The True Cost of Healthcare Savings: Cost-Cutting by Insurance Companies Disadvantages Patients
As the cost of providing medical care has increased dramatically in recent years, some healthcare providers resorted to overcharging insurers for out-of-network care needed for emergencies or specialized treatment. To purportedly control such costs, insurers turned to data analytics firm MultiPlan to reduce the amounts they were eventually required to pay. Rather than fixing the problem, however, this shifted the financial burden of these providers’ high rates to patients.
On the surface, MultiPlan claimed to use data analytics to help insurers optimize the design of their benefit plans. Notwithstanding, in practice, its data models were designed primarily to minimize the amount insurance companies have to pay for out-of-network care. This greatly benefited the insurance companies, but it left all providers with substantial portions of their bills unpaid.
MultiPlan’s revenue is directly tied to its ability to reduce insurers’ costs, leaving little doubt as to why insurers contract with it or what it trains its data models to accomplish. Insurers receive a bill from a provider, MultiPlan uses its data models to reduce the insurer’s obligation, and the insurer pays MultiPlan a percentage of the savings. For MultiPlan to increase its revenue, it has to decrease the amount the insurer pays — resulting in an even larger bill for the patient. And to make matters worse, MultiPlan, as a central hub, allows insurers to override its algorithms, essentially setting any price they want. Insurers are required by MultiPlan to contribute their claims pricing data and reimbursement strategies to its tools, effectively eliminating competition between themselves for out-of-network provider services. Insurers have effectively been allowed to collectively set their out-of-network reimbursement rates through MultiPlan.
The harm caused by this can be enormous, and it lands squarely on patients’ shoulders. Stuck with excessive medical bills, some patients opt not to continue receiving needed treatments, impacting their recovery.
Others see their quality of life evaporate due to medical debts they can never afford to pay off. When patients try to fight the charges, they’re met with attorneys working for healthcare providers and insurance companies, leaving individual patients with little hope of success.
Healthcare providers have also felt the pinch, since insurance companies are a more reliable source of revenue than individual patients. MultiPlan’s practices place significant financial strain on such providers, particularly concerning out-of-network services where payment rates are often so low that they do not cover operating costs. Many smaller practices have been forced to shut down, cease certain services, or merge with large hospital conglomerates, reducing patients’ healthcare options. MultiPlan’s dominant market position leaves providers with little choice but to accept these reduced payments. Even when MultiPlan offers to “negotiate,” the process is one-sided, forcing providers to accept extreme underpayments. Nearly all commercial healthcare payers have adopted its repricing methodology, leaving healthcare providers with little choice but to accept the “repriced” payment amounts dictated by MultiPlan between 94.5% and 99.4% of the time.
As a result, MultiPlan’s business model is being challenged in court by providers who claim the model goes too far in cutting insurers’ costs, as well as addiction treatment providers who say the algorithms for out-of-network reimbursements amount to price-fixing and threaten to undermine substance use disorder (SUD) treatment. Providers have also sued a group of healthcare insurance companies that used MultiPlan’s services in a conspiracy to fix prices and eliminate market competition. The access to sensitive pricing data allowed these insurance companies to coordinate and suppress industry-wide reimbursement rates, creating an artificial market depression.
The potential for price-fixing when MultiPlan’s algorithms are used across multiple insurers has also caught the attention of Congress, prompting investigations and potential regulatory action.
All of this points to potential changes in the future, but for the time being that’s cold comfort for patients trying to recover while reeling from excessive bills. As long as the issue remains unresolved, providers will continue to overcharge, insurers will continue to minimize their payments, and patients will continue to face financial struggle while also coping with serious medical challenges.
Patient Burden
MultiPlan’s cost-reduction model pushes large bills to patients.
Underpaid Providers
Providers receive reduced payments, causing financial strain and service cutbacks.
Price Manipulation
MultiPlan enables insurers to collectively set low reimbursement rates, leading to price-fixing accusations.
Congressional Scrutiny
Congressional investigations are underway due to concerns over suppressed reimbursement rates.
Burden on Patients, Scrutiny from Congress
MultiPlan’s business model, designed to reduce insurers’ payments for out-of-network care, has come under fire for shifting financial strain onto patients and healthcare providers, while also drawing congressional attention for potential price-fixing practices.
Hunter J. Shkolnik is a partner and Nestor D. Galarza is a senior associate at Napoli Shkolnik.