In the battle over health care costs, private equity plays a role on both sides – Tech News (Trending Perfect)


Insurers have long blamed hospitals owned by private equity and physician groups for high bills that drive up health care costs. But the private equity-backed vehicle helps insurers make billions of dollars and shift costs to patients.

The tool, Data iSight, is the debut offering of a cost containment company called MultiPlan that has attracted round after round of private equity investment since positioning itself as a major player in the lucrative medical payments space. Today, Hellman & Friedman, the California-based private equity giant, and the Saudi Arabian government's sovereign wealth fund, are among the company's largest investors.

The development of Data iSight, which recommends how much each medical bill should pay, represents an untold chapter in the story of private equity's impact on American health care.

A New York Times investigation into the insurers' relationship with MultiPlan found that combating predatory billing is just one aspect of the collaboration. Low copayments have saddled patients with unexpectedly large bills, reduced wages for doctors and other medical professionals, and left employers who fund health plans with high, often unexpected, fees — all while bringing in the nation's largest health insurers a lot of… the money.

Often, when someone gets insurance through their employer and sees a doctor outside the plan's network, the insurance company forwards the bill to MultiPlan to recommend an amount to pay. Both MultiPlan and the insurance company receive a processing fee from the employer, which usually depends on the size of the final payment: the smaller the amount paid, the higher the fee.

This business model has made Data iSight a cash cow. Of the few tools MultiPlan offers to insurers, Data iSight consistently provides the most economical recommendations, typically resulting in the highest fees.

MultiPlan, which has been publicly traded since 2020, did not respond to detailed questions about Data iSight. A statement from an outside public relations firm said MultiPlan's payment recommendations were fair and “widely accepted.” She said the company is “committed to reducing out-of-network costs,” including using “data-driven tools to determine fair compensation.”

In recent years, there has been growing concern about private equity investments in medical practices studies Bills have been documented to rise. Insurers and MultiPlan say Data iSight is a necessary counterweight.

Among these financial interests there are patients, most of whom are in the dark. If they encounter the name Data iSight, it is usually written in small letters of thick paper. Those who complained said they were given only assurances that the accounts were strict and fair.

For Mary Lavin, who suffers from chronic pain, the cost of chiropractic appointments near Irvine, California, has doubled. Nadia Slim's treatment appointments in the Boston area have also become almost as expensive. Andrew Fahnele was on the hook for more than two-thirds of his ambulance bill after his 14-year-old son was rushed to the emergency room in Anaheim, California. In each case, Data iSight was cited by the insurance company.

“I thought, ‘Who are these people?’” Mr. Fahnele said. “I started googling 'what is Data iSight?'”

MultiPlan's business model is based on simple math: Take the amount a doctor charges, subtract MultiPlan's recommended reimbursement, and you get what the company defines as a savings or discount. MultiPlan and the insurance company typically collect a percentage of those stated savings as a processing fee.

This arrangement helps insurers take advantage of the most common way Americans obtain health coverage: through an employer who pays medical claims with its own money, using only the insurance company as an administrator. With MultiPlan, insurance companies reduce medical bills, then charge employers to do so.

For decades, MultiPlan has determined payments primarily through negotiations. The discounts were modest but came with the agreement not to charge more patients.

After MultiPlan founder Donald Rubin sold it in 2006, the company's new private equity owners began a move toward automated pricing that executives later called “MultiPlan 2.0.”

In 2010, it purchased Viant, an Illinois-based company Algorithms used to Recommend payment. But for some types of care, Viant Accounts used a database of billed amounts. Therefore, if medical providers charge more over time, the recommended payments will likely also rise.

A small company in Grapevine, Texas, has developed an alternative strategy. Instead of starting with a bill and negotiating it, Tom Gallas, a former insurance company CEO, wanted to calculate and negotiate the cost of care.

Mr. Gallas bought an analytics company called Data Advantage in 2005 and hired a team at his company, National Care Network, to implement his vision. The result was Data iSight.

It relied on data provided by medical facilities to the federal government and techniques developed by Medicare to estimate treatment costs. Then she threw in some extra money, aiming to allow a fair profit. The goal was to save insurers and employers money without paying so little that providers would sue them or go after patients for the credit.

In 2011, Mr. Gallas sold to MultiPlan.

“The industry was condensing,” he said. “Seems like the right time.”

Although he considers Data iSight revolutionary, he did not anticipate what it would become.

Executives from the nation's largest insurance companies gathered in Laguna Beach, California, in 2019 and heard from Dale White, executive vice president of MultiPlan.

He presented a slide showing the cover of the self-help book, “Life is Magic,” which had been digitally altered to show Mr. White’s face and the reading “MultiPlan Is Magic.” “We have some things up our sleeve too,” the slide added.

The company's annual revenue reached about $1 billion, and three groups of private equity investors received money. After purchasing MultiPlan for just over $3 billion in 2010 from The Carlyle Group, BC Partners and Silver Lake sold it for $4.4 billion. in 2014 to Starr Investment Holdings and Partners Group, which sold it two years later to Hellman & Friedman for $7.5 billion.

Hellman & Friedman, which owned the company when it went public in 2020, declined to comment.

Supporting the growth was Data iSight. Annual revenue brought in by MultiPlan grew from $23 million in 2012 to more than $323 million in 2019, according to a 2020 investor presentation. The following year, CEO Mark Tabak told investors that Data iSight was the company's biggest earner. Money in MultiPlan among its companies. Largest insurance clients.

While the company continued to offer other tools, it promoted Data iSight as an “industry-leading” and “cutting-edge” way to “maximize savings.”

For insurers, this tool came with trade-offs: lower payments but potentially increased patient complaints. They introduced it gradually. The country's largest insurer by revenue, UnitedHealthcare, began using it in 2016 for some plans and treatments, documents show.

As Data iSight spreads, patients, doctors, and medical facilities are starting to receive unwelcome surprises. Some practices that negotiated contracts with MultiPlan found that they no longer received the agreed-upon price, and patients were no longer protected from large bills.

Brett Lockhart performed spine surgery at a facility near Cocoa, Florida, at a price negotiated with MultiPlan. When his insurance company used Data iSight, he found himself on the hook for nearly $300,000. The bill is the subject of a lawsuit and remains unpaid.

MultiPlan's rise in fortunes was more than just an increase in the number of claims. Average fees from each claim also rose, executives told investors.

In a presentation shortly before it went public in 2020, MultiPlan stressed that its tools were “scalable”: The company said that reducing payments by just half a percent could generate $10 million in additional profits.

After MultiPlan failed to meet its revenue target in 2022, Mr. White, who became CEO, assured investors that the company had an “action plan” that included “aggressively executing on new initiatives with our customers to help them deal with the healthcare acceleration.” Costs.”

He said the change in Data iSight's methodology would generate $6 million in additional revenue.

MultiPlan told investors it plans further “improvements” to the tools, including the use of artificial intelligence.

As patients and providers demanded an explanation for the drop in payments, MultiPlan has fought to keep details about Data iSight confidential, arguing in lawsuits that the information is proprietary.

The interviews and documents, some of which were obtained after The Times filed a petition in federal courts, Displays some ideas.

Data iSight starts by using Medicare's methods to set prices. But later accounts are less transparent. MultiPlan says it applies multiples that allow for a fair profit for hospitals and something approaching a fair market price for doctors. Documents show that MultiPlan allows insurers to cap prices and set what they consider fair profit margins for medical facilities.

MultiPlan pitched Data iSight as an alternative to paying higher Medicare rates, an option offered by some insurance companies. Paying about 120% of the government-set price “seems fair, perhaps even generous,” but it is “inherently misleading” because “the average consumer does not understand how low Medicare rates are,” one MultiPlan document said.

However, interviews and documents indicate that Data iSight's recommended prices are sometimes about 160 to 260 percent of Medicare prices — amounts that former MultiPlan employees described as “ridiculously low” and “insanely low.”

Even rates that may seem reasonable can overwhelm medical practices. For example, UnitedHealthcare, citing Data iSight, offered Dr. Darius Cohan approximately 350 percent of the Medicare price for surgery to repair a patient's eardrum. It amounted to $3855.36.

Dr. Cohan, who has a small practice in Manhattan, said the meager payouts are forcing him to consider joining a large hospital system or a private equity-backed group.

“I'm a dinosaur, but my patients love it,” he said. “I may not be able to afford it.”



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