AI does what insurers ask. Providers say that’s the problem.

Dr. Jonathan Fellers first realized Maine’s largest insurance provider was downcoding his claims last January. Nine months later, the psychiatrist dropped Anthem from his network. But not before his office spent hundreds of hours mailing physical copies of every patient interaction more than 1,000 miles to the company’s Indianapolis headquarters, in an effort to appeal the claims.

“We couldn’t survive on getting paid as little as we were for these patients,” Fellers said. “It would be very equivalent to like, if you went out to a restaurant and saw on the menu the steak was this much and you bought the steak. Then decided afterwards, ‘You know, I don’t think it was a very good quality steak. I’m going to only pay as much as a hamburger for it.’ ”

Fellers’ experience is not uncommon. The nation’s second-largest insurer is working on back payments owed to providers, with the insurer blaming months-long payment delays on an update to its claims processing system and the downcoding on a recently implemented platform from Cotiviti, a vendor that uses artificial intelligence to identify improper payments. The delay in resolving the situation has led some provider groups to question if computer problems are really to blame for the issues, or if they’re an intentional strategy on the part of the insurer, which they say never planned on paying back providers anyway.

Because of the opaque payment rules governing the Cotiviti algorithm and a lack of communication from Anthem about the new technology, the rumor mill is running wild, Fellers said. For his part, he believes the insurer downcoded and delayed provider payments to increase its cash reserve.

“They use this algorithm to decide that what I billed was not appropriate, without looking at the medical records, without looking at anything, just a computer program made that decision,” Fellers said. “It’s convenient when you get to define who an outlier is.”

Cotiviti, which advertises itself as an AI-powered payment integrity company that saves its 180 health insurer customers more than $5.7 billion annually, declined to comment. Anthem has temporarily paused use of the software and will not use it for specialty behavioral health providers going forward, an Anthem spokesperson wrote in an email. Staffing issues at the insurer compounded workflow challenges it was having with its software, and Anthem has reprocessed all of the downcoded claims and is in the process of repaying providers, the spokesperson said.

“Moving forward, we are holding ourselves to a higher standard for speed and accuracy in paying claims,” the spokesperson said. “Along with other enhancements, we expect this will create an improved overall care provider experience that will lead the industry.”

Anthem has established a team dedicated solely to assisting Maine providers and is reaching out directly to clinicians who have been impacted by its new system, the spokesperson said. The company has said Cotiviti and an update to its automated claims processing system also downcoded and delayed payments to clinicians in New Hampshire, and that it is working to pay back providers. It denied having broad-scale problems with its reimbursement system, saying that, in the last 12 months it processed 92% of claims within 14 days, and 98% within 30 days. The spokesperson did note that if a provider was unhappy with their reimbursement amount, renegotiating the claim could hold up payment.

But the American Hospital Association has fielded complaints about Anthem from dozens of hospitals nationwide, said Molly Smith, group vice president for public policy. The hospital lobbying group wrote a letter to Anthem CEO Gail Boudreaux in September asking the insurer to figure out how to get providers paid. In response, Anthem set up a SWAT team of provider relations officials on the ground, Smith said. But she said the payment delays have still not been resolved.

“There is a problem with their claims-processing backlog, and it appears to be somewhat of a technology issue, but it’s kind of hard to believe that’s all it is because these problems have persisted for many, many months,” Smith said.

Anthem denied having any business incentive to delay payments to providers.

Attention from regulators

State insurance commissioners in Maine and Georgia are investigating Anthem’s market conduct. The New Hampshire insurance commissioner said he is working with the insurer to resolve payment delays. Wisconsin’s insurance commissioner said its office helped every provider resolve their issues with Anthem’s computer problems except one, whose dispute is ongoing. Ohio’s insurance commissioner encouraged providers that are having problems with Anthem to come forward. Colorado’s insurance commissioner continues to look into complaints about the insurer. And officials from three other states said privacy laws prohibit them from confirming or denying whether a formal audit of Anthem’s business practices had been launched.

“I don’t doubt that just like other parts of the service economy they may be having problems keeping sufficient employees,” Federation of American Hospitals President and CEO Chip Kahn said. “I also wouldn’t doubt that they’re gonna try to maximize their time value of money. The slower they pay, the more they control the money.”

The industry group has heard complaints from health systems in every state where Anthem operates, and does not believe they have been resolved, Kahn said. FAH is in the early stages of collecting data on how Anthem and other insurers’ claims processing systems automatically downcode provider claims, with the aim of using the information to highlight the nationwide, industry-wide scope of the issue to regulators and the public. Kahn believes growing technological sophistication of insurers’ claims processing systems is responsible, in part, for increasing the number of payer and provider disputes in 2021. Health insurers have used automated claims processing systems for decades, but AI represents an emerging technology in this field.

“We’ve seen an evolution of the use of these kinds of software,” Kahn said. “It’s not totally brand new, it’s been around for a long time, it’s just that a lot of advances have been made in the software that allow insurers more sophistication in shaping the kind of results, finding the mistakes or the ambiguous notations that allow them to always find the least-expensive code or least amount to pay.”

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The technology powering insurers’ claims processing can generally be divided into a four-tiered system, said Dan Howell, a partner in the healthcare and life sciences division of cosultancy West Monroe.

At its most basic level, the majority of insurers have implemented a claims processing clearinghouse, with the market for these systems dominated by vendors HealthEdge and TriZetto, which are responsible for reviewing at least 50% of all claims in the U.S., Howell said. When an issue with a provider bill arises in these systems—say, the clinician includes the wrong ZIP code in their address—humans intervene to update the claim or send it back to the provider for revision. Many of these manual efforts have been supplemented by robotic process automation, Howell said.

On top of these systems, some insurers have implemented AI or machine learning to scan multiple claims and identify reimbursement patterns, which they can then use to influence payment policies, he said. Many of these AI systems act as a secondary processor to their main claims systems, and most insurers use them to target fraud, waste and abuse. Integrating AI into their original claims systems is an incredibly complicated process that most insurers have not completed, Howell added.

“I don’t want to hypothesize that that’s what Anthem was doing,” he said. “But if one were doing that, it would be pretty complex. And I can see why that would hold up some claims.”

Growing Demand

The market for automating provider information is growing, driven by insurers’ digital acceleration during the COVID-19 pandemic, an influx of patient claims, and the No Surprises Act, said Meghan Gaffney, CEO of Veda, a 5-year-old data automation startup. In the three years since the company launched its first product, Veda now counts six of the 10 largest health plans as customers, Gaffney said. She declined to specify the insurers’ names.

“If you think about a large health system, they’re sending Excel spreadsheets with thousands of rows and hundreds of columns to the health plans,” Gaffney said. “Today, if they’re not using data, there are people at computers hand-keying that data in. The No Surprises Act is telling health plans, ‘Hey, you have 48 hours to get this in your system and, by the way, it needs to be correct.’ It’s really game-changing in the market. It’s forcing them to modernize.”

She said she wouldn’t be surprised if updating a claims processing system took a year, although she noted a successful implementation would not have delayed payment. She was not sure if insurers revealing how their claims processing algorithms worked would be useful for providers. Instead, she thought it was more important for insurers to be transparent about how AI’s decisions impacted clinicians and patients, and avoid blaming bad outcomes on the system.

“If you think about AI, it’s like a saw or a hammer, a tool for a carpenter. We can do really good or really bad things with a hammer. You can build a house or break a window,” Gaffney said. “The tool isn’t the problem. I think what’s happening is that the tool has become a good excuse for enacting policies that might not be doing good things for people.”

As payers’ use of AI in claims processing explodes, so have problems with the system, although Anthem’s high-profile issues are the first instance in which a health insurer has been called out in this arena, said Elena Elkina, a partner at Aleada Consulting who advises healthcare clients in data management and privacy.

As an example, she pointed to a Twitter post last year from property, pet and life insurer Lemonade boasting that AI analyzes 1,600 data points—including consumers “non-verbal cues”—to more conveniently deny claims. The insurer did not specify what information it inputs into its algorithm, but said it does not discriminate based on individual appearance, disability or other personal characteristics. After being largely panned for its data collection methods and potential biases, the insurtech deleted “this awful thread which caused more confusion than anything else” in an updated Twitter post.

The company said it doesn’t profit from denying claims and donates any premiums not spent on customer care to charity. Insurers that save money through claims automation rarely pass on any cost savings to members, Elkina said.

“It’s like membership to a gym—you can buy the membership or you can get it as a gift, but you need to go there to benefit from it,” Elkina said. “It’s the same as AI. You can have a good use case, but in order to start using it effectively, you need to put in a lot of effort. And I think companies don’t realize it. They invest money into this and expect AI to be a magic switch. But it’s not.”

Back in Maine, the situation has gotten worse since the state’s medical association started hearing complaints from independent clinicians and hospitals in September, said President Dr. Jeffrey Barkin. He believes Anthem lost staff during the start of the pandemic and implemented Cotiviti as a “defensive measure” to bridge the lack of manpower. But he said that when individuals started returning to providers in droves in 2021—to make up for care deferred during the first year of the pandemic—Anthem’s claims count spiked, highlighting the dysfunctional system it had put in place and spotlighting its staff shortage.

“There may be some hope for improvement in sight,” Barkin said. “But if they’re not able to meet their obligations, and it’s billions of dollars, well, that may demonstrate that having a privately owned, publicly traded company like Anthem run Blue Cross plans is not a doable thing, which might be a really important thing to know in designing a health plan moving forward.”

After Fellers dropped Anthem from his network, he obtained single-case and continuity-of-care agreements so the 63 patients insured through the carrier could continue to see him with low out-of-pocket costs. He was also connected with an Anthem representative who is trying to patch up their relationship.

Fellers said he’s not sure what it would take for him to go in-network with Anthem. Reimbursing him retrospectively for the $30,000 he says they owe him in downcoded claims would help, and offering interest on late payments could also help ease the situation. But he doesn’t feel hopeful about either of those occurring. And for now, he has no plans to take the insurer back.

“I really wanted to accept insurance so that people could use the benefits that they’ve really earned and be able to see someone,” Fellers said. “I now understand why providers really have left the network or don’t want to work with them. It’s really, I think, unconscionable that they’re doing this at the height of a pandemic.”