We knew that with Michael Essien's transfer to AC Milan, a medical would be no mere formality. The Bison's knees are, by this point, held together by sheer force of will, and I'm sure that even a cursory examination by an expert would leave them with serious concerns. So then there's no surprise that reports from Italy suggest that Essien has failed the first round of his medical with knee problems.
Yes, that's the first round, not the whole thing. Essentially, Repubblica Sport (whom as far as I can tell are the originators of the report) are claiming that Milan need to run a battery of further tests to verify that Essien's knees are actually up to playing in competitive games, not that he'll be shipped back to Stamford Bridge with a stamp declaring him broken. So this isn't so much news as it is the natural progression of things -- Milan know exactly what they're doing with older players, and Essien's injury history means that they were always going to want to take a closer look as to what exactly is going on there.
Obviously, we'd have liked it if Essien passed his medical with flying colours, but that wasn't ever going to happen. This is just how it's going to have to be, and it doesn't mean the transfer has been scuppered.