Price-fixing-as-a-service: The claim against healthcare cost-cruncher MultiPlan

Interview Price fixing – an agreement between competitors to set price levels – has been illegal under the US Sherman Antitrust Act since 1890.

But, allegedly, it's alive and well among real estate and healthcare companies, thanks in part to the ease with which software algorithms support collusion as a service.

RealPage, a Texas-based maker of software that sets rents for property managers, and six large landlord clients, are currently being sued by the US Department of Justice for fixing rent prices to keep them high, using non-public data from its clients, at the expense of renters.

RealPage insists that its software and its use of non-public data are legal.

MultiPlan, a New York-based provider of "cost-containment solutions" for health insurance companies like Aetna, Cigna, and United Healthcare, is accused of fixing healthcare reimbursement costs – fees paid by insurance companies to doctors and hospitals – to keep payments low, to the detriment of doctors and patients. MultiPlan does a lot of things, including payment and data analytics services for insurers.

Specifically, as detailed [PDF] in multidistrict litigation against the company, MultiPlan is alleged to be operating a "cartel" with healthcare insurance companies to set the price for "out-of-network" healthcare services.

In the US, most healthcare consumers generally have some form of insurance that pays, in part or in whole, for medical treatment and procedures.

A common form of medical insurance is the Preferred Provider Organization (PPO), a plan that pays for medical services that are both in-network and out-of-network, with reimbursement for out-of-network services generally being a smaller percentage of the total bill. Consumers typically have to pay more for seeking out-of-network medical care, though they may choose to do so if a favorite physician or specialist isn't participating in-network.

According to the amended complaint, the insurance company "cartel" aims to reduce payments to doctors and hospitals for out-of-network services, with Multiplan receiving fees based on the money saved.

"The cartel members do this by agreeing to stop competing against each other on pricing for out-of-network goods and services, stop using their independent judgment on how much to pay for such goods and services, and instead pool their non-public pricing data and their pricing decisions in one entity – MultiPlan," the amended complaint says.

"MultiPlan uses the cartel's commingled competitively sensitive pricing data, a common pricing methodology, a coordinated regime of pricing caps, and regular meetings and communications so that the cartel members can do in concert what none of them could do by competing independently – force ever-decreasing, below-market pricing on providers for out-of-network goods and services."

Multiplan insists this is not the case, and that its actions are lawful. A company spokesperson told The Register:

Jennifer Scullion, a partner at New Jersey-based Seeger Weiss LLP and one of the lead attorneys for the plaintiffs in the multidistrict litigation against Multiplan that's being heard by an Illinois court, begs to differ. She spoke with The Register about the case.

Scullion: "The basic theory of the case is that these doctors are looking to get paid by insurers for what are called out of network services. These are folks who are not under contracts with the insurers for the services they're providing. And the allegation is that the insurers, instead of each one independently deciding how much they will pay the doctor for their service, have colluded and pooled effectively their pricing through MultiPlan.

"MultiPlan is doing the pricing. MultiPlan is using everyone's data. Everyone's data is shared into MultiPlan. And MultiPlan decides how much the doctors get paid.

"The effect is that the amounts doctors are getting paid has been substantially lowered from what it was before, when the insurers were each independently deciding how much to pay the doctors. So that's an antitrust violation because the insurers are competitors. They're supposed to be pricing independently. They're not supposed to be sharing their data. They're not supposed to be having one entity do all of the pricing for them.

"It's a little bit of an unusual antitrust case because the doctors are the ones that are getting paid. So the claim here is that [MultiPlan] has unlawfully suppressed the rates at which doctors are getting paid as opposed to the RealPage case where the allegation is that the landlords have artificially hiked up the rents. So it's the reverse but just as problematic."

The Register: Why is this coming up in multiple cases now? Collusion has been a part of antitrust law since the beginning. Is there something unique about software or algorithms that makes the alleged price coordination easier to accomplish or more difficult to detect?

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Scullion: "There are two answers to that. The big picture answer is that folks are always looking for a new way to skirt the law. It's really that simple. I think that the defendants in our case, in RealPage, and these other algorithmic pricing cases think they've found sort of the 'Aha, well, we can't talk to each other directly but oh my gosh we can just use this third party to do the pricing.' Well, the courts and the DOJ, and our case are saying, 'No, it's just more of the same thing.' It's exactly what has been declared unlawful in the past. The fact that you're running it through an algorithm doesn't make it any more lawful.

"One thing it's important to understand, in our case, what's happening now is a new version of what happened in the late 2000s, which was when a lot of the same insurers did a different scheme. They used a pricing platform, at that point it was United Healthcare that had a platform called Ingenix. And they were all using Ingenix to do their pricing and the New York [Attorney General] said, 'What are you doing? This is collusive pricing. You can't do this.' The case [PDF] never went to trial. There were consent decrees and as part of the consent decrees each of [the health insurance companies] agreed to stop using Ingenix, the common platform that effectively again shared pricing.

"Instead they all agreed to use this thing called FAIR Health which allowed them to use publicly available information but still required that they each independently do their pricing. What happened was their consent decrees were expiring after five years and literally, as they're rolling off of their consent decrees, they're rolling onto MultiPlan. And MultiPlan's pitch was 'We have this algorithm. We can do this. Everyone give us your data. We will run it through and we will do the pricing. We'll do the negotiations for you.'

"The key thing of course is that they said if we all do this, we can all do better. That's the allegation. It's not just United Healthcare outsourcing its own pricing and saying that United ultimately controls its pricing.

"No, the idea is that United hands its data over to MultiPlan to do the pricing, knowing that Aetna and Cigna and others are doing the same. And MultiPlan comes back to the insurers, through meetings and one-on-ones, to say, 'you know, we think we should push your pricing down to this amount so that your quote is in alignment with the others.'

"There's very much an open understanding that this is collective action as opposed to independent pricing by each insurer. That fundamentally is still the problem.

When you're running it through an algorithm, that makes it even more dangerous because you're able to so quickly use the data and know how to target a doctor.

"When a doctor sends a claim in for a procedure, MultiPlan, because it has the data from all these insurers and is doing the pricing for all of them, literally can can look and say, 'Aha, we know the absolute lowest amount this doctor has been paid for that procedure before so we know there's no way we're going above that and we're going to try and push them even lower.'

The Register: Given the New York Attorney General's prior involvement in the preceding case, is there any government involvement in the current litigation?

Scullion: "It's a great question. We know that there have been investigations. We know that Congress for example has called for investigations of MultiPlan and the case is getting an awful lot of attention from the media. At this time, I'm not aware of any formal federal proceeding being commenced by the DOJ like they did with RealPage. That being said, it certainly is something that I would hope that the DOJ is looking at."

The Register: What's the current legal status of the case?

Scullion: "We're still in the motion phase. We and our colleagues filed on behalf of individual providers in what are called direct actions.There also is a class action that's been filed. Direct actions are effectively early opt-outs from the class – people who said, 'No, we're gonna want to do it on our own, not in the class.' But the class actions and the direct actions have been put together in front of one judge – Matthew Kennelly in the Northern District of Illinois, Chicago federal court – in what's called a multidistrict litigation because there have been cases all around the country. So we're there. And what's happened is master complaints have been filed by the direct action plaintiffs and by the class actions. There will be motions dismissed filed on January 16th. Both the class and the direct action plaintiffs have asked the judge to allow for discovery to begin even as the motions to dismiss are being briefed and argued."

The Register: What impact have the alleged practices had on healthcare, on doctors and on patients? The amended complaint says, "by 2020 MultiPlan was setting the prices for over 370,000 out-of-network claims per day on behalf of payors that represented over 80 percent of all payments for out-of-network goods and services, resulting in a total underpayment of approximately $19 billion in 2020 alone."

Scullion: "The real impact is on healthcare because a lot of our clients are providers who are either in a geographic region where there aren't a lot of options for patients or they're in a healthcare specialty where again there aren't a lot of options. And what we're hearing from them is that they're really being put between a rock and a hard place. They're being way underpaid for their services, barely above Medicare rates, and so they're like, 'Do I continue to accept these patients who have insurers that are working with MultiPlan and are severely underpaying me for my services or do I not give these patients services?' And that's a horrible, horrible choice to put to providers and frankly it's also unfair to patients.

"The other part of this is that when MultiPlan and the insurers underpay for the services, they calculate as a savings the difference between what the healthcare provider was charging for the service and what ultimately the healthcare provider was paid – they're calculating that as a savings and then charging the employer the sponsor of the plan a fee based on the quote savings.

"So the doctors aren't getting paid their full amounts, the patient's services are at risk, and the employers are getting charged fees for these 'savings,' sometimes incredibly substantial fees that might even be more than what the doctor eventually got paid. So that's where the perverse aspect of this – the doctor might be getting paid less than what MultiPlan and the insurers are being paid for the 'savings' and the employers are starting to wake up to this and saying, 'What is this savings fee that I'm having to pay?'"

The Register: To the extent that the alleged anticompetitive behavior is enabled through code, do you foresee any issues with discovery or presenting your case as a result of technical challenges or trade secrets claims?

Scullion: "This isn't the first case where code is part of how the unlawful conduct was perpetrated. So I'm sure there'll be a special protective order that governs with respect to code.

That's fine. We can give it all the protection that it actually warrants – I doubt it'll be as much as the defendants say. But that shouldn't get in the way.

"A lot of this case is going to come down to the interpersonal. The code is in some ways a smokescreen because really where the rubber hits the road is that the insurers, when they decided to work with MultiPlan, did so knowing it was that they were doing it collectively, knowing that everyone else was doing it. And that was the advantage of working with MultiPlan. That was the advantage of using MultiPlan's pricing tools. MultiPlan was doing it for everybody and had everybody's data. That's really what matters in the end.

"That's what they're paying for, the collective firepower and being able to strong arm the providers because the providers have nowhere they can turn. They can't say to patients, 'You should really lobby your employer to switch to Aetna because Cigna is screwing over. The providers can't do that anymore because [the insurance firms] are all using MultiPlan." ®