AdventHealth’s Shawnee Mission Medical Center is suing Blue Cross and Blue Shield of Kansas City, alleging the insurer improperly withheld more than $2 million in payments by denying hundreds of valid medical diagnoses submitted by the hospital’s physicians.
The lawsuit, originally filed in Missouri state court in May and moved to federal court on July 2, centers around a dispute over Blue KC’s use of clinical validation audits to retrospectively reject diagnosis codes tied to inpatient hospital claims. Merriam, Kan.-based Shawnee Mission alleges that the audits, performed by third-party vendors, routinely overturn its physicians’ documented diagnoses without meaningful engagement or adequate justification, thereby violating the two organizations’ contract.
The complaint specifically mentions Apixio, a vendor hired by Blue KC in early 2024 to conduct clinical audits after the insurer had previously used another vendor, Cotiviti. According to the complaint, Apixio uses artificial intelligence tools marketed as being able to conduct complex reviews “in minutes, not days,” and has asserted that 60% of inpatient diagnoses are clinically invalid, which AdventHealth called staggering and deeply flawed. The lawsuit alleges that neither Apixio nor Cotiviti consulted with physicians or provided transparency into their qualifications or use of AI in reviewing medical records, arguing that the process bypassed standard medical review safeguards.
AdventHealth is alleging that more than 350 claims involving diagnoses such as malnutrition, respiratory failure, and sepsis were denied, even when supported by patient records and confirmed by providers. The denials are allegedly disproportionately focused on conditions that, when coded, increase reimbursement rates due to their complexity and the resources required to treat them. The hospital claims that Blue KC’s selective auditing of the diagnoses is an intentional strategy to minimize its financial obligations.
The lawsuit is seeking a declaratory judgment stating that Blue KC’s clinical validation audit practices breach the provider agreement and violate the law. AdventHealth is asking the court to require the insurer to pay for denied claims that are documented in medical records and to permanently halt the clinical validation audit process unless performed by qualified personnel in a transparent manner. The hospital is also requesting damages for the alleged underpayments.
Becker’s has reached out to Blue KC for comment and will update this article if more information becomes available.
