UnitedHealth argues algorithm lawsuit should be dismissed because patients didn’t spend years appealing denials

UnitedHealth Group should be released from a lawsuit that alleges its algorithm-based technology prematurely cut off care to its Medicare Advantage members, the company said in court filings this week, because patients and their families did not finish Medicare’s appeals process.

“Plaintiffs have failed to exhaust the exclusive administrative appeal process set by the Medicare Act,” UnitedHealth’s lawyers argued. Even if those requirements were met, they added, the grievances of patients and families are with the federal government, not UnitedHealth and its subsidiary NaviHealth. “The plaintiffs have sued the wrong defendants,” the filing states.

Medicare’s appeals process is backlogged and complicated. Completing it can take years in some instances, potentially draining the finances of Medicare beneficiaries and their families who decide to pay for care on their own while they wait for a resolution. For patients who do appeal, the frailest ones may die before they ever get a decision.

The arguments from UnitedHealth are the company’s first attempt to dismiss a class action lawsuit that was spurred by a series of STAT stories. Last November, people enrolled in a UnitedHealth Medicare Advantage plan and their families sued UnitedHealth and its subsidiary, NaviHealth, for cutting off payment for rehab care.

STAT’s investigation found those payment denials were based on an algorithm’s predictions, unbeknownst to patients, and UnitedHealth’s employees were advised not to stray from those calculations — forcing extremely sick and injured patients to pay for care out of their own pockets or return home even if they couldn’t walk or go to the bathroom independently.

As the class action case has ramped up, a flurry of changes have unfolded at NaviHealth, the company that monitors care and implements the algorithm. Its longtime CEO, Harrison Frist, the son of former Senate Majority leader Bill Frist — who helped write Medicare Advantage into law — recently resigned. A round of layoffs also swept through the company, and UnitedHealth has scrubbed NaviHealth’s brand off its ledger, even as it continues to use its computer model to help decide how much rehab care patients should receive.

Medicare has a multi-step process for Medicare Advantage enrollees to appeal payment denials. If they lose after first appealing to the health insurance company, they then go to an independent contractor called a quality improvement organization. If appeals fail there twice, patients can next appeal to an administrative law judge. The final stop is the Medicare Appeals Council.

Patients rarely appeal, and if they do, they almost never make it to the administrative law judge or Medicare Appeals Council. However, UnitedHealth said the court “cannot disregard or override” the federal rules that require patients to go through that process before initiating a lawsuit, contending that several plaintiffs didn’t appeal their denials at all.

“When a plaintiff has not exhausted administrative remedies and obtained a ‘final decision,’ the plaintiff’s claims are not ripe for judicial review,” UnitedHealth’s attorneys wrote in their motion to dismiss the case.

However, in their complaint, attorneys for patients and their families said they should be exempt from having to go through Medicare’s entire appeals process because “they would suffer irreparable harm.” If people stayed in nursing homes or other facilities with no insurance coverage, they “risk being responsible for months’ or years’ worth of medical bills if their appeals are denied,” according to the class action complaint. If they simply go home and forgo care, their health is put in jeopardy.

“Plaintiffs are elderly people who have suffered serious medical traumas. If they opt to forgo care while waiting for a decision on appeal, they risk further serious injury or death,” the plaintiffs alleged.

UnitedHealth said patients can’t allege they will be hurt or that their appeals attempts are “futile” because, sometimes, patients win appeals if they invest time and money to do so. “The delay in the administrative proceeding, standing alone, does not constitute irreparable harm,” UnitedHealth’s attorneys wrote in the motion to dismiss the case.

Gene Lokken’s family, who is part of the class suing UnitedHealth and NaviHealth, has been mired in that appeals process for nearly two years. They have struggled to recoup money they had to pay for his care following algorithmically facilitated denials.

After he was hospitalized for a broken leg in the spring of 2022, Lokken became severely ill and briefly stayed in a hospice facility before bouncing back. “When the hell am I going to get out of this chair?” his daughter Pam, remembers him asking. He needed more rehab care, but was denied coverage by UnitedHealth, which followed the NaviHealth algorithm to cut off payment.

“I was just thunderstruck,” Pam Lokken, Gene’s daughter, said of the denial. She thought that perhaps she just needed to explain the situation, to talk to a human who would quickly realize the mistake — that her dad was a fighter, that he was getting stronger, and that he needed more rehab to get back to his life.

But the algorithm had spoken, and UnitedHealth followed it. She ended up paying thousands of dollars out-of-pocket while appealing — a process that is still going on even after her father’s death. “This is devastating for families,” she said of the drawn out denial-and-appeal process.

UnitedHealth listed several other reasons why a federal judge should toss out the case. The company argued that federal law requires Medicare Advantage beneficiaries to sue the Department of Health and Human Services, not insurance companies. It also said any alleged violations of state law don’t apply because this lawsuit involves Medicare Advantage, which is governed by federal law and supersedes state laws.