Insurance companies have long blamed private equity-owned hospitals and physician groups for exorbitant billing that drives up health care costs. But a tool backed by private equity is helping insurers make billions of dollars and shift costs to patients.

The tool, Data iSight, is the premier offering of a cost-containment firm called MultiPlan that has attracted round after round of private equity investment since positioning itself as a central player in the lucrative medical payments field. Today, Hellman & Friedman, a California-based private equity giant, and the Saudi Arabian government’s sovereign wealth fund are among the firm’s largest investors.The evolution of Data iSight, which recommends how much of each medical bill should be paid, is an untold chapter in the story of private equity’s influence on U.S. health care.

A New York Times investigation of insurers’ relationship with MultiPlan found that countering predatory billing is just one aspect of the collaboration. Low payments have burdened patients with unexpectedly large bills, slashed pay for doctors and other medical professionals, and left employers that fund health plans with high, often unanticipated fees — all while making the country’s biggest health insurance companies a lot of money.

Often, when someone gets insurance through an employer and sees a doctor outside the plan’s network, the insurer routes the bill to MultiPlan to recommend an amount to pay. Both MultiPlan and the insurer receive processing fees from the employer, usually based on the size of the final payment: the smaller the payout, the bigger the fees.

This business model has made Data iSight a cash cow. Of the handful of tools MultiPlan offers insurers, Data iSight consistently makes the most frugal recommendations, typically resulting in the highest fees.

MultiPlan, which has been publicly traded since 2020, did not respond to detailed questions about Data iSight. A statement issued by an outside public relations firm said MultiPlan’s payment recommendations were fair and “widely accepted.” It said the company was “committed to lowering out-of-network costs,” including by using “data-driven tools to determine fair reimbursements.”

In recent years, concern over private equity’s investments in medical practices has grown, as studies have documented rising bills. Insurers and MultiPlan say that Data iSight is a necessary counterweight.

Caught between these moneyed interests are patients, who are mostly in the dark. If they encounter Data iSight’s name, it is typically in the fine print of dense paperwork. Those who have complained said they got little more than assurances that the calculations were rigorous and fair.

For Mary Lavigne, who has chronic pain, chiropractor appointments near Irvine, California, almost doubled in cost. Nadia Salim’s Boston-area therapy appointments also became almost twice as expensive. And Andrew Faehnle was on the hook for more than two-thirds of an ambulance bill after his 14-year-old was rushed to an emergency room in Anaheim, California. In each case, insurance statements cited Data iSight.

“I thought, ‘Who the heck are these people?’ “ Faehnle said. “I started Googling, ‘What’s Data iSight?’ “

MultiPlan’s business model is based on simple math: Take the amount a doctor charges, subtract MultiPlan’s recommended payout, and you have what the firm identifies as a savings or discount. Usually, MultiPlan and the insurer each collect a percentage of that declared savings as a processing fee.

This arrangement helps insurers profit from the most common way Americans get health coverage: through an employer that pays medical claims with its own money, using an insurer only as an administrator. Using MultiPlan, insurers cut medical bills, then charge employers for doing so.

For decades, MultiPlan determined payments primarily through negotiations. The discounts were modest but came with an agreement not to collect more from patients.

‘MultiPlan Is Magic’

Executives from the country’s major insurers gathered in Laguna Beach, California, in 2019 and heard from Dale White, a MultiPlan executive vice president.

He presented a slide showing the cover of a self-help book, “Life Is Magic,” that had been digitally altered to show White’s face and to read “MultiPlan Is Magic.” The slide added: “We have a few things up our sleeve, too.”

The firm’s annual revenues had reached about $1 billion, and three sets of private equity investors had cashed in. After buying MultiPlan for just more than $3 billion in 2010 from the Carlyle Group, the firms BC Partners and Silver Lake sold it for a reported $4.4 billion in 2014 to Starr Investment Holdings and Partners Group, which sold it two years later to Hellman & Friedman for a reported $7.5 billion.

Hellman & Friedman, which owned the company when it went public in 2020, declined to comment.

Fueling the growth was Data iSight. The annual revenue it brought MultiPlan grew from $23 million in 2012 to more than $323 million in 2019, according to an investor presentation in 2020.

‘Crazy low’ payments

There was more to MultiPlan’s rising fortunes than just an increase in the number of claims. The average fee from each claim also grew, executives told investors.

In a presentation shortly before it became a publicly traded company in 2020, MultiPlan stressed that its tools were “scalable”: Reducing payments by just a half-percent could yield an additional $10 million in profits, the company said.

After MultiPlan fell short of a revenue target in 2022, White, who had become CEO, assured investors that the company had an “action plan” that included “aggressively implementing new initiatives with our customers to help them cope with accelerating health care costs.”

A change to Data iSight’s methodology, he said, should produce an additional $6 million in revenue.

Data iSight starts by using Medicare’s methods for setting rates. But subsequent calculations are less transparent. MultiPlan says it applies multipliers that allow for a fair profit for hospitals and something approximating a fair market rate for physicians. The documents show that MultiPlan allows insurers to cap prices and set what they consider fair profit margins for medical facilities.

MultiPlan has pitched Data iSight as an alternative to simply paying marked-up Medicare rates, an option some insurers offer. Paying around 120% of the government-set rate “sounds fair, maybe even generous,” one MultiPlan document said, but this is “inherently misleading” because “the average consumer does not understand just how low Medicare rates are.”

Interviews and documents, however, indicate that Data iSight’s recommended prices are sometimes about 160% to 260% of Medicare rates — amounts that former MultiPlan employees described as “ridiculously low” and “crazy low.”

Even rates that may sound reasonable can strain medical practices. For example, UnitedHealthcare, citing Data iSight, offered Dr. Darius Kohan roughly 350% of the Medicare rate for a surgery to repair a patient’s eardrum. It amounted to $3,855.36.

Kohan, who has a small practice in New York City, said skimpy payments were forcing him to consider joining a large hospital system or private equity-backed group.

“I am a dinosaur, but my patients like that,” he said. “I may not be able to sustain it.”