Hospital claims Blue Cross KC wrongfully denied medical diagnoses

AdventHealth Shawnee Mission Medical Center in Merriam, Kansas, has filed a lawsuit accusing Blue Cross and Blue Shield of Kansas City of coordinating with third-party vendors to improperly reduce payments for inpatient services.

According to the hospital, Blue Cross KC rejected medical diagnoses using “dubious criteria” in their clinical validation audits, which is in violation of federal law, the suit claims.

The lawsuit alleged that Blue Cross KC invalidated more than 350 medical diagnoses and has yet to pay more than $2 million owed to the hospital.

WHAT’S THE IMPACT

In particular, AdventHealth criticized Blue Cross KC’s relationship with its vendors, which perform clinical validation audits under their arrangement with the insurer. The hospital alleged that Blue Cross KC’s reasons for clinically invalidating diagnoses are not disclosed in advance.

The criteria the insurer uses, according to AdventHealth, is outdated or based on irrelevant medical guidance, and often draws from publications that don’t reflect industry standards. The hospital also accused Blue Cross KC of manipulating the text of the references it cited to defend its decisions to clinically invalidate diagnoses, which had the result of reducing the payment rate owed to AdventHealth.

Blue Cross KC used Cotiviti as its vendor prior to 2024, and then switched to Apixio, which broke up last year and was merged with other companies in a transaction with New Mountain Capital.

The lawsuit alleges that the Apixio platform, which uses artificial intelligence, conceals qualifications for overturning physician diagnoses and how AI is used in the payer's processes. The hospital claimed its appeals are often denied instantly without analyses or human contact.

About 350 cases were identified in the lawsuit in which Blue Cross KC deemed diagnoses "clinically invalid and unsupported" per the clinical validation technology.

THE LARGER TREND

In March, the American Medical Association said it was concerned that the use of AI is further burdening the prior authorization process and resulting in increasing denials that harm patients.

The Centers for Medicare and Medicaid Services also said, in a memo sent to states last year, that it's concerned AI could "exacerbate discrimination and bias."

Other payers have been sued over alleged use of AI to deny care, including Humana and UnitedHealth Group. Two years ago, a class action lawsuit claimed the former used a hospital readmission prediction model by NaviHealth, a post-acute care management platform, to deny care to Medicare Advantage members. Purchased by UHG's OptumHealth in 2020, that company was eventually renamed Home & Community Care.