CMS Cautions MA Plans About Use of AI

In the Medicare Advantage (MA) program, overseen by the Centers for Medicare & Medicaid Services (CMS), Medicare Advantage Organizations (MAOs) – typically private insurers – receive monthly payments from CMS. The MAOs then contract with healthcare providers and suppliers to provide services pursuant to multiple MA plans offered by the MAOs. With the rise of artificial intelligence (AI), many providers have expressed concern that MAOs are using AI tools to review claims, make coverage determinations, deny claims, and conduct audits with little to no human oversight.

CMS recently released its 2024 MA Final Rule and a set of accompanying frequently asked questions (FAQs). In these, CMS cautioned MAOs that, while an algorithm or software tool can be used to assist MA plans in making coverage determinations, it remains the responsibility of the MAO to ensure that the algorithm or AI complies with all applicable rules for how coverage determinations by MA organizations are made. CMS emphasized that this included that MAOs make medical necessity determinations based on the circumstances of each specific individual including the patient’s medical history, physician recommendations, and clinical notes; and in line with all fully established Traditional Medicare coverage criteria (including established criteria in applicable Medicare statutes, regulations, National Coverage Determinations (NCDs), or Local Coverage Determinations (LCDs)), or with publicly accessible internal coverage criteria that are based on current evidence in widely used treatment guidelines or clinical literature.

CMS gave several examples of non-compliant use of AI by MAOs, mostly due to a lack of human, clinical oversight of the AI-driven tool and the implementation of its outputs. In an example involving a decision to terminate post-acute care services, CMS noted that an algorithm or software tool can be used to assist providers or MA plans in predicting a potential length of stay, but that prediction alone cannot be used as the basis to terminate post-acute care services. For those services to be terminated in accordance with MA regulations, the patient must no longer meet the level of care requirements needed for the post-acute care at the time the services are being terminated, which can only be determined by re-assessing the individual patient’s condition prior to issuing the notice of termination of services. Additionally, for inpatient admissions, CMS noted that algorithms or AI alone cannot be used as the basis to deny admission or downgrade to an observation stay; the patient’s individual circumstances must be considered against the permissible applicable coverage criteria.

Providers who encounter use of AI tools by MAOs should be aware that there are restrictions on how MAOs can use such tools and that there are certain baseline rules regarding how MAOs can make coverage determinations. As MAOs continue to introduce new AI tools to analyze the mass troves of patient and claims data available to the MAOs, providers are likely to see more and more claims determinations and audit  findings based on AI-driven analysis.

For over 35 years, Wachler & Associates has represented healthcare providers and suppliers nationwide in a variety of health law matters, and our attorneys can assist providers and suppliers in understanding new developments in healthcare law and regulation. If you or your healthcare entity has any questions pertaining to Medicare Advantage or healthcare compliance, please contact an experienced healthcare attorney at 248-544-0888 or wapc@wachler.com.