspace.

James: And I've got Connecticut's new AI rules for state health plans, plus the payer pledge on CMS's ACCESS model.

Nora: So, Chris Klomp, nominated as deputy secretary at HHS, testified Wednesday before the Senate HELP Committee. Murray said the Washington state contractor running WISeR denied more requests than it approved in its first three months.

James: And the vendors get paid how?

Nora: Murray said they're paid based on the number of claims they deny.

James: That's an awkward pair of facts to put next to each other.

Nora: She also cited a CMS Office of the Actuary memo warning that participants would have an incentive to deny as many claims as possible.

James: What did Klomp actually say to that?

Nora: He first said his understanding was that contractors are not paid on denial volume.

James: First said. So that changed.

Nora: He then acknowledged there are financial penalties for inappropriate denials, and said the Innovation Center monitors performance. Only after that did he land on the line that it must be done appropriately, or it should not expand.

James: And Murray wants to stop the oncology expansion specifically.

Nora: She said she'd do everything she can to fight it. STAT reported the planned expansion matches a June 2025 Innovation Center plan, from records the Electronic Frontier Foundation reported on, that contemplated cancer treatment, MRI, and air ambulance.

James: And Klomp, if confirmed, runs the department that runs this program.

Nora: That's the position he'd be in.

James: Speaking of who reviews these decisions, Connecticut just put its own rules on paper. Comptroller Sean Scanlon announced five rules Tuesday for the state employee health plan and the municipal partnership plan, covering more than 270,000 people.

Nora: Which carriers are involved?

James: CT Mirror reported Anthem on medical, Cigna on dental, Aetna on retiree Medicare Advantage, and Caremark on pharmacy, effective January 1, 2027.

Nora: What are the actual rules?

James: No adverse determination made solely by an AI system, each one needs human review. AI can't be the sole basis to downcode claims, reduce provider payments, or alter billing codes without human review. Plus disclosure when AI materially assists a benefit decision, no using member data to train other models, and validation audits with governance disclosed to his office.

Nora: Scanlon's quote is pretty direct.

James: He said you and your doctor should make your health care decisions, not artificial intelligence. He wants the legislature to extend this to all state-regulated plans in 2027, which CT Mirror said would cover about 220,000 more residents.

Nora: Is this new legally, or does it echo other states?

James: Alabama, Georgia and Minnesota require human review of payer utilization decisions by statute. Connecticut's comes through the plans' own rules for their carriers, not a law.

Nora: And downcoding specifically is what worries revenue cycle people most, right?

James: Becker's Hospital Review reported Tuesday that two dozen revenue cycle leaders named it their top fear.

Nora: Fits with Connecticut singling it out by name.

James: On to money. Sword Health, the virtual physical-therapy company, is buying Headspace.

Nora: Sword said in a Sept. 16 release it's an all-cash deal, closing at the start of the fourth quarter.

James: For how much?

Nora: Sword didn't disclose a price, but trade press put it at up to $300 million.

James: And Headspace was worth a lot more once.

Nora: It was valued at $3 billion when it merged with Ginger back in 2021. This is roughly a tenth of that.

James: What does each side bring?

Nora: Sword, valued around $4 billion, says it has treated more than 1 million people with what it calls AI Care, and serves 2,500 organizations. Headspace brings a 15,000-provider network, 84 peer-reviewed studies, and 20,000 employer clients, by the companies' own count.

James: Anything from Headspace's leadership on how the combined thing works?

Nora: Their chief executive described it as a model that brings in a human clinician when it is needed.

James: Worth noting Headspace is already an accepted participant in the ACCESS program, which pays for technology-enabled care of depression and anxiety based on outcomes.

Nora: Which brings us right to your other story.

James: CMS made a bigger ACCESS announcement Tuesday. Three out of four people with Medicare now qualify for at least one track.

Nora: And payers are signing on?

James: CMS said major health payers representing 165 million Americans across Medicare Advantage, Medicaid, and private insurance have pledged to adopt an outcomes-based payment structure aligned to it.

Nora: How many payers is that, actually?

James: Fierce Healthcare counted 17. They also reported CMS is publishing sample provider agreements, standardized billing codes, and reporting infrastructure so Medicaid programs can adopt the model.

Nora: Any quote on the design intent?

James: Jacob Shiff, the Innovation Center's chief AI officer, told Fierce it was designed from day one for impact beyond Original Medicare.

Nora: What's joining next?

James: Heart failure, COPD, substance use, and nicotine dependence join the model in spring 2027.

Nora: So the structure that lets Headspace, Noom, and WeightWatchers bill Medicare for chronic-condition management could extend into commercial and Medicaid contracts too.

James: With payment tied to outcomes like blood pressure and A1c, under these pledges.

Nora: That's a lot of payment logic resting on a handful of company pledges with terms nobody's disclosed.

James: Fair. We don't know the contract details, just the commitment.

Nora: Between Connecticut writing rules for AI denials and CMS building payment rails for AI-adjacent care, it's two very different reactions to the same technology in the same week.

James: One's putting up guardrails, the other's laying track. Both are betting on where this goes next.

Nora: Sources and corrections are at physicianintheloop.org. I'm Nora Davis.

James: I'm James Hudson. See you tomorrow.