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For years, Medicare has been wrestling with how to pay for artificial intelligence and other software-based clinical tools. The Centers for Medicare and Medicaid Services is good at calculating the costs of physical items, from a cotton swab to the wear and tear on a CT scanner. But an algorithm to predict cardiac risk from a CT scan, or an AI-based map to visualize prostate cancer’s spread? Less so.

This month, in its proposed rules for hospital outpatient payments and physician fees for 2027, CMS has signaled that it’s ready to build a more consistent payment structure for clinical software and AI that factors in their impact on patient outcomes. It’s starting — as an interim step, just for 2027 — by proposing a practical change to the way it labels and pays for several clinical software and AI services.

After requesting feedback several times on AI and software payment structures, “it’s really the first time that we’ve heard the agency say that they are planning a different policy moving forward,” said Cybil Roehrenbeck, executive director of industry group the AI Healthcare Coalition. Medicare payment — and its influence on private insurers’ coverage of emerging technologies — has a significant impact on what clinical software and AI gets commercialized and reaches patients.

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