The Health Tech Investment Act (S.1399): What It Would Change for Digital Health Reimbursement

FDA clearance has never guaranteed Medicare payment. That gap is the single most common reason an authorised AI product stalls after launch, and it is the gap the Health Tech Investment Act (S.1399) is written to close.

S.1399 is a bipartisan Senate bill, introduced on 9 April 2025 by Senators Mike Rounds (R-SD) and Martin Heinrich (D-NM), that would replace today's reactive, case-by-case coding process with a defined, cost-based Medicare payment pathway for FDA-authorised artificial intelligence and machine learning devices. It was read twice, referred to the Senate Finance Committee, and remains there with no floor action recorded.

What the bill would actually do

S.1399 amends Section 1833(t) of the Social Security Act to create a Medicare payment pathway for what it calls "algorithm-based healthcare services" (ABHS). It is narrow and technical by design: it targets the hospital outpatient payment system rather than rewriting Medicare broadly. Four mechanisms do the real work.

**A statutory definition of ABHS.** The bill defines an algorithm-based healthcare service as one delivered through an FDA-cleared or FDA-approved device that uses artificial intelligence, machine learning, or similarly designed software to generate clinical outputs or conclusions a physician or practitioner uses in screening, detection, diagnosis or treatment. Eligibility is tied directly to existing FDA authorisation, so the device must already be cleared or approved before the payment pathway applies. If you are still choosing a route, our guide to global FDA pathways sets out how 510(k), De Novo and PMA differ for software.

**Mandatory New Technology APC assignment.** For qualifying services furnished on or after 1 January 2026, HHS would be required to assign the service to a New Technology Ambulatory Payment Classification, using the structure CMS first established in its CY2002 OPPS final rule.

**Manufacturer-submitted, cost-based pricing.** Rather than CMS estimating payment from proxy data, HHS would set the New Technology APC rate using cost data submitted by the manufacturer: invoice prices, subscription-based pricing, clinical staffing costs, overhead and other resources tied to delivering the service.

**A protected minimum payment period.** HHS could not remove a qualifying service from its New Technology APC until adequate claims data supports reassignment, and in no case before the service has been paid under that APC for at least five years. Earlier summaries of the bill referenced a two-year floor; the introduced text sets five, which is a materially longer runway to build a claims history before facing a payment cliff.

The bill also extends eligibility to algorithm-based services performed concurrently with, adjunctive to, or as part of another underlying service, provided the AI component requires additional distinct resources. That closes a gap where AI add-ons were bundled into a base procedure's payment with no separate valuation.

How S.1399 differs from CMS's SaMS proposal

S.1399 and CMS's CY2027 OPPS "Software as a Medical Service" proposal address the same problem through different mechanisms, and the difference matters for how much weight you put on either in a near-term plan. We covered the agency side in our briefing on the CY2027 SaMS framework.

S.1399 is a statutory change to the Social Security Act and needs congressional passage; SaMS is agency rulemaking under existing CMS authority, adjustable every year. S.1399 guarantees five years of New Technology APC placement; SaMS is an interim, one-year-at-a-time policy with no statutory guarantee. S.1399 requires manufacturer-submitted cost data as the rate basis; SaMS rates are CMS-determined under agency methodology. And S.1399 would be permanent once enacted, while CMS has been explicit that SaMS is interim while it develops a long-term valuation framework.

Because S.1399 has not advanced past committee referral, treat it today as a signal of bipartisan legislative intent rather than a payment guarantee. CMS rulemaking is the nearer-term, more actionable lever; S.1399 is the durable upside case.

Industry support and momentum

AdvaMed, the medical device industry's largest trade association, called the bill "landmark bipartisan legislation" that would establish a stable reimbursement pathway for AI- and ML-enabled devices. Legal and health policy analysts have framed it as replacing a reactive, piecemeal system with one that is streamlined, consistent and innovation friendly. As of the latest tracking, though, the bill has not progressed beyond its April 2025 referral.

What it means for each stakeholder

**AI-enabled device manufacturers and digital health companies.** A five-year guaranteed payment window would materially de-risk post-clearance commercialisation and give you a defensible reimbursement timeline for investors and health system buyers. Start organising invoice, subscription-pricing and cost-of-delivery documentation now: cost-based rate setting requires that data in a specific, auditable format.

**Investors.** S.1399 reduces one of the least predictable variables in digital health return modelling: how long a cleared AI product must operate before durable Medicare payment. A statutory five-year floor is a stronger underwriting assumption than year-by-year discretionary policy. Diligence teams should track committee status as a material risk or catalyst.

**Hospitals and health systems.** Predictable, cost-based New Technology APC payment lowers the financial uncertainty around adopting AI diagnostic and decision-support tools, which can speed value analysis committee approval.

**Regulatory and market access teams.** Because ABHS eligibility is anchored to FDA clearance or approval, regulatory and reimbursement strategy have to be sequenced together from early development, not run as separate workstreams. Our medical device market access guide covers how to run the two tracks in parallel, and the EU MDR and UKCA guide shows where the European routes diverge from the US picture.

**Policy and advocacy stakeholders.** With the bill in Senate Finance since April 2025, trade association advocacy and coalition-building will largely determine whether it reaches a markup.

Four things to do now

1. **Benchmark eligibility.** Check whether current and pipeline products meet the ABHS definition: FDA-cleared or approved, AI/ML-based, generating a clinical output or conclusion for a clinician.

2. **Build the cost-data file.** Assemble invoice pricing, subscription-fee structures, staffing costs and overhead in the format the bill would require, so you are submission-ready if cost reporting becomes law.

3. **Track committee activity.** Watch Senate Finance and any companion House activity. Movement is the clearest signal to promote S.1399 from watch-list item to active strategy input.

4. **Compare against SaMS.** Use the CY2027 OPPS SaMS framework as the immediate lever and S.1399 to model the best-case, longer-term payment scenario.

Legislative reimbursement reform moves slowly, but the direction of travel for algorithm-based Medicare payment is now clear on both the legislative and regulatory tracks. MedTech Compass scores regulatory route, reimbursement route and evidence readiness together across 25+ markets, so you can see where a cleared product actually gets paid.

Sources

Congress.gov, "S.1399 — Health Tech Investment Act, 119th Congress" (bill text and status tracker)

Morgan Lewis, "How the Health Tech Investment Act Could Reshape Medicare Reimbursement for Algorithm-Based Services," 23 May 2025

AdvaMed, "Bipartisan Health Tech Investment Act Will Enhance Patient Access to AI-Enabled Medical Devices," 15 April 2025

MobiHealthNews, "Bill proposes Medicare reimbursement for AI-enabled medical devices," 7 March 2025

Sidley Data Matters, "Medicare Reimbursement Pathway for AI-Enabled Medical Devices Considered in Senate's Health Tech Investment Act," 14 May 2025

This briefing summarises pending federal legislation for general strategic awareness. It is not legal or legislative advice. S.1399 has not been enacted and remains subject to change through the committee and floor process. Consult qualified healthcare and legislative counsel before making commercial or reimbursement decisions based on it.