A federal district court has partially denied UnitedHealthgroup’s Motion to Dismiss a class action lawsuit challenging its use of artificial intelligence to deny post-acute care for its Medicare Advantage members, allowing the case to proceed.
The lawsuit, The Estate of Lokken v. UnitedHealthgroup, pending in the federal district court for the District of Minnesota, alleges that United’s use of its nH Predict AI Model to evaluate the medical necessity of post-acute care, rather than relying on physicians’ review of individual patients’ cases, has led to the deterioration of patients’ conditions, and in some cases, to death. The lawsuit alleges that United knew of the AI Model’s inaccuracies because over 90% of denials are reversed on appeal.
In reaching its decision the Court had to determine (1) whether the case should be dismissed for failure to exhaust administrative remedies, and (2) whether the claims set forth in the complaint were preempted by the Medicare Act.
The Plaintiffs had acknowledged that they did not fully exhaust the four-step Medicare Advantage appeals process. They argued, however, that exhaustion of appeals would be futile because United’s process sends patients into an infinity loop of denials. The Court agreed, finding:
These Plaintiffs allegedly suffered great harm, up to and including death, because of an allegedly defective procedure of denying claims compounded by efforts to obliterate any means of effective review through the administrative process. As a result, the Court will find that although Plaintiffs’ claims were subject to administrative review, waiver is appropriate such that the Court can exercise jurisdiction.
The Court also ruled that the Medicare Act did not preempt either Plaintiffs’ breach of contract claim or their claim for breach of the implied covenant of good faith and fair dealing.
In analyzing the preemption issue, the Court examined the language of the Medicare Act’s preemption clause and prior case law interpreting that clause, and held that “Plaintiffs’ claims are expressly preempted by the Medicare Act if they regulate the same subject matter as the Medicare standards or otherwise frustrate the purpose of a Medicare standard.”
The breach of contract and the breach of the implied covenant of good faith and fair dealing were not preempted because those claims arose out of United’s evidence of coverage documents rather than from the Medicare Act. This is because these documents described claims decisions as being made by “clinical services staff” and “physicians,” without any reference to artificial intelligence. Therefore, the Court held that:
…[I]n analyzing these claims the Court would only be required to investigate whether UHC complied with its own written documents. Because ruling on these two claims would require the Court to only apply basic contract principles, the breach of contract and breach of the implied covenant of good faith and fair dealing claims do not regulate the same subject matter as the Medicare Act, and thus are not preempted.
The attorneys at Whatley Kallas, LLP are pursuing claims on behalf of its provider clients for inappropriate denials and underpayments of both Medicare Advantage and commercial claims. We will continue to follow and report on this and similar cases as they go through the courts.
The Court’s decision is linked here.