Advent Health Hospital Sues Blue Cross and Blue Shield of Kansas City
An Advent Health hospital in Merriam, Kansas, has taken legal action against Blue Cross and Blue Shield of Kansas City (Blue KC), demanding $2 million for denied claims linked to documented diagnoses. The hospital also wants the insurer to stop using clinical validation AI models to reject payments.
Advent Health Shawnee Mission Hospital claims that Blue KC employs artificial intelligence technology that audits claims and overrides physicians' medical judgments on necessary patient care.
Why This Case Matters
The hospital alleges that Blue KC withheld more than $2 million in payments by wrongfully denying hundreds of medical diagnoses made by its doctors. According to the lawsuit filed in the U.S. District Court for the Western District of Missouri, these denials violate their contract as well as state and federal regulations.
The complaint points to about 350 instances where Blue KC’s AI-driven clinical validation technology labeled diagnoses as "clinically invalid and unsupported." This technology focuses heavily on comorbidities and complications to deny claims. Blue KC reportedly uses Apixio, a software platform analyzing structured and unstructured patient data to automate claims review. Previously, the insurer used Cotiviti for similar purposes.
Apixio’s marketing claims that its technology finds "a staggering 60% of the hospital stays it reviews include clinically invalid medical diagnoses," raising concerns about the accuracy and fairness of these automated denials.
The hospital contends that Blue KC’s AI process lacks transparency, hiding the criteria for overturning physician diagnoses. It also alleges that appeals are often rejected instantly without human analysis or contact. Notably, Blue KC has previously recognized Shawnee Mission for excellence in cardiac care, bariatric surgery, joint replacements, maternity care, and spine surgery.
Earlier this year, Datavant acquired parts of Apixio and merged them with Machinify, another AI healthcare payments software vendor. We have reached out to these companies for comment and will update if a response is provided.
The Larger Trend in Healthcare AI and Insurance
More than 60% of physicians believe that unregulated AI tools systematically deny coverage for necessary care, according to an American Medical Association (AMA) analysis released earlier this year. The AMA has expressed concern that AI is adding burdens to the prior authorization process and increasing denials that negatively affect patients.
The Centers for Medicare and Medicaid Services (CMS) also warned states last year that AI could exacerbate discrimination and bias in healthcare decisions. Lawsuits over AI-driven denials have targeted other insurers, including Humana and UnitedHealth Group.
Two years ago, a class action lawsuit challenged Humana's use of NaviHealth’s hospital readmission prediction model to deny care for Medicare Advantage members. NaviHealth, acquired by UnitedHealth Group’s OptumHealth in 2020 and later renamed Home & Community Care, faced scrutiny after CMS clarified that algorithms alone cannot justify denial or downgrade of inpatient admissions.
Apixio was owned by Centene from 2020 to 2023 before being divested to New Mountain Capital, which manages $37 billion in assets.
On the Record
The lawsuit states: "BCBSKC’s unlawful and unethical actions undermine the fundamental principle that healthcare decisions in America should be made by doctors, with the medical expertise, legal responsibility and accountability for making treatment decisions for their patients and should not be made by auditors, accountants or artificial intelligence devices."
This case highlights ongoing tension between healthcare providers and insurers over the use of AI in claims management. The balance between technology and human clinical judgment remains at the heart of the debate.
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