A defeat for UnitedHealthcare in a legal battle over the cost of medical treatment marks a setback for the US health insurer in its battle with private equity firms that have poured billions of dollars into contentious bets on healthcare.
Envision Healthcare, a KKR-owned company that employs doctors who staff emergency rooms and anaesthesiology departments in hundreds of US hospitals, sued UnitedHealthcare in 2018 in a dispute over billing practices. The litigation then disappeared from public view after the proceedings moved from federal court to a secretive arbitration panel.
But in a ruling earlier this year, which has not previously been made public, three arbitrators sided with Envision’s claim that UnitedHealthcare had breached the contract between the two companies by unilaterally reducing reimbursement rates for its physicians’ services.
They ruled UnitedHealthcare must pay damages of $91mn, according to a redacted copy of the arbitrators’ report, which was seen by the Financial Times.
The award could represent just a fraction of UnitedHealthcare’s ultimate financial exposure if other physician staffing companies also prevail in dozens of lawsuits and regulatory complaints alleging the insurer had underpaid them.
UnitedHealthcare said it disagreed with the decision to award damages and noted Envision had asserted many claims that the arbitrators had denied.
The award comes at a pivotal moment for Envision, which last month missed a payment on its debt and has hired restructuring advisers to manage the burden of borrowings it incurred as part of a $9.9bn buyout by private equity firm KKR.
Since that deal was signed in 2018, physician staffing groups have been hit by multiple setbacks, including rising labour costs, a global pandemic that kept patients away from hospitals, and new federal legislation banning medical providers from pursuing patients for bills their insurers refuse to cover.
Compounding those difficulties is a long-running feud between doctors’ groups and UnitedHealthcare, the biggest US health insurer, in which each side accuses the other of systematic misconduct.
In a lawsuit filed last year, UnitedHealthcare claimed Envision drastically overcharged for routine encounters by submitting bills indicating that patients would have risked death or permanent impairment unless they had received immediate and complex care.
In a statement to the FT, UnitedHealthcare said it would “continue efforts to protect our members and customers from the small number of bad actors . . . who demand unreasonable and anti-competitive rates for their services and drive up the cost of care for everyone”.
Envision is fighting the lawsuit, and counters it is the victim of a long-running campaign by UnitedHealthcare to avoid paying legitimate medical bills.
In the last three months of last year, Envision registered more than 3,000 disputes with health insurers via the government body charged with resolving disagreements over the cost of hospital care, according to an official tally published by the Centers for Medicare and Medicaid Services, a US government agency, last week.
According to Loren Adler, an economist who studies healthcare policy at the Brookings Institution, such disputes are likely to have far-reaching consequences, not only for the warring parties, but for the cost and availability of healthcare.
“The stakes are high because, to the extent insurers pay less for care, some of that will flow through to lower premiums,” Adler said. “But from a consumer perspective, you also want the payments to be enough that you can still get access to care.”
