Local KC Hospital Challenges Blue KC Over AI-Powered Insurance Denials
AdventHealth Shawnee Mission, located in Merriam, has filed a lawsuit against Blue Cross and Blue Shield of Kansas City (Blue KC). The hospital alleges that the insurer wrongfully denied payments exceeding $2 million by rejecting hundreds of medical diagnoses made by its physicians.
The dispute centers on Blue KC's partnership with Apixio, a company that uses artificial intelligence to audit medical claims. According to the lawsuit, Blue KC identified more than 350 diagnoses submitted by AdventHealth as “clinically invalid and unsupported” through a process called "clinical validation."
Contract and Regulatory Concerns
The hospital's attorneys argue that Blue KC’s denial of claims breaches their contract and violates both state laws and federal regulations. The lawsuit emphasizes that healthcare decisions should be made by licensed doctors responsible for patient care—not by auditors, accountants, or AI systems.
The hospital seeks damages and a court order requiring Blue KC to pay for all diagnoses properly documented in medical records. It also requests a halt to the insurer's clinical validation audits.
Focus on Inpatient Claims and Comorbidities
Blue KC’s audits reportedly target inpatient claims involving diagnoses with comorbidities and complications. These diagnoses typically justify higher reimbursement rates, reflecting the extra resources needed for evaluation and treatment. AdventHealth contends that Blue KC’s outsourcing of audits to vendors like Apixio (since 2024) and previously Cotiviti appears aimed at avoiding full payment obligations.
Opaque Use of Artificial Intelligence
The lawsuit highlights a lack of transparency regarding who at Blue KC or its vendors is responsible for overturning physician diagnoses and how extensively AI is involved in these decisions. Apixio promotes itself as a provider of “AI-powered clinical chart review solutions” and claims that 60% of hospital stays it reviews contain invalid diagnoses. This implies that licensed doctors err in a majority of cases reviewed, according to Apixio’s marketing materials.
Apixio also advertises rapid claim reviews, boasting the ability to complete complex audits in minutes using AI-driven automated workflows. However, AdventHealth reports that many appeals are denied almost instantly, even for complex cases with substantial documentation. These denials rarely engage in meaningful analysis or involve communication with the hospital’s medical staff.
The hospital’s legal team stresses that neither Apixio nor Cotiviti has consulted the treating physicians before overturning diagnoses, effectively substituting their own opinions for those of licensed medical professionals.
Implications for Healthcare and Insurance Professionals
- Insurance providers employing AI for claim audits must ensure transparency and maintain respect for physician expertise.
- Hospitals and providers should carefully review denial patterns, especially when AI tools are involved.
- Healthcare organizations need to assess the risk of automated denials impacting reimbursement and patient care.
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