A class action lawsuit was filed Tuesday against UnitedHealth Group and a subsidiary alleging they illegally use an algorithm to deny rehabilitation services to seriously ill patients, even though the companies know the algorithm has a high error rate.
The class action lawsuit, filed on behalf of deceased UnitedHealthcare Medicare Advantage plan patients and their families by the California law firm Clarkson, follows the release of a STAT investigation on Tuesday. The investigation cited in the lawsuit found that UnitedHealth pressured medical staff to follow an algorithm that predicts a patient’s length of stay in order to deny payment to people with Medicare Advantage plans. Internal documents revealed that managers within the company set a goal for clinical staff to keep patients’ rehab stays 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 the computer algorithm to “systematically deny claims” from Medicare beneficiaries struggling to recover from debilitating illnesses in nursing homes “. The lawsuit also cites STAT’s previous reporting on the issue.
“The fraudulent scheme clearly provides defendants with financial gain in the form of insurance premiums without requiring them to pay for the promised care,” the lawsuit states. “Elderly people across the country are being kicked out of care facilities prematurely or forced to drain family savings to continue receiving the care they need, all because….” [artificial intelligence] The model “doesn’t agree with her real doctors’ recommendations.”
In an emailed statement, a UnitedHealth spokesperson said the NaviHealth prediction tool is not used to determine coverage.
“The tool serves as a guide to help us inform providers, families and other caregivers about what type of support and care the patient may need both in the facility and upon returning home. Coverage decisions are based on CMS coverage criteria and the terms of the member’s plan,” UnitedHealth said in the statement. The company added that the lawsuit “has no merit and we will defend ourselves vigorously.”
The lawsuit alleges that UnitedHealth knew that the algorithm had an extremely high error rate and that it denied patients’ claims knowing that only a tiny percentage – 0.2% – would appeal in an attempt to to annul the insurer’s decision. The complaint alleges that the algorithm, called nH Predict, has a 90% error rate, with that calculation based on the percentage of payment denials that were reversed through internal appeals or administrative law judge rulings.
“This demonstrates the blatant inaccuracy of the nH Prediction AI model and lack of human review in denying claims,” the lawsuit says. She accuses UnitedHealth and NaviHealth of breach of contract, breach of good faith and fair dealing, unjust enrichment and violations of insurance laws in several states.
The two plaintiffs leading the class action lawsuit are the families of two deceased Wisconsin residents, both of whom had Medicare Advantage coverage through UnitedHealth. In May 2022, 91-year-old Gene Lokken suffered a broken 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 approved Lokken to begin physical therapy, UnitedHealth and NaviHealth only paid for 19 days of therapy at the nursing home before saying Lokken was safe to go home, the lawsuit says. Lokken’s doctors and therapists appealed the denial of payment, saying his muscles were “paralyzed and weak,” to no avail, the complaint says. To continue receiving nursing home care, Lokken and his family paid about $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 stopped his care after 20 days, the lawsuit says. Tetzloff and his wife appealed and paid for his care out of their own pockets during this time. His doctors submitted documents indicating that Tetzloff needed more time to recover, but the companies maintained their denial. Tetzloff asked UnitedHealth and NaviHealth why they issued denials, and the companies “refused to provide any reason, saying it was confidential,” the complaint says. He and his wife spent $70,000 on his care. Tetzloff died last October in an assisted living facility.
UnitedHealth, in response to STAT’s reporting, has maintained that its medical reviewers conduct a review by making a final decision on whether to deny a patient payment. However, these physicians review denial recommendations sent to them by clinical case managers who are subject to the company’s 1 percent performance target.
The company’s algorithm is not only used to predict the care needs of patients with UnitedHealth policies. It is also used by the country’s second-largest Medicare Advantage insurer, Humana, as well as several regional health plans.
Former case managers at NaviHealth said they faced disciplinary action, including possible termination, even when the patients they cared for met Medicare criteria for receiving additional care.
To learn more about how this story was covered and why it matters, join Casey Ross and Bob Herman for a live discussion with Casey Ross and Bob Herman on Friday, November 17 at 1:30 p.m. Eastern Time on STAT+ Connect .