Healthcare Conflicts Create Opportunities for Litigation Funders

As rampant consolidation collides with inflation-squeezed margins in the American healthcare system, tensions between service providers and insurers are reaching a breaking point, often boiling over into litigation. This situation presents opportunities for litigation funders, as highlighted in a new article by Burford Capital LLC.

Released on Wednesday, the Burford Quarterly article titled “The Business Trends Driving High-Value Commercial Disputes In The U.S. Healthcare Sector” was penned by Burford underwriter Charles Griffin and Managing Director Greg McPolin.

Griffin explained in an interview that the core conflict stems from providers seeking fair compensation while payors aim to minimize payments. Several industry factors, including rampant consolidation, private equity activity, and post-pandemic inflation, have created a fertile environment for large-scale litigation.

These tight margins, exacerbated by rising costs in worker salaries, prescription drugs, and medical equipment, recently led the American Hospital Association (AHA) to declare an “unprecedented economic crisis” for U.S. hospitals and healthcare providers. This was emphasized in an amicus brief filed in a lawsuit against health insurers accused of underpaying out-of-network providers using algorithmic pricing tools.

The AHA’s brief contrasted the financial struggles of its members with the profitable insurers, stating that the economic divergence between providers and payors has become the new normal. As a result, healthcare providers are employing increasingly aggressive tactics, leading to frequent litigation.

For instance, in-network providers often file claims against insurers to recover alleged underpayments. While most of these claims are resolved in private arbitration, some have led to substantial public awards, such as Envision Healthcare Corp.’s $91 million win against UnitedHealthcare in 2023 and a Radiology Partners affiliate’s $153 million award against the same insurer later that year.

This ongoing struggle has driven further consolidation among providers and insurers, each seeking to maximize bargaining power. Private equity firms have amplified this trend by employing strategies like “roll-ups,” where they consolidate providers to raise prices significantly.

These strategies have drawn scrutiny from the media, federal government, and led to notable lawsuits, such as the Federal Trade Commission’s case against U.S. Anesthesia Partners Inc., accusing it of monopolistic practices. The Department of Justice is also reportedly investigating UnitedHealthcare’s ownership of physician groups through its Uptum subsidiary.

Griffin noted that anticompetitive conduct could lead to significant claims, citing the $2.67 billion settlement in a multidistrict litigation against Blue Cross Blue Shield. He suggested that opting out of class action settlements could yield even higher recoveries for companies, making such cases attractive for litigation funding.

In summary, the American healthcare industry’s current landscape is ripe for increased litigation, with many disputes likely remaining under the surface.