Medicare created temporary payment paths for diagnostic software and some lab-data AI, but not a blanket right to payment for every AI tool.
Medicare has started paying attention to software that helps doctors diagnose patients. In its Calendar Year 2027 outpatient payment final rule, CMS, the agency that runs Medicare, created a name for this software and set up temporary ways to pay for it. The name is Software as a Medical Service, or SaMS.
CMS uses SaMS for software that supports clinical decisions through algorithmic analysis. The label is meant to separate medical-function tools from ordinary cloud software and from other digital health tools, such as remote patient monitoring and prescription digital therapeutics. Examples CMS named:
Qualifying SaMS services will go into New Technology payment classes. These are temporary categories for new services when CMS lacks enough claims and cost data for a permanent slot. A new code, status indicator O1, marks SaMS services eligible for separate payment.
CMS also created a payment path for stand-alone algorithmic analyses run on results from lab tests already done. One example is a second look at genomic sequencing results. These will be paid as "other diagnostic tests" under the outpatient system, not under the clinical lab fee schedule. Rates will match the corresponding 2026 lab fee schedule rates. CMS says this matters for companies building proprietary genomic and lab analytics, and for hospitals that want to offer them.
The rule does not give every AI or software tool a right to separate payment. Payment still depends on the specific service and its coding requirements. CMS also did not build a full reimbursement framework for SaMS. The physician payment rule has no AI-specific payment path either, though CMS issued a Request for Information asking industry how payment should account for technology-enabled primary care and clinical AI.
CMS offered a snapshot of adoption. It estimates that about 25 percent of U.S. physicians use AI documentation tools such as ambient scribes. It called OpenEvidence likely the most widely used AI tool in primary care, with more than 40 percent of U.S. physicians self-reporting use. The tool answers clinical questions using peer-reviewed journals and guidelines. CMS does not think AI care-delivery agents are widely used yet.
Many commenters were skeptical of AI in health care and wanted proof of clinical value before Medicare pays. Still, they broadly backed tools that summarize patient history, flag screening and vaccination gaps, and cut repetitive paperwork.
CMS calls the new approach interim. It says it is working on a longer-term reimbursement framework and will weigh the feedback it received in future rulemaking. Companies that sell diagnostic software or lab analytics now have a defined, if temporary, route to Medicare payment. Everyone else is still waiting for rules.
Medicare now has temporary payment routes for diagnostic software and lab-data analysis, but each tool still has to fit specific service and coding rules.
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