UnitedHealth sued over use of algorithm in Medicare Advantage plans

a A class-action lawsuit was filed Tuesday against UnitedHealth Group and an affiliate that alleges it illegally used an algorithm to deny rehabilitation care to seriously ill patients, even though the companies knew the algorithm had a high error rate.

The class action lawsuit, filed on behalf of deceased patients with a UnitedHealthcare Medicare Advantage plan and their families by the California-based law firm Clarkson, comes on the heels of the publication of a STAT investigation on Tuesday. The investigation, cited in the lawsuit, found that UnitedHealth pressured medical staff to follow an algorithm that predicted a patient’s length of stay, to issue payment denials to people with Medicare Advantage plans. Internal documents revealed that managers within the company set a goal for clinical staff to keep patients in rehabilitation within 1% of the days predicted by the algorithm.

The lawsuit, filed in U.S. District Court in Minnesota, accuses UnitedHealth and its subsidiary, NaviHealth, of using a computer algorithm to “deny claims” from Medicare beneficiaries struggling to recover from debilitating illnesses in nursing homes. The lawsuit also cites previous STAT reports on the issue.

“The fraudulent scheme provided the defendants with clear financial gains in the form of policy premiums without having to pay for the promised care.” Complaint Allegedly. “Across the country, seniors are being prematurely evicted from care facilities or forced to deplete family savings to continue receiving needed care, all because [artificial intelligence] The model “does not agree” with the recommendations of real doctors.”

In an emailed statement, a UnitedHealth spokesperson said the NaviHealth prediction tool is not used to make coverage decisions.

“The tool is used as a guide to help us inform providers, families and other caregivers about the type of assistance and care a patient may need both in the facility and after returning home. Coverage decisions depend on CMS coverage standards and the terms of the member’s plan,” UnitedHealth said in the statement. “The lawsuit has no basis and we will defend ourselves vigorously.”

The lawsuit alleges that UnitedHealth knew the algorithm had an extremely high error rate and that it denied patients’ claims knowing that only a tiny percentage — 0.2% — would file an appeal to try to overturn the insurer’s decision. The complaint alleges that the algorithm, called nH Predict, had a 90% error rate, based on the percentage of payment denials that were reversed through internal appeals processes or administrative law judge rulings.

“This demonstrates the blatant inaccuracy of nH’s AI prediction model and the absence of human review involved in the claims denial process,” the lawsuit alleges. UnitedHealth and NaviHealth are accused of breach of contract, breach of good faith and fair dealing, unjust enrichment, and violations of insurance law in multiple states.

The plaintiffs leading the class action are the families of two deceased Wisconsin residents, both of whom had Medicare Advantage coverage through UnitedHealth. In May 2022, Gene Lukin, 91, broke his leg and ankle and remained in a nursing home for a month without physical therapy to allow his injuries to heal. After his doctor then agreed for Lokken to begin physical therapy, UnitedHealth and NaviHealth only paid for 19 days of nursing home treatment before saying Lokken was safe to return home, according to the lawsuit. Loken’s doctors and therapists appealed the denial of payment, saying his muscles were “paralyzed and weak,” but to no avail, the complaint said. To continue receiving care at the nursing home, Loken and his family paid nearly $150,000 over the next year, until his death in July 2023.

Dale Tetzloff, 74, suffered a stroke in October 2022, and his doctor immediately recommended long-term care in a nursing home. UnitedHealth and NaviHealth cut off his care after 20 days, the suit says. Tetzloff and his wife appealed and paid for his care out of pocket during that time. His doctors provided records saying Tetzloff needed more time to recover, but the companies supported their denials. Tetzloff asked UnitedHealth and NaviHealth why they made this denial, and the companies declined to provide any reason, stating that it was confidential, according to the complaint. He and his wife spent $70,000 to care for him. Tetzloff died at an assisted living facility last October.

UnitedHealth confirmed in response to the STAT reports that its physician reviewers provide a check by making a final determination on whether a patient has been issued a payment denial. But these doctors review denial recommendations sent to them by clinical case managers who are subject to the company’s 1% performance target.

The company’s algorithm isn’t just used to predict the care needs of patients with UnitedHealth policies. It’s also used by the nation’s second-largest Medicare Advantage insurer, Humana, as well as several regional health plans.

Former case managers at NaviHealth said they were subject to discipline, including possible termination, even if the patients they managed met Medicare standards to receive additional care.

For more information on how to tell this story and why it matters, join Casey Ross and Bob Herman on Friday, November 17 at 1:30 PM ET on STAT + CONTACT For live discussion.