Insurance companies have long blamed privately owned hospitals and medical groups for exorbitant billing that drives up health care costs. But a private equity-backed tool is helping insurers make billions of dollars and pass costs along to patients.
The tool, Data iSight, is the flagship offering from a cost-containment company called MultiPlan that has attracted round after round of private equity investment since it positioned itself as a central player in the lucrative medical payments field. 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 evolution of Data iSight, which recommends how much to pay for each medical bill, is an untold chapter in the story of private equity's influence on American healthcare.
A New York Times investigation into insurers' relationship with MultiPlan found that countering predatory billing is just one aspect of the collaboration. Low payments have saddled patients with unexpectedly high bills, slashed the salaries of doctors and other medical professionals, and left employers who fund health plans with high, often unexpected fees, all while making a lot of money. to the largest health insurance companies in the country.
Often, when someone gets insurance through an employer and sees a doctor outside the plan's network, the insurer sends the bill to MultiPlan to recommend an amount to pay. Both MultiPlan and the insurer receive processing fees from the employer, generally based on the size of the final payment: the smaller the payment, the higher the fees.
This business model has turned Data iSight into a source of income. Of the few tools MultiPlan offers insurers, Data iSight consistently makes the most frugal recommendations, typically resulting in the highest rates.
MultiPlan, which has been public since 2020, did not respond to detailed questions about Data iSight. A statement issued by an outside public relations firm said MultiPlan's payment recommendations were fair and “widely accepted.” He said the company was “committed to reducing out-of-network costs,” including by using “data-driven tools to determine fair reimbursements.”
Concern has grown over private equity investments in medical practices in recent years, as studies have documented rising bills. Insurers and MultiPlan say Data iSight is a necessary counterweight.
Caught between these moneyed interests are the patients, most of whom know nothing. If they find the Data iSight name, it's usually found in the fine print of dense paperwork. Those who complained said they received little more than assurances that the calculations were rigorous and fair.
For Mary Lavigne, who suffers from chronic pain, chiropractor appointments near Irvine, California, nearly doubled in cost. Nadia Salim's therapy appointments in the Boston area also became almost twice as expensive. And Andrew Faehnle had to foot more than two-thirds of an ambulance bill after his 14-year-old son was rushed to an emergency room in Anaheim, California. In each case, the insurance statements cited Data iSight.
“I thought, 'Who the hell are these people?'” Faehnle said. “I started Googling: 'What is Data iSight?'”
'The timing seemed right'
MultiPlan's business model is based on simple math: Take the amount a doctor charges, subtract MultiPlan's recommended payment, and you get what the company identifies as a savings or discount. Typically, MultiPlan and the insurer each charge a percentage of the declared savings as a processing fee.
This agreement helps insurers benefit from the most common way Americans get health coverage: through an employer who pays medical claims out of their own money, using an insurer only as administrator. By using MultiPlan, insurers reduce medical bills and then charge employers for doing so.
For decades, MultiPlan determined payments primarily through negotiations. The discounts were modest but came with an agreement not to charge patients more.
After MultiPlan founder Donald Rubin sold it in 2006, the company's new private equity owners began moving toward automated pricing that executives would later call “MultiPlan 2.0.”
In 2010 it purchased Viant, an Illinois-based company that algorithms used to recommend refunds. But for some types of care, Viant's calculations used a database of billed amounts. So if medical providers charged more over time, recommended payments were likely to increase as well.
A small company in Grapevine, Texas, had developed an alternative strategy. Instead of starting with a bill and negotiating it, Tom Galas, a former insurance executive, wanted to calculate the cost of care and negotiate it.
Galas bought an analytics company called Data Advantage in 2005 and assigned a team at his company, National Care Network, to execute his vision. The result was Data iSight.
It was based on data that medical centers submitted to the federal government and on techniques developed by Medicare to estimate treatment costs. He then contributed some extra money, intended to allow for 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 balance.
In 2011, Galas sold to MultiPlan.
“The industry was condensing,” he said. “The timing seemed right.”
Although he considered Data iSight to be revolutionary, he said, even he didn't anticipate what it would become.
'MultiPlan is magical'
Executives from the nation's top insurers 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 a self-help book, “Life is Magic,” which had been digitally altered to show Mr. White's face and say “MultiPlan is Magic.” The slide adds: “We also have a few things up our sleeves.”
The company's annual revenue had reached about $1 billion, and three groups of private equity investors had cashed in. After purchasing MultiPlan for just over $3 billion in 2010 from the Carlyle Group, the companies 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.
The growth driver was Data iSight. The annual revenue MultiPlan generated 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 It was MultiPlan's main source of income among its largest insurance clients.
While the company continued to offer other tools, it introduced Data iSight as an “industry-leading” and “next-generation” way to “maximize savings.”
For insurers, the tool had its trade-offs: lower payments but potentially more patient complaints. They implemented it gradually. The nation's largest insurer by revenue, UnitedHealthcare, began using it in 2016 for certain plans and treatments, documents show.
As Data iSight spread, patients, doctors, and medical facilities began receiving unwanted surprises. Some clinics that had negotiated contracts with MultiPlan found that they were no longer receiving the agreed-upon rate and patients were no longer protected from high bills.
Brett Lockhart had spinal surgery at a facility near Cocoa, Florida, that had a negotiated rate with MultiPlan. When his insurer used Data iSight, he was forced to pay almost $300,000. The invoice is the subject of litigation and remains unpaid.
'Very low' payments
There was more to MultiPlan's growing fortunes than a simple increase in the number of claims. The average fee for each claim also increased, executives told investors.
In a presentation shortly before becoming a publicly traded company in 2020, MultiPlan emphasized that its tools were “scalable”: Reducing payments by just half a percent could generate an additional $10 million in profits, the company said.
After MultiPlan missed its 2022 revenue target, White, who had become CEO, assured investors that the company had an “action plan” that included “aggressively implementing new initiatives with our customers to help them cope with the acceleration of health care.” costs.”
A change in Data iSight's methodology, he said, should produce an additional $6 million in revenue.
MultiPlan has told investors it plans to make further “improvements” to the tools, including the use of artificial intelligence.
As patients and providers demanded an explanation for the decline in payments, MultiPlan has fought to keep details about Data iSight confidential, claiming in lawsuits that the information is proprietary.
Interviews and documents, some obtained after The Times asked federal courts, offer some perspectives.
Data iSight starts by using Medicare methods to set rates. But subsequent calculations are less transparent. MultiPlan says it applies multipliers that allow for a fair profit for hospitals and something close to a fair market rate for doctors. The documents show that MultiPlan allows insurers to cap prices and set what they consider fair profit margins for medical facilities.
MultiPlan has introduced Data iSight as an alternative to simply paying high Medicare rates, an option offered by some insurers. Paying about 120 percent of the government-set rate “seems fair, perhaps even generous,” a MultiPlan document said, but this is “inherently misleading” because “the average consumer does not understand how low Medicare rates are.” ”.
However, interviews and documents indicate that Data iSight's recommended prices sometimes range between 160 and 260 percent of Medicare rates, amounts that former MultiPlan employees described as “ridiculously low” and “very low.” “.
Even fees that may seem reasonable can overburden medical practices. For example, UnitedHealthcare, citing Data iSight, offered Dr. Darius Kohan approximately 350 percent of the Medicare rate for surgery to repair a patient's eardrum. It amounted to $3,855.36.
Dr. Kohan, who has a small practice in Manhattan, said meager payments forced him to consider joining a large hospital system or a group backed by private equity.
“I'm a dinosaur, but my patients like that,” he said. “I may not be able to hold it.”
