Advent Health Shawnee Mission Hospital filed a lawsuit against Blue Cross and Blue Shield of Kansas City, claiming the insurer used artificial intelligence-driven technology to audit claims and override doctors' medical decisions on necessary patient care.
The Merriam, Kansas-based hospital filed suit in U.S. District Court for the Western District of Missouri, alleging Blue KC wrongfully denied hundreds of medical diagnoses made by its physicians and withheld more than $2 million in payments for care services. The lawsuit cited about 350 cases where Blue KC deemed diagnoses "clinically invalid and unsupported" using clinical validation technology that focuses on comorbidities and complications to deny claims.
Blue KC uses Apixio, a platform that analyzes structured and unstructured data to develop patient health profiles for automated claims analyses. The insurer previously used Cotiviti for similar purposes. The hospital claims the AI conceals qualifications for overturning physician diagnoses and how AI is used in the payer's processes. Appeals are often denied instantly without analysis or human contact, according to the lawsuit.
Blue KC previously selected Shawnee Mission for distinctions in cardiac care, bariatric surgery, knee and hip replacement, maternity care and spine surgery. Apixio was owned by insurer Centene from 2020 to 2023, when the payer divested it to New Mountain Capital. Earlier this year, Datavant purchased pieces of Apixio and combined them with Machinify, another vendor of healthcare payments software leveraging AI.
The lawsuit argues that Blue KC violated the parties' contract and state and federal regulations through its AI-driven denial process. Shawnee Mission seeks damages for how the payer's alleged withholding of payments has affected the organization. The hospital wants Blue KC ordered to pay the $2 million in denied claims and to stop using clinical validation models to deny payments.
Other payers face similar lawsuits over alleged use of AI to deny care, including Humana and UnitedHealth Group. Two years ago, a class action lawsuit claimed Humana used a hospital readmission prediction model by NaviHealth to deny care to Medicare Advantage members. CMS clarified that for Medicare Advantage inpatient admissions, algorithms alone cannot be used as the basis to deny admission or downgrade to an observation stay.
According to the lawsuit: "BCBSKC's unlawful and unethical actions undermine the fundamental principle that healthcare decisions in America should be made by doctors, with the medical expertise, legal responsibility and accountability for making treatment decisions for their patients and should not be made by auditors, accountants or artificial intelligence devices."
Apixio's marketing claims that its technology revealed "a staggering 60% of the hospital stays it reviews include clinically invalid medical diagnoses," according to the Kansas City Star story.
This lawsuit represents a direct challenge to AI-driven claims denial systems that are being deployed by major insurers. The case highlights the growing tension between cost-containment technologies and physician autonomy in treatment decisions. With AI systems analyzing millions of claims and making rapid denial decisions, healthcare providers are pushing back against what they see as algorithmic interference in medical care.
The Centers for Medicare and Medicaid Services has expressed concern that AI could "exacerbate discrimination and bias" in healthcare decisions. As more payers adopt AI-driven claims processing, successful challenges like this lawsuit could set precedents for how AI can be used in healthcare reimbursement decisions and whether providers can effectively challenge automated denials.
Healthcare providers are confronting AI systems that challenge their clinical judgment and deny reimbursement for documented diagnoses. This lawsuit could establish important precedents for how AI can be used in claims processing and what recourse providers have when algorithms override medical expertise. Healthcare organizations should closely monitor this case as it may influence future AI deployment in claims management and provider contract negotiations.
Insurers use AI to reduce administrative costs, identify billing inconsistencies, and increase efficiency in reviewing high volumes of claims.
Clinical validation involves reviewing medical records to determine if documented diagnoses are supported by clinical evidence, often to identify and remove potential upcoding.
While AI tools can assist in auditing claims, overriding physician diagnoses can raise legal and ethical concerns, especially if it violates contracts or regulatory protections.
Some courts have allowed these cases to proceed, and a few have scrutinized insurers’ use of opaque AI tools that lack transparency or due process.
Healthcare providers worry that AI may prioritize cost savings over patient care and replace clinical judgment with automated, opaque decision-making.