Lawyers representing a bankrupt California health system are suing MultiPlan and some of the country's largest health insurance companies, alleging they conspired to underpay for out-of-network services to the tune of about $10 billion per year.
The liquidator for Daly City-based Verity Health System, a not-for-profit company that operated six hospitals, argues that the cost-management company MultiPlan gathers reams of pricing data from insurers and sets uniform prices for out-of-network services regardless of geography. The lawsuit alleges major insurers including UnitedHealthcare and Cigna unlawfully agreed to the scheme by virtue of their contracts with MultiPlan.
MultiPlan believes the lawsuit has no merit and will vigorously contest the "baseless claims against us and our clients," the for-profit company said in a statement.
The complaint, filed in the Superior Court of California for the County of San Francisco in September, alleges violations of state's Cartwright Act antitrust law in the forms of price-fixing, monopolization and horizontal market allocation. The plaintiffs also claim MultiPlan engaged in unlawful horizontal and vertical exchanges of competitively sensitive business information.
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"In a competitive market, market forces would dictate the price, not a hub for a price-fixing conspiracy," said Patrick Ryan, a principal at the law firm Bartko, Zankel, Bunzel & Miller, which represents Verity Health System's liquidating trust. "It's illegal for competitors to agree to charge the same price, even if they do it through a separate entity."
Verity Health System primarily served Medicare and Medicaid patients, which made higher-paying commercial patients critical to their finances, the lawsuit says. The provider claims that the years of underpayment for out-of-network services it endured as a result of MultiPlan's conduct diminished its ability to provide the best patient care, improve its facilities and upgrade its technology. Ultimately, Verity Health System and other providers went bankrupt as a result, according to the complaint.
Most of MultiPlan's revenue comes from "repricing" out-of-network bills between its network of more than 1 million providers and 700 payers. The company negotiates down from providers' original bills and takes a cut for itself.
The lawsuit doesn't accuse insurers of explicitly communicating with one another to agree to offer the same, lower rates for out-of-network services, Ryan said. Rather, it alleges MultiPlan acted as the "hub" through which they all agreed to fix and reduce the amounts paid to Verity Health System and other providers.
"The insurer defendants did not actually need to communicate directly with one another in order to unlawfully agree to fix prices for out-of-network reimbursements," Ryan said.
The complaint recycles an example used in another lawsuit against MultiPlan regarding subsidiary Data iSight's repricing for moderately complex emergency department exams in seven distinctly different states: California, Kansas, New Hampshire, New Mexico, Oklahoma, Pennsylvania and Wyoming. The providers' billed amounts for the services ranging from $778 to $1,094. Data iSight repriced all of them to exactly $413.39, according to the complaint.
"What's at issue is you have all the major insurance companies giving all their data to MultiPlan," Ryan said. "MultiPlan is taking all of that data and it's spitting out the same price for the identical procedure to all of these providers. That's a price fix, and that's illegal." More providers will make similar claims in court, he predicted.
The complaint says MultiPlan's scheme shortchanged providers $10 billion per year from 2012 through at least 2020, the last year Verity Health System's attorneys investigated. The lawsuit notes MultiPlan's profit margin has exceeded 70% in each of the past four years and that the insurers in California's highly consolidate market also are very profitable.
Defendants also includes Centene, Humana, the Blue Cross and Blue Shield Association, and these company's California subsidiaries. The complaint also names companies MultiPlan purchased and Churchhill Capital III, the special purpose acquisition company that took MultiPlan public in an $11 billion deal last year.
None of the insurance companies nor Churchill Capital III responded to a request for comment. The Blue Cross and Blue Shield Association does not comment on pending litigation, a spokesperson wrote in an email.
Verity Health System's legal argument is a "big stretch," said Mike Holland, a senior credit analyst who who covers MultiPlan for Bloomberg Intelligence. "The company has gone bankrupt and the lawyers are trying to make a cash grab here, it sounds, to extract some kind of settlement from the insurers," he said.
There's a lot of finger-pointing between insurers and providers when it comes to high out-of-network prices, Holland said. Ultimately, it's hard to pin the blame on one or the other when the problem is a "necessary evil" under the current system, he said.
The lawsuit's argument that insurers artificially decrease reimbursement for out-of-network procedures sounds a lot like what's set to happen once the No Surprises Act takes effect in 2022, said Matt Wolf, a director and healthcare senior analyst with RSM. The surprise billing law enacted this year relies on insurers' median contracted rates for out-of-network services when billing disputes go to arbitration, a standard that providers contend gives unfairly favors insurers.
The surprise billing law could threaten MultiPlan's business model once it's fully implemented. "Is this an omen of the economics of healthcare to come once the No Surprises Act goes into effect?" Wolf said.
MultiPlan is no stranger to lawsuits. Modern Healthcare found it has faced more than 200 federal lawsuits since 1988, with 35 of those currently open.