Insurers reap hidden fees by slashing payments. You may get the bill.

Weeks after undergoing heart surgery, Gail Lawson found herself back in an operating room. Her incision wasn't healing, and an infection was spreading.

At a hospital in Ridgewood, N.J., Dr. Sidney Rabinowitz performed an hourslong procedure to repair tissue and close the wound. While recuperating, Lawson phoned the doctor's office in a panic. He returned the call himself and squeezed her in for an appointment the next day.

But the doctor was not in her insurance plan's network of providers, leaving his bill open to negotiation by her insurer. Once back on her feet, Lawson received a letter from the insurer, Minnetonka-based UnitedHealthcare, advising that Rabinowitz would be paid $5,449.27 — a small fraction of what he had billed the insurance company. That left Lawson with a bill of more than $100,000.

"I'm thinking to myself, 'But this is why I had insurance,'" said Lawson, who is fighting UnitedHealthcare over the balance. "They take out, what, $300 or $400 a month? Well, why aren't you people paying these bills?"

The answer is a little-known data analytics firm called MultiPlan. It works with UnitedHealthcare, Cigna, Aetna and other big insurers to decide how much out-of-network medical providers should be paid. It promises to help contain costs using fair and independent analysis.

But a New York Times investigation, based on interviews and confidential documents, shows that MultiPlan and the insurance companies have a large and mostly hidden financial incentive to cut those reimbursements as much as possible, even if it means saddling patients with large bills. The formula for MultiPlan and the insurance companies is simple: The smaller the reimbursement, the larger their fee.

Here's how it works: The most common way Americans get health coverage is through employers that "self-fund," meaning they pay for their workers' medical care with their own money. The employers contract with insurance companies to administer the plans and process claims. Most medical visits are with providers in a plan's network, with rates set in advance.

But when employees see a provider outside the network, as Lawson did, many insurance companies consult with MultiPlan, which typically recommends that the employer pay less than the provider billed. The difference between the bill and the sum actually paid amounts to a savings for the employer. But, the Times found, it means big money for MultiPlan and the insurer, since both companies often charge the employer a percentage of the savings as a processing fee.

In recent years, the nation's largest insurer by revenue, UnitedHealthcare, has reaped an annual windfall of about $1 billion in fees from out-of-network savings programs, including its work with MultiPlan, according to testimony by two of its executives. Last year alone, MultiPlan told investors, it identified nearly $23 billion in bills from various insurers that it recommended not be paid.

MultiPlan and the insurers say they are combating rampant overbilling by some doctors and hospitals, a chronic problem that research has linked to rising health care costs and regulators are examining. Yet, the little-understood financial incentive for insurers and MultiPlan has left patients across the country with unexpectedly large bills, as they are sometimes asked to pick up what their plans didn't pay, the Times found. In addition, providers have seen their pay slashed, and employers have been hit with high fees, records and interviews show.

In some instances, the fees paid to an insurance company and MultiPlan for processing a claim far exceeded the amount paid to providers who treated the patient. Court records show, for example, that Cigna took in $4.47 million from employers for processing claims from eight addiction-treatment centers in California, while the centers received $2.56 million. MultiPlan pocketed $1.22 million.

MultiPlan, which makes nearly all of its revenue from such fees, markets its calculations as "defensible, repeatable and completely transparent" and independent of insurance company influence. The firm estimates that its reach extends to more than 100,000 health plans covering more than 60 million people. Patients have encountered its pricing recommendations after a variety of treatments.

In examining MultiPlan's dominant role in this secretive world, the Times reviewed more than 50,000 pages of confidential corporate records, legal filings, claims information and other documents. The Times also interviewed more than 100 patients, doctors, billing specialists, advisers to employer health plans and former MultiPlan employees.

The Times found:

Patients hit with unexpectedly large bills sometimes forgo care or cease long-term treatment, and complain that appeals are fruitless.

MultiPlan's recommended payments not only push back against known overbillers, but can also squeeze smaller practices. Kelsey Toney, who provides behavioral therapy for children with autism from a clinic in rural Virginia, saw her pay cut in half for two patients.

Insurers pitch MultiPlan to employers as a way to control costs, but the fees can be onerous and unpredictable.

Insurers can influence MultiPlan's purportedly independent payment recommendations, according to MultiPlan documents made public by a federal judge after a petition from the Times. That generally means paying even less to doctors and making more in fees.

Former employees at MultiPlan, which has annual revenues of about $1 billion, described a numbers-driven culture that encouraged locking in unreasonably low payments and tied their bonuses to the reductions.

Regulators rarely intervene. Enforcement primarily falls to an agency within the federal Department of Labor, which says it has one investigator for every 8,800 health plans.

In separate statements, UnitedHealthcare, Cigna and Aetna said MultiPlan helps them control costs for employers. A UnitedHealthcare spokesperson said employers negotiate and accept contract terms, including the fee, and described the arrangement as "an industry-standard approach." A Cigna spokesperson also said the fee "aligns with industry standards," adding that "it is fully transparent to our client" and has no influence on payouts to medical providers.

As to the issue of patients being billed for unpaid balances, Aetna said it offered employers "various options and strategies" to minimize the risk of unexpected charges. Cigna said that payment decisions could be appealed, and that it collected no fee if the patient was billed the balance. UnitedHealthcare blamed "egregious" charges by out-of-network providers and suggested that criticism of its work with MultiPlan had been stoked by a private-equity-backed medical staffing firm that is suing the insurer.

Determining what to pay when a patient goes out of network has long been a contentious issue. Although such claims represent a small portion of all medical visits, they can be expensive, little understood by patients and difficult to avoid. Legislation that took effect in 2022 now protects patients from certain kinds of surprise bills but does not cover a vast majority of the claims directed to MultiPlan.

Insurers say that the traditional approach — paying a portion of what providers typically charge — no longer works because of dramatic price hikes. Cigna said some out-of-network providers last year tried to charge "up to 1,904% of what they charge Medicare." Providers argue that insurers and MultiPlan can't be trusted to set fair rates.

The situation echoes a past scandal. Fifteen years ago, the New York attorney general broke up a pricing system that his office's investigation concluded was "rigged." The central player, UnitedHealth, agreed to pay $350 million to patients and medical professionals who said they had been shortchanged, and along with other major insurers, it agreed to reforms meant to ensure it wouldn't happen again.

But the settlement left an opening.

Investigating the Industry

In 2009, a woman from Yonkers, New York, became a symbol of patients' outrage and the promise of change.

Mary Reinbold Jerome had been diagnosed with ovarian cancer at age 62 and received treatment at Memorial Sloan Kettering. Because the hospital was outside her plan's network, she was billed tens of thousands of dollars.

Jerome lodged a complaint with the state attorney general's office, helping to prompt an industrywide investigation.

She stood beside Andrew Cuomo, then the attorney general, as he announced his office's blistering conclusions: A payment system riddled with conflicts of interest had been shortchanging patients, and at its core was a data company called Ingenix. Insurers used the company, a UnitedHealth subsidiary, to unfairly lower their payments and shift costs to patients, the probe found.

UnitedHealthcare, Cigna, Aetna and other major insurers agreed to replace Ingenix with a nonprofit that would provide independent pricing data. Jerome was featured on news programs and hailed as an agent of change, while senators held hearings and blasted insurers for cheating patients.

In 2010, Jerome died.

"She was thinking beyond her own situation," her daughter, Eva Jerome, said in an interview. "She was hoping it would have a broader impact."

But amid the triumph, a key detail in the attorney general's agreements with insurers largely escaped notice: The companies were required to use the nonprofit database for only five years.

'Not a real negotiation'

As MultiPlan became deeply embedded with major insurers, it pitched new tools and techniques that yielded even higher fees, and in some instances told insurers what unnamed competitors were doing, documents and interviews show.

After meeting in 2019 with a MultiPlan executive, a UnitedHealthcare senior vice president wrote in an internal email that other insurers were using MultiPlan's aggressive pricing options more broadly, and that UnitedHealthcare could catch up.

In theory, many of MultiPlan's recommendations are negotiable. But documents and interviews revealed tactics meant to pressure medical practices to accept low payments. Some offers came with all-caps admonitions and deadlines just hours away. Accept and receive prompt payment; refuse and risk an even lower payout. Practices and billing specialists said this often wasn't an empty threat.

"It's not a real negotiation," said Tammie Farkas, who handles billing for her husband's small New York-area practice focused on repairing blood vessels in the brain.

Insurers can set negotiation parameters for MultiPlan, including not negotiating at all, records and interviews show. Multiple providers and billing specialists said that in recent years they had increasingly been told their claims weren't eligible for negotiation.

Tools rolled out to combat price-gouging hospitals and private-equity profiteers, the Times found, have also been directed at people such as Toney.

She charges the rates that Virginia pays for people on Medicaid. But last year, she said, Meritain Health, an Aetna subsidiary, informed her that fair payment for her services was less than half what Medicaid paid, based on calculations by MultiPlan.

Toney has not billed the parents of her two patients covered by Meritain, but going forward, she will not accept patients with similar insurance.

"It puts me in a tough position," she said. "Do I want to pay myself a salary or be able to help people?"