How the surprise billing ban is changing MultiPlan’s business
Cost management company MultiPlan has pledged to narrow the gap between high bills from off-grid providers and how much traditional insurers would pay. But less than a year after their $ 11 billion IPO, political winds threaten the stability of its core business.
The New York-based company has traditionally operated as a Preferred Vendor Organization, or PPO, facilitating payments between 1.2 million vendors and 700 payers. Through this network service company, MultiPlan collects a payment — often a percentage of the discount negotiated on the original provider’s invoice — for each healthcare transaction it facilitates. Historically, most of the revenue generated by MultiPlan has come from off-grid invoices re-priced at rates lower than usual off-grid rates.
The surprise billing ban promises to disrupt that business, forcing the company to rotate its offerings, or deal with irrelevance, said Loren Adler, associate director of the University of California-Brookings Schaeffer Initiative for Health Policy.
“I’ve never been able to figure out exactly how they plan to make money once surprise billing is illegal,” Adler said.
As of January 1, 2022, the No Surprises law prohibits surprise billing for emergency services and high cost sharing off-grid, forcing providers and payers to agree on a price or take the dispute to court. independent arbitrator. The law builds on previous regulations in some states by enforcing the mandate for self-insured clients, as well as extending coverage to fully insured people who live in all 20 states without surprise bill laws.
MultiPlan did not respond to requests for interviews on the impact the new federal mandate could have on its operations. But he said he expects federal law to cut about 10% of his income. A series of articles on their website point to the idea that their service will always be relevant, but their payment calculations may need to evolve in response to the No Surprises Law.
MultiPlan was launched in 1980 to address the growing problem with tight networks of insurers: if a member traveled from Chicago to Indianapolis, had an accident and sought care, they likely turned to an off-grid provider. To help insurers negotiate lower service rates, MultiPlan formed a shadow network of negotiated rates with providers that were not part of most insurance plans, and sold this network to other insurers. .
In 2006, MultiPlan boasted of the largest PPO network in the country and counted the 10 largest insurers in the country among its clients. The Affordable Care Act launched MultiPlan’s operations in 2010 requiring insurers to cover off-grid emergency services. At the same time, a multitude of new insurtechs entered the market and MultiPlan offered these small businesses easy access to a large network of suppliers.
From 2006 to 2016, MultiPlan changed hands four times between private equity firms, with its value increasing sevenfold. Along the way, it also made significant acquisitions of competitors like Viant and NCN, ultimately dominating the off-grid re-pricing and rental networks markets.
In July 2020, the company went public through an $ 11 billion merger with a special purpose acquisition company, or SPAC, with some analysts questioning whether the deal was made to address an imminent problem. maturity of bonds, rather than as a growth opportunity for investors. At the time, the company said it was moving from its network-based services to providing payment analysis and integrity tools, in part in response to the threat of a surprise billing ban. Investors said they plan to expand MultiPlan’s various lines of business, as well as target new payers beyond traditional insurers.
The company used the money from its IPO to buy HST for $ 140 million in November 2020 and Discovery Health Partners for $ 155 million in March, and has touted the deals as a way to grow its business at- beyond network services, which are in decline.
In the company’s most recent first quarter, ended March 31, MultiPlan generated $ 69.4 million from its network services, down 5.7% from the $ 73.6 million reported to the same period last year. The company’s payment analysis and integrity services, however, offset those declines, increasing the company’s revenue 1.1% year-over-year to $ 254.9 million. But the makeup of MultiPlan’s business has not changed much since the company’s PSPC announcement, with network services continuing to account for around 30% of its revenue, leaving investors to question the growth potential of the company. society.
“Depending on how the mediation process unfolds, you wouldn’t need a company like MultiPlan to say, ‘OK, we’re going to fight this one, we’re not going to fight this one,” he said. said Matt Wolf, a senior healthcare analyst at RSM. “That’s a big part of what these payment integrity and data analytics services provide.”
The company’s offer transition comes after a short sellers report claimed that Multiplan’s largest client, UnitedHealth Group, was phasing out MultiPlan from its services and assumed that UnitedHealthcare, based in Minnetonka, Minnesota , could represent a third of the total activity of MultiPlan. Many investors believe the company is developing an internal alternative to MultiPlan – a June policy document from UnitedHealthcare describes Naviguard as its “primary off-grid offering” for employers to resolve disputes with suppliers. UnitedHealthcare declined to comment on its relationship with MultiPlan, but indicated how it plans to pivot its operations towards the surprise billing ban. The document notes that it plans to rely on Naviguard, and does not mention MultiPlan. MultiPlan, for its part, said its relationship with UnitedHealthcare continues to grow and that any claim to the contrary is false.
“I would never count UnitedHealthcare or Optum among anything,” Wolf said.
Some have speculated that the real value MultiPlan provides to insurers was to serve as a “legal shield”, allowing payers to attribute the low reimbursement rates to company algorithms in order to avoid state sanctions and 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 pending against MultiPlan, some of which have been consolidated. Many complaints come from behavioral care providers and emergency department physicians accusing MultiPlan of recommending reimbursements at below market rates. UnitedHealthcare recently unveiled policies to restrict payments to these types of clinicians – a policy change sent MultiPlan’s share price plunging 25% in just one week. If MultiPlan is held responsible for these allegations, it could face high legal payments which 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 kind of like,’ Clearly I paid a fair rate, this independent organization tells me that it’s a fair rate, ”Adler said. . “But again, okay, they don’t need that legal shield anymore. Because now what they owe for these services is very clear.”
However, legislative changes and legal problems must not lead to the demise of MultiPlan.
Thanks to the No Surprises Act, the dispute between payers and providers is transferred to baseball-type arbitration after 30 days of negotiation, with an independent arbitrator deciding between an insurer’s offer and a clinician’s offer, said Erin Duffy, a researcher at the USC Schaeffer Center. for health policy and economics. MultiPlan could monetize its large pool of historical claims data to help arbitrators determine a fair rate.
Payors and providers could also consult MultiPlan when deciding what their initial offering should be, which would increase MultiPlan’s bottom line in the short term. In the long run, however, Duffy expects healthcare players to agree on tariffs for the most common procedures, with the threat of an arbitrator pushing more providers into the network and a decision maker. independent being used only to decide payment for rare procedures.
“I don’t think the services provided by MultiPlan will change much, but I think their algorithms will probably adapt to this new market benchmark that arbitrators are responsible for taking into account: the median amount allowed on the network,” said said Duffy.