An algorithm, not a doctor, predicted a rapid recovery for Frances Walter, an 85-year-old Wisconsin woman with a shattered left shoulder and a respiratory condition that made it hard to breathe. In 16.6 days, it estimated, she would be ready to leave her nursing home.
On the 17th day, her Medicare Advantage insurer, Security Health Plan, followed the algorithm and cut off payment for her care, concluding she was ready to return to the apartment where she lived alone. Meanwhile, medical notes in June 2019 showed Walter’s pain was maxing out the scales and she could not dress, go to the bathroom, or even push a walker without help.
It would take more than a year for a federal judge to conclude that the insurer’s decision was “at best, speculative’’ and that Walter was owed thousands of dollars for more than three weeks of treatment. While she fought the denial, she had to spend down her life savings and enroll in Medicaid just to progress to the point of putting on her shoes, her arm still in a sling.
Health insurance companies have rejected medical claims for as long as they’ve been around. But a STAT investigation found artificial intelligence is now driving their denials to new heights in Medicare Advantage, which covers more than 31 million people. It is part of Medicare, but coverage plans are sold and administered by private insurers instead of directly through the government.
Insurers are using unregulated predictive algorithms to pinpoint the precise moment when they can shut off payment for a patient’s treatment. The denials that follow are setting off heated disputes between doctors and insurers, often delaying treatment of seriously ill patients who are neither aware of the algorithms, nor able to question their calculations.
People who spent their lives paying into Medicare are left to either pay for their care themselves or get by without it. If they disagree, they can file an appeal, and spend months trying to recover their costs, even if they don’t recover from their illnesses.
“We take patients who are going to die of their diseases within a three-month period of time, and we force them into a denial and appeals process that lasts up to 2.5 years,’’ Chris Comfort, chief operating officer of Calvary Hospital, a palliative and hospice facility in the Bronx, N.Y., said of Medicare Advantage. “So what happens is the appeal outlasts the beneficiary.’’
Algorithms promise to deliver personalized care and better outcomes. But patient advocates said in many cases they do the opposite — spitting out recommendations that fail to adjust for a patient’s individual circumstances and conflict with basic rules on what Medicare plans must cover.
“It ends up being a hard-and-fast rule that the plan or the care management firms really try to follow,’’ said David Lipschutz, associate director of the Center for Medicare Advocacy, a nonprofit group that has reviewed such denials for more than two years in its work with Medicare patients.
Medicare Advantage has become highly profitable for insurers as more patients over 65 and people with disabilities flock to plans that offer lower premiums and prescription drug coverage but give insurers more latitude to deny and restrict services.
An industry’s birth
Over the last decade, a new industry has formed around these plans to predict how many hours of therapy patients will need, which types of doctors they might see, and when they will be able to leave a hospital or nursing home. The predictions have become so integral to Medicare Advantage that insurers themselves have started acquiring the makers of the most widely used tools.
Elevance, Cigna, and CVS Health, which owns insurance giant Aetna, have all purchased these capabilities in recent years. One of the biggest and most controversial companies behind these models, naviHealth, is now owned by UnitedHealth Group.
It was naviHealth’s algorithm that suggested Walter could be discharged after a short stay. Its predictions about her recovery were referenced repeatedly in naviHealth’s assessments of whether she met coverage requirements. Two days before her payment denial was issued, a medical director from naviHealth again cited the algorithm’s estimated length of stay prediction — 16.6 days — in asserting that Walter no longer met Medicare’s coverage criteria because she had sufficiently recovered, according to records obtained by STAT.
Her insurer, Security Health Plan, which had contracted with naviHealth to manage nursing home care, declined to respond to STAT’s questions about its handling of Walter’s case, saying that doing so would violate the health privacy law known as HIPAA.
Walter died shortly before Christmas last year.
NaviHealth did not respond directly to questions about the use of its algorithm. But a spokesperson for the company said in a statement its coverage decisions are based on Medicare criteria and the patient’s insurance plan.
“The naviHealth predict tool is not used to make coverage determinations,’’ the statement said. “The tool is used as a guide to help us inform providers, families and other caregivers about what sort of assistance and care the patient may need both in the facility and after returning home.’’
As the influence of these predictive tools has spread, a recent examination by federal inspectors of denials made in 2019 found that private insurers were using internally developed criteria to delay or deny care.
STAT’s investigation was based on a review of hundreds of pages of federal records, court filings, and confidential corporate documents, as well as interviews with physicians, insurance executives, policy experts, lawyers, patient advocates, and family members of Medicare Advantage beneficiaries.
It found that insurers with huge financial interests are leveraging AI to help make life-altering decisions with little independent oversight. AI models used by physicians to detect diseases such as cancer, or suggest the most effective treatment, are evaluated by the Food and Drug Administration. But tools used by insurers in deciding whether those treatments should be paid for are not subjected to the same scrutiny.
Doctors, medical directors, and hospital administrators described increasingly frequent Medicare Advantage payment denials for care routinely covered in traditional Medicare. Many said their attempts to get explanations are met with blank stares and refusals to share more information.
“They say, ‘That’s proprietary,’’’ said Amanda Ford, who facilitates access to rehabilitation services for patients following inpatient stays at Lowell General Hospital. “It’s always that canned response: ‘The patient can be managed in a lower level of care.’’’
The cost of caring for older patients recovering from serious illnesses and injuries, known as post-acute care, has long created friction between insurers and providers. For decades, facilities such as nursing homes racked up hefty profit margins by keeping patients as long as possible — sometimes billing Medicare for care that wasn’t necessary or even delivered.
The enactment of the Affordable Care Act in 2010 created an opportunity for reform. Instead of paying for care after the fact, providers would be paid a lump sum upfront, incentivizing them to use fewer resources to deliver better outcomes.
At the time, most Republicans in Congress were wringing their hands over the new law and its subsidies to help low- and middle-income Americans pay for health insurance. Tom Scully, the former head of the Centers for Medicare and Medicaid Services under George W. Bush, shared those concerns. But he also saw something else: a potential billion-dollar business.
A calibrated opportunity
Scully drew up plans for naviHealth just as the new law was taking effect. Its payment reforms aligned perfectly with the Medicare Advantage program he had played a pivotal role in creating during the Bush administration.
As a well-connected partner at the private equity firm Welsh, Carson, Anderson & Stowe, Scully heard of a small shop called SeniorMetrix that was working on this type of post-acute data and analytics. The firm quickly won him over.
He wrote a $6 million check to buy the company, which he rebranded naviHealth. Scully raised $25 million, including from the health system Ascension and the rehabilitation hospital chain Select Medical, and he coaxed another $25 million from Welsh Carson.
Then naviHealth started making its sales pitch to Medicare Advantage plans: Let us manage every piece of members’ care for the first 60 to 90 days after they are discharged from hospital, and we’ll all share in any savings.
The sweetener was the technology. One of the company’s core products is an algorithm called nH Predict. It uses details such as a person’s diagnosis, age, living situation, and physical function to find similar individuals in a database of 6 million patients it compiled over years of working with providers. It then generates an assessment of the patient’s mobility and cognitive capacity, along with a down-to-the-minute prediction of their medical needs, estimated length of stay, and target discharge date.
By summer 2015, naviHealth was managing post-acute care for more than 2 million people whose insurance plans had contracted with the company. It was also working with 75 hospitals and clinics seeking to more carefully manage contracts in which they shared financial responsibility for holding down costs. At the time, spending on post-acute care accounted for $200 billion annually.
That same year, Scully sold naviHealth to the conglomerate Cardinal Health for $410 million — roughly eight times the investment. In 2018, another private equity firm, Clayton, Dubilier & Rice, upped the ante and paid $1.3 billion to take over naviHealth. Then in 2020, UnitedHealth — the largest Medicare Advantage insurer in the country — bought naviHealth in a deal valued at $2.5 billion.
In an interview with STAT, Scully said the concept behind naviHealth is “totally correct,’’ because it roots out wasteful spending. But when presented with reporting that showed naviHealth was at the center of voluminous denials and overturned appeals, Scully said he wasn’t in a position to comment on what may have changed since he sold his stake.
“The naviHealth decision tool as I knew it — again, this is eight years ago — has a place and is valuable. If [it] overdoes it and is inappropriately denying care and sending people to the wrong site of service, then they’re foolish, and they’re only hurting themselves reputationally,’’ Scully said. “I have no idea what United’s doing.’’
An upsurge in appeals
Providers told STAT that as naviHealth was changing hands, they started noticing an increase in denials.
“It was eye-opening,’’ said Brian Moore, an advocate for patients who receive payment denials from insurers at North Carolina-based Atrium Health. “The variation in medical determinations, the misapplication of Medicare coverage criteria — it just didn’t feel like there [were] very good quality controls.’’
He and many other providers began pushing back. Between 2020 and 2022, the number of appeals filed to contest Medicare Advantage denials shot up 58 percent, with nearly 150,000 requests filed in 2022, according to a federal database.
In comments to federal regulators and interviews with STAT, many providers described rigid criteria applied by naviHealth, which exercises prior authorization on behalf of the nation’s largest Medicare Advantage insurers.
Federal records show most denials for skilled nursing care are eventually overturned, either by the plan itself or an independent body that adjudicates Medicare appeals.
Under traditional Medicare, patients who have a three-day hospital stay are typically entitled to up to 100 days in a nursing home.
With the use of the algorithms, however, Medicare Advantage insurers are cutting off payment in a fraction of that time.
Federal officials proposed new rules in December that say Medicare Advantage insurers can’t deny coverage “based on internal, proprietary, or external clinical criteria not found in traditional Medicare coverage policies.’’ Insurers also would have to create a “utilization management committee’’ that reviews their practices every year.
Major lobbying groups for health insurance companies did not make anyone available for interviews.
Final regulations are due this spring