Insurers have long blamed private equity hospitals and physician groups for exorbitant fees that drive up health care costs. But a private equity-backed tool is helping insurers make billions of dollars and shift the cost to patients.
The tool, Data iSight, is the flagship offering from a cost-containment company called MultiPlan, which has attracted every round of private equity investment since positioning itself as a central player in the lucrative medical payments sector. Today Hellman & Friedman, the California-based private equity giant, and the Saudi Arabian government’s sovereign wealth fund are among the company’s biggest investors.
The development of Data iSight, which suggests how much of each medical bill should be paid, is an untold chapter in the history of private equity’s influence on American health care.
A New York Times investigation into the insurers’ relationship with MultiPlan found that dealing with aggressive billing is only one aspect of the partnership. The low payments have saddled patients with unexpectedly large bills, reduced pay for doctors and other health care professionals, and left employers who fund health plans with high, often unpredictable fees — all while making big money for the nation’s largest health insurance companies. country.
Often, when someone is insured through an employer and sees a doctor outside the plan’s network, the insurer sends the bill to MultiPlan to suggest an amount to pay. Both MultiPlan and the insurance company receive processing fees from the employer, usually based on the size of the final payment: the smaller the payment, the higher the fees.
This business model has made Data iSight a cash cow. Of the few tools MultiPlan offers insurers, Data iSight consistently makes the leanest recommendations, usually resulting in the highest charges.
MultiPlan, which has been publicly traded 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 is “committed to reducing out-of-network costs,” including by using “data-driven tools to determine fair reimbursements.”
In recent years, concern about private equity investment in medical practices has grown as studies have documented rising bills. Insurers and MultiPlan say Data iSight is a necessary counterweight.
Caught between these financial interests are patients, who are mostly in the dark. If they come across the name Data iSight, it’s usually in the fine print of dense bureaucracy. Those who have complained said they received little more than assurances that the calculations were rigorous and fair.
For Mary Lavigne, who has chronic pain, chiropractor appointments near Irvine, Calif., nearly doubled in cost. Nadia Salim’s area treatment appointments in Boston also became almost twice as expensive. And Andrew Faehnle was on the hook for more than two-thirds of the ambulance bill after his 14-year-old was rushed to an emergency room in Anaheim, California. In each case, the insurance claims mentioned Data iSight.
“I thought, ‘Who the hell are these people?’ said Mr. Feinle. “I started Googling, ‘What is Data iSight?’
“The time seemed right”
MultiPlan’s business model is based on simple math: Take what a doctor charges, subtract MultiPlan’s recommended payment, and you have what the company defines as a savings or discount. Typically, MultiPlan and the insurer collect a percentage of the declared savings as a processing fee.
This arrangement helps insurers take advantage of the most common way Americans get health coverage: through an employer that pays medical claims with its own money, using an insurer only as an administrator. Using MultiPlan, insurers reduce medical bills and then charge employers to do so.
For decades, MultiPlan determined payments primarily through negotiations. The discounts were modest but came with an agreement not to collect more from patients.
After MultiPlan founder Donald Rubin sold it in 2006, the company’s new private-equity owners began a move toward automated billing that executives would later call “MultiPlan 2.0.”
In 2010, it bought Viant, an Illinois-based company that used algorithms to recommend compensation. But for some types of care, Viant’s calculations used a database of billed amounts. So, if medical providers charge more over time, recommended payments are also likely to increase.
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.
Mr. Galas bought an analytics company called Data Advantage in 2005 and tasked a team at his company, National Care Network, with executing his vision. The result was Data iSight.
It was based on data submitted by medical facilities to the federal government and on techniques developed by Medicare to estimate treatment costs. He then threw in some extra money, with the intention of allowing a fair profit. The goal was to save insurers and employers money without paying so little that providers would sue them or pursue patients for the rest.
In 2011, Mr. Galas sold to MultiPlan.
“The industry was consolidating,” he said. “The time seemed right.”
Although he considered Data iSight revolutionary, he said, even he didn’t expect what would happen.
“MultiPlan is magic”
Executives from the nation’s major 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 a self-help book, ‘Life is Magic’, which had been digitally altered to show Mr White’s face and read ‘MultiPlan Is Magic’. The slide added: “We have a few things up our sleeve as well.”
The company’s annual revenue reached about $1 billion, and three sets of private equity investors had cashed in. After buying 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.
Fueling the development was Data iSight. MultiPlan’s annual revenue 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 MultiPlan’s top money maker among its largest insurance clients.
While the company continued to offer other tools, it touted Data iSight as an “industry-leading” and “state-of-the-art” way to “maximize savings.”
For insurers, the tool came with trade-offs: lower payments but potentially more patient complaints. They started 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 to receive unwelcome surprises. Some practices that had negotiated contracts with MultiPlan found they were no longer receiving the agreed rate and patients were no longer protected from large bills.
Brett Lockhart underwent spine surgery at a facility near Cocoa, Florida, which had a negotiated rate with MultiPlan. When his insurer used Data iSight, he was on the hook for nearly $300,000. The bill is in dispute and remains unpaid.
“Crazy low” payouts
MultiPlan’s growing fortunes didn’t just come from an increase in the number of claims. The average fee from each claim also increased, executives told investors.
In a presentation just before it went public in 2020, MultiPlan emphasized that its tools were “scalable”: Cutting payments by just half a percent could generate an additional $10 million in profits, the company said.
After MultiPlan fell short of its 2022 revenue target, Mr. White, who had become chief executive, assured investors that the company had an “action plan” that included “aggressively implementing new initiatives with our customers to help them to deal with accelerating health care litigation costs.”
A change in Data iSight’s methodology, he said, would bring in an additional $6 million in revenue.
MultiPlan told investors it plans further “improvements” to the tools, including the use of artificial intelligence.
As patients and providers have demanded an explanation for the payment reductions, MultiPlan has struggled to keep details about Data iSight confidential, arguing in lawsuits that the information is proprietary.
Interviews and documents, some obtained after the Times filed in federal court, offer some insight.
Data iSight begins by using Medicare’s methods to determine charges. But the subsequent calculations are less transparent. MultiPlan says it applies multipliers that allow for a fair profit for hospitals and something approaching a fair market rate for doctors. The documents show that MultiPlan allows insurers to set price caps and set what they consider fair profit margins for medical facilities.
MultiPlan has introduced Data iSight as an alternative to simply paying Medicare surcharges, an option offered by some insurers. Paying about 120% of the government-set rate “sounds fair, perhaps even generous,” a MultiPlan document said, but that’s “inherently misleading” because “the average consumer doesn’t understand how low Medicare rates are.”
Interviews and documents, however, indicate that Data iSight’s recommended rates are sometimes about 160 to 260 percent of Medicare rates — amounts that former MultiPlan employees described as “ridiculously low” and “insanely low.”
Even rates that may sound reasonable can burden medical practices. For example, UnitedHealthcare, citing Data iSight, offered Dr. Darius Kohan about 350 percent of the Medicare rate for a surgery to repair a patient’s eardrum. It came to $3,855.36.
Dr. Kohan, who has a small practice in Manhattan, said the insufficient payments were forcing him to consider joining a large hospital system or a private equity-backed group.
“I’m a dinosaur, but my patients like that,” he said. “I may not be able to sustain it.”
