Various participants in the Medicare program have raised questions concerning the role of artificial intelligence (“AI”), algorithms and other similar tools in making coverage determinations for Medicare program beneficiaries. This discussion has attracted more attention as new technologies emerge and expand across the industry. Interestingly, it is important to note that several health insurers are now facing class action litigation regarding their alleged improper use of AI models or algorithms in the review and denial of medical claims.

In the preamble to the final rule, CMS stated that Medicare Advantage Organizations (“MAOs”) must make medical necessity determinations based on the circumstances of individual beneficiaries, as opposed to relying on an algorithm or software that does not consider individual circumstances. In the FAQs, CMS clarifies that an algorithm or software tool can be used to assist MAOs in making coverage determinations, provided that such tools comply with all applicable coverage determination rules. CMS reasons that “an algorithm that determines coverage based on a larger data set instead of the individual patient’s medical history, the physician’s recommendations, or clinical notes would not be compliant.” CMS specifically notes that algorithms and AI cannot be used to solely deny certain care; in particular:

An algorithm or software tool predicting the length of a patient’s post-acute care stay cannot be the sole grounds for terminating services. An algorithm or AI cannot be used to solely deny an inpatient admission or downgrade to an observation stay. In each case, the patient’s unique circumstances and present condition must be considered.

CMS also cautions that algorithms and software tools used to deny coverage for basic benefits cannot incorporate coverage criteria beyond those permitted by CMS regulations. Finally, CMS expresses concerns that algorithms and AI technologies can “exacerbate discrimination and bias,” suggesting that MAOs must take care to ensure that their use does not violate the nondiscrimination provisions of Section 1557 of the Affordable Care Act.