Blue Cross and Blue Shield of Kansas City has improperly reduced payments for inpatient services in coordination with third-party vendors, a lawsuit from AdventHealth Shawnee Mission Medical Center alleges.
The hospital claims Blue KC uses clinical validation audits to reject medical diagnoses and declare them “invalid” under “secret and dubious criteria,” in violation of state and federal law, the lawsuit (PDF) says. Blue KC, allegedly, has not paid more than $2 million owed to the AdventHealth hospital after invalidating more than 350 medical diagnoses.
At the crux of the plaintiff’s argument is Blue KC’s relationship with third-party care platforms for providers and payers. The health system has never approved of Blue KC’s relationship with vendors performing clinical validation audits, yet AI technology can supplant a physician’s opinion. Vendors used by Blue KC have publicly touted its AI technology in the past.
“BCBSKC’s determinations to clinically invalidate physicians’ diagnoses are purportedly based on criteria from various sources, but such criteria have never been disclosed to Advent in advance,” said the plaintiffs. “Upon information and belief, the criteria are often based on outdated literature, irrelevant medical guidance, or publications that do not reflect an industry standard definition for medical diagnoses.
“In some instances, BCBSKC has even manipulated the text of the exact references BCBSKC cited to defend its decisions to clinically invalidate diagnoses from Advent’s physicians and thereby reduce the Payment Rate owed to Advent,” the plaintiffs added, noting the insurer’s denials are targeted at diagnoses classified as comorbidities or complications.
Blue KC used Cotiviti prior to 2024, before switching to Apixio.
Apixio broke up in the last year. The company was partially purchased by Datavant in September, and combined with Machinify after merging with other companies in a transaction with New Mountain Capital. Centene sold the company in 2023 after buying the brand in 2020.
“In their audits, both Cotiviti and Apixio generally admit that the condition at issue has been documented in the medical record by a physician or other healthcare professional whose scope of practice includes establishing diagnoses,” the lawsuit says. “Nonetheless, Cotiviti and Apixio, on behalf of Blue KC, opine on the validity or invalidity of the physicians’ medical diagnoses for Advent’s patients.”
The lawsuit says Blue KC incentivized vendors to establish its own diagnosis parameters, giving the health plan permission to side with the vendor’s expertise.
Cotiviti and Apixio have not disclosed the extent of AI’s role in diagnosis decisions, though AdventHealth said many appeals to Apixio are often rejected instantly. Blue KC and the two vendors did not immediately respond to a request for comment.
“Apixio’s marketing portrays an aggressive payer-focused approach, suggesting a staggering 60% of the hospital stays it reviews include clinically invalid medical diagnoses,” said the plaintiffs. “In other words, Apixio opines for its clients that licensed physicians erroneously diagnose patients in 60% of hospital inpatient stays Apixio reviews.”
AdventHealth said its agreement with Blue KC does not give the health plan the authority to complete audits based on medical necessity.