In a recent announcement, MultiPlan, an entity offering a shadow provider network to insurers, declared that it was going public through a SPAC. Upon closer inspection, MultiPlan represents some of the worst aspects of American health care.
The world of health insurance is deliberately murky. There are monthly premiums, basically a subscription to access the insurance; deductibles, which are minimum amounts a patient pays before the insurance kicks in, usually in an emergency or surgery setting; and co-pays, which are additional fees the patient pays for the privilege of seeing a doctor, usually $20-70.
All of the patient-side fees are confusing, but the provider-side is even more so. Insurers handle negotiations with doctors and hospitals (and, importantly, negotiating with a doctor does not necessarily mean the insurer has negotiated with the hospital and vice versa) to reach a set price for a specific service. These prices are negotiated down from the hospital or physician’s chargemaster (a list of prices). The chargemaster bears no relation to actual charges but is instead the provider’s best attempt to set a high bar at the outset of a negotiation process. When an uninsured patient is billed an extraordinary amount, it’s usually because they didn’t have the negotiation layer of an insurer built in.
The purported value add of insurers, then, is that they lessen costs for patients by handling catastrophic expenses and negotiating down high provider fees.
For a few reasons, this isn’t wholly true. For one, health systems are increasingly merging with insurers, meaning any “negotiation” on behalf of the patient is happening within two divisions of the same company.
But also, many insurers are doing much less negotiation than they make it seem.
Three weeks ago, a new merger announcement threw the health care world into a bit of a tizzy. MultiPlan, a complementary PPO network, announced it was going public via a SPAC. The announcement forced quite a few people to start looking up what MultiPlan actually does, including me.
MultiPlan, it turns out, is a corporation that handles a lot of insurers’ work for them. It handles negotiation with providers nationwide and consequently has the largest preferred provider network in the country. This means that insurers can contract with MultiPlan and simply get access to MultiPlan’s network, rather than doing thousands of negotiations. This service is so valuable that all 10 of the top 10 insurers use it, and the corporation seems to have carved out a little monopoly at the top.
MultiPlan didn’t start with so much power. It was founded in 1980 to solve an growing problem: when people traveled, their narrow network insurance plans didn’t follow them. If a person from Delaware had an accident in Colorado, they likely fell out of network and did not receive insurance coverage. To fill this gap, MultiPlan formed a network of “shadow contracts,” negotiated rates with providers that fell outside most networks, and sold this network to other insurance plans.
Over time, as the main insurers became bigger and more national, these shadow contracts became less important. But MultiPlan remained at the top of the insurer network, mostly because the Affordable Care Act of 2010 triggered an avalanche of startup insurers (Oscar, Clover, etc.) while also mandating that insurers cover out-of-network emergency care (although it did not ban surprise billing). MultiPlan offered these smaller insurers an easy way to access a large network of providers.
In 2006, private equity firms began eyeing MultiPlan as a valuable service with few competitors, a market position that only grew after the aforementioned 2010 ACA devlopments. Over the ten years from 2006 to 2016, MultiPlan changed hands between PE firms no fewer than four times. Meanwhile, MultiPlan was also making large acquisitions of competitors and firms in adjacent spaces:
2006: MultiPlan acquired by Carlyle Group for $1 billion
2006: MultiPlan acquires PHCS, the largest primary care network in the US
2010: MultiPlan acquired by BC Partners and Silver Lake for $3.1 billion
2010: MultiPlan acquires Viant, another competitor
2011: MultiPlan acquires NCN, a reimbursement management platform
2014: MultiPlan acquired by Starr Investment Holdings and Partners Group for $4.4 billion
2014: MultiPlan acquires Medical Alert & Review, which identifies wasteful billing
2016: MultiPlan acquired by Hellman & Friedman for $7.5 billion
Not only did MultiPlan’s value increase by a factor of more than 7 times over 10 years—its owners “cleaned up,” in the words of a Wall Street Journal blog post— it also acquired many of its potential competitors. To my knowledge, MultiPlan no longer has competitors. It’s just MultiPlan and the insurers that use it.
Following some of these acquisitions, MultiPlan expanded its service offerings beyond provider negotiation. The corporation also uses a Palantir-like combination of algorithm and human to root out “fraud and abuse” in payments. And for insurers who worry about what their members think of them, MultiPlan offers a set of analytics services that “balance[s] out-of-network savings and member service.”
From what I can tell, this means MultiPlan has a side business in blocking certain treatments and medications to save the insurer money, or at least making things very hard on doctors who try to prescribe expensive care.
This makes sense from MultiPlan’s perspective, as MultiPlan’s revenue (as far as I can tell—they’re not yet public) comes from a combination of the contract fees that insurers pay to access MultiPlan’s network, in addition to a percentage of the “savings” MultiPlan gets for insurers by routinely lowballing doctors.
Theoretically, MultiPlan’s harsh negotiation tactics should be good for rising American health care costs; insurers are supposed to lower costs by negotiating lower prices on behalf of the patient.
But instead, MultiPlan acts like a mafia enforcer for insurers, forcing doctors to accept low payments while insurance premiums for patients…somehow continue to rise.
MultiPlan’s key strategy for forcing doctors to accept low prices is by erecting a bureaucratic layer so thick and complicated that few can navigate it. On one MultiPlan fax to a doctor that I saw, MultiPlan gave the physician 8 days to respond to a low-ball negotiation. “Please note that if you do not wish to sign the attached proposal,” the fax said, “this claim is subject to a payment as low as 110% of Medicare rateas based on the guidelines and limits on the plan for this patient.”
In other words, if the physician disagrees with MultiPlan’s reimbursement offer, MultiPlan reserves the right to cut the price even lower.
MultiPlan preys on physicians using these subtly forceful faxes, expecting physicians’ medical billing staff to not have time to fight through layers of bureaucratic tape. And according to a friend who works in medical billing, even if a staff member takes it upon themselves to complain about a low rate to MultiPlan, MultiPlan refuses to negotiate on the grounds that it is not the insurer.
Now MultiPlan is going public via a SPAC. There’s a lot of money to be made in leveraging the fragmentation of the health care system and bending physicians to your will, and Churchill Capital looks ready to sweep it up.
Thank you for this analysis, was not previously clear to me how multiplan worked. Thought you might enjoy this, https://www.ft.com/content/fc744cca-8109-4b4b-8b91-f592b8736be8
Great information! Does UPMC use Multiplan?