How Banning Surprise Billing Changes MultiPlan’s Business

Political winds threaten the stability of MultiPlan’s core business……..

ByGrover Roach

August 4, 2021

Cost management company MultiPlan promised to bridge the gap between high bills from out-of-network providers and the amount traditional insurers would pay. But less than a year after its $ 11 billion IPO, political winds threaten the stability of its core business.

The New York-based firm has traditionally operated as a preferred provider organization, or PPO, facilitating payments between 1.2 million providers and 700 payers. Through this network services business, MultiPlan collects a payment, often a percentage of the negotiated discount from the original provider’s bill, for each healthcare transaction it facilitates. Historically, most of the revenue generated by MultiPlan came from out-of-network invoices that were modified by rates lower than typical out-of-network.

The surprise billing ban promises to turn this business upside down, either by forcing the company to change its offerings or by facing irrelevance, said Loren Adler, associate director of the Brookings Schaeffer Initiative for Health Policy at the University of California.

“I’ve never gotten to be what I consider a full understanding of exactly how they plan to keep making money on Earth once surprise billing is illegal,” Adler said.

On January 1, 2022, the No Surprises Act prohibits surprise billing for emergency services and high out-of-network cost sharing, forcing providers and payers to agree on a price or take the dispute to an independent arbitrator. The law builds on previous regulations in some states when enforcing the mandate for self-insured clients, and it also extends protection to fully insured individuals living in the 20 states with no surprise bill laws on the books.

MultiPlan did not respond to interview requests about how the new federal mandate could affect its business. But he has said that he expects federal law to cut about 10% of his income. A. series of articles on its website points to the idea that your service will remain relevant, but your payment calculations may need to evolve in response to the No Surprises Act.

Make it public

MultiPlan was launched in 1980 as a response to the growing problem posed by insurer’s tight networks: If a member was traveling from Chicago to Indianapolis, had an accident, and sought care, they would likely go to an out-of-network provider. To help insurers reduce service fees, MultiPlan formed a parallel network of negotiated rates with providers that were not in most insurance plans and sold this network to other insurers.

By 2006, MultiPlan had the largest PPO network in the country and had the 10 largest insurers in the country as clients. The Affordable Care Act launched MultiPlan’s business in 2010 by requiring insurers to cover out-of-network emergency services. At the same time, a series of new insurtechs entered the market and MultiPlan offered these smaller companies easy access to a large network of suppliers.

From 2006 to 2016, MultiPlan changed hands between private equity companies four times, and its value increased seven times. Along the way, it also made large acquisitions of competitors like Viant and NCN, eventually dominating the off-grid rental and repricing network markets.

In July 2020, the company went public through an $ 11 billion merger with a special purpose acquisition company, or SPAC, and some analysts questioned whether the deal was made to resolve a bond maturity issue that looming, rather than as a growth opportunity for investors. . At the time, the company said it was moving from relying on its web-based services to providing payment integrity and analytics tools, in part in response to the threat of a surprise billing ban. Investors said they planned to grow MultiPlan’s various lines of business, as well as target new payers beyond traditional insurers.

The company used the cash from its IPO to buy HST for $ 140 million in November 2020 and Discovery Health Partners for $ 155 million in March, and touted these deals as a way to grow its business beyond network services, which is decreasing.

During the company’s most recent first quarter ending March 31, MultiPlan generated $ 69.4 million from its network services, a 5.7% drop from the $ 73.6 million reported during the same period of the year. last. However, the company’s payment integrity and analytics services offset these decreases, increasing the company’s revenue by 1.1% year-over-year to $ 254.9 million. But MultiPlan’s business combination hasn’t changed much since the company’s SPAC announcement, and network services continue to account for about 30% of its revenue, leaving investors questioning the company’s growth potential.

“Depending on how the mediation process plays out, it wouldn’t be necessary for a company like MultiPlan to say, ‘Okay, we’re going to fight this one, we’re not going to fight this one,’” said Matt Wolf. Senior Health Analyst at RSM. “That’s a big part of what those payment integrity and data analytics services offer.”

The transition in the company’s offering occurs after a short seller report claimed that Multiplan’s largest customer, UnitedHealth Group, was phasing out MultiPlan from its services and speculated that Minnetonka, Minnesota-based UnitedHealthcare could account for one-third of MultiPlan’s total business. Many investors believe the company is developing an internal alternative to MultiPlan – a June UnitedHealthcare policy document describes Naviguard as its “leading off-grid offering” for employers to resolve disputes with suppliers. United Healthcare declined to comment on its relationship with MultiPlan, but listed how it planned to shift its operations to the surprise billing ban. The document states that it plans to rely on Naviguard and does not mention MultiPlan. MultiPlan, for its part, has said that its relationship with United Healthcare continues to grow and that any claims to the contrary are false.

“I would never rule out United Healthcare or Optum,” Wolf said.

Some have speculated that the real value MultiPlan provided to insurers was to serve as a “legal shield,” allowing payers to blame the company’s algorithms for low reimbursement rates as a way to avoid penalties from states. and the courts. MultiPlan has faced more than 200 federal lawsuits since 1988, according to the government’s electronic case management system, Pacer. There are currently 35 lawsuits open against MultiPlan, some of which have been consolidated. Many complaints come from behavioral health providers and emergency department physicians who accuse MultiPlan of recommending reimbursements at below-market rates. United Healthcare has recently introduced policies that attempt to restrict payments to these types of doctors – a policy change caused MultiPlan’s stock price to plunge 25% in just one week. If MultiPlan is found liable for these allegations, it could face high legal fees that add another challenge to its business, Adler said.

“The argument is, ‘Look, we use MultiPlan, they tell us what the fair rate is, and therefore it’s something like,’ I clearly paid a fair rate, this independent organization tells me it’s a fair rate,” he said. Adler. . “But again, right, they no longer need that legal shield. Because now it is very clear what they owe for these services.”

Still, legislative changes and legal problems don’t have to lead to MultiPlan’s demise.

Through the No Surprises Act, the dispute of payers and providers is moved to a baseball-style arbitration after 30 days of negotiation, with an independent arbitrator deciding between the offer of an insurer and the offer of a doctor, said Erin Duffy, a research scientist at USC’s Schaeffer Center. for Health Policies and Economics. MultiPlan could monetize its large set of historical claims data to help arbitrators determine a fair rate.

Payers and vendors can also consult MultiPlan when deciding what their initial offering should be, providing a short-term boost to MultiPlan’s bottom line. However, in the long term, Duffy hopes that healthcare industry players will agree on fees for most common procedures, with the threat of an arbitrator pushing more providers within the network and an independent decision maker who It is only used to decide the payment of rare procedures.

“I don’t think the services that MultiPlan provides are going to change much, but I think their algorithms will probably fit this new market benchmark that arbitrators need to consider: the median amount allowed within the network,” Duffy said.