PHOENIX (CN) - Arizona Attorney General Kris Mayes sued one of the nation's largest preferred provider healthcare networks on Monday, accusing it and eight large insurance companies of operating a price-fixing scheme that underpaid hospitals and overcharged patients for out-of-network care. 

For years, MultiPlan and insurers Aetna, Cigna, UnitedHealthcare, Humana, Elevance, Molina, Centene and Health Care Service Corp. have relied on a shared AI-powered algorithm to decide how much to pay physicians for outofnetwork care, which relied in part on their collective sharing of confidential claims payment information with and through MultiPlan, Mayes says in a lawsuit filed in Maricopa County. 

"This case is another example of old-fashioned price-fixing using new technology, but it's against the law all the same," Mayes said in a Monday press conference in Phoenix.

Rather than competing by setting payments independently, Mayes says the insurers used the same shared formula and the same data and delegated out-of-network payment negotiation decisions to MultiPlan. MultiPlan then used the shared data to calculate the lowest possible payment to a hospital for a given treatment.

As a result, physicians weren't properly compensated for care provided, and patients were forced to foot the rest of the bill. 

"Families paid more," Mayes said. "Independent providers struggled to keep their doors open. Patients are forgoing visits to the doctor because their deductibles are growing and the cost of prescription medicine is rising."

In the lawsuit, Mayes says one patient was left with a bill of more than $100,000 for an out-of-network heart surgery that MultiPlan priced at just $5,449.27. Another was charged tens of thousands for opioid addiction treatment. 

Arizona patients pay thousands of dollars a year for preferred provider organization plans that allow them the flexibility to see out-of-network doctors when they need to. But when insurers don't cover the costs patients expect them to, that benefit disappears. Some PPO plans require a patient to pay the hospital first and receive reimbursement directly from their insurer. But often, those insurers pay only the lowball price they would have offered to the hospital, Mayes said.

Mayes accuses MultiPlan and the eight insurers of violating the state Consumer Fraud Act by misrepresenting the value of PPO coverage and hiding the fact that a thirdparty algorithm - not the insurers themselves - determines what providers are paid. She also accuses them of violating the Arizona Uniform State Antitrust Act by acting together on shared data to suppress insurance payouts across the market. 

"The more they squeeze our doctors and hospitals, the more MultiPlan makes," Mayes said.

The scheme most acutely affects independent physicians.

"I don't have the staff to fight the insurance companies on what they give me," said Dr. Andrew Carroll, a family physician in Chandler. 

Physicians who did challenge low payments were faced with MultiPlan employees whose bonuses relied on low payments and who used aggressive pressure tactics to force acceptance, according to Mayes.

"As a physician, I took an oath to care for my patients," Carroll said. "But I can't fulfill this oath with a hidden algorithm designed not for care but strictly for profit."

In January, the Arizona Medical Association sued MultiPlan in the federal district of Northern Illinois, lodging similar accusations. That lawsuit is now in discovery. Association President Jason Jameson said Monday that MultiPlan's price-fixing is driving small physicians out of practice. 

"The litigation introduced today will improve healthcare for Arizona. As of now, the insurers have the upper hand, but together we can level the playing field."

In Arizona, Mayes asks that a state judge issue a permanent injunction stopping the insurers from sharing data and the algorithm, return money via restitution to patients, providers and employers, seize MultiPlan's unlawful profits, and impose civil penalties for violations of state antitrust and consumer fraud laws. 

"This office will always stand up for Arizona consumers," Mayes said. "We will always stand up against big corporations, private equities and CEOs who put profits over the people that they serve."

How the scheme works

Rather than set their own reimbursement rates, insurers follow MultiPlan's pricing recommendations in a coordinated effort to reduce prices through MultiPlan's algorithm, Mayes says in the lawsuit. That algorithm recommends "unreasonably low" payments for each medical code for all out-of-network care. 

"Competition disappeared in the state of Arizona." 

Insurers share confidential claims and payment data with MultiPlan, which pools and uses it to power the algorithm and keep payments low industrywide. 

"They know everything about our doctors, our nurses, our hospitals, our patients," Mayes said Monday. 

The scheme resulted in patients paying more out of pocket and independent providers, especially in rural areas, cutting services or going out of business. Meanwhile, MultiPlan's profits skyrocketed by paying less to doctors. 

MultiPlan has not responded to a request for comment.

Source: Courthouse News Service