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This narrative review explores how faculty in health professions education use generative AI (GenAI) tools for student assessment, through the lens of bounded rationality. Drawing on 11 studies, we examine how GenAI supports decision-making by addressing constraints related to time, cognitive capacity, and information. Faculty use GenAI to generate assessments, grade responses, and streamline feedback, often developing heuristics to guide its use. While GenAI can expand rational decision-making, overreliance without critical oversight may introduce new limitations. Our findings suggest that bounded rationality provides a valuable framework for understanding faculty engagement with GenAI and highlight the need for faculty development that emphasizes both technical proficiency and reflective judgment.