MultiPlan debt craters as UnitedHealth contract termination fears flare up

MultiPlan bonds traded off today on growing fears that UnitedHealthcare — one of its largest customers — will stop using MultiPlan’s services to help resolve claims, according to three sources following the situation. 

The unrest unfolded amid United’s ongoing litigation against physician staffing firm Team Health, with the lawsuit fueling anxiety that the insurance provider could drop MultiPlan’s services in the near term, the sources said. 

In the lawsuit filed in the US District Court for the Eastern District of Tennessee last month, the health insurance company alleged Team Health upcoded for services to the tune of USD 100m since 2016 to deceive United into overpaying for emergency-room doctor services.

MultiPlan’s USD 1.3bn 5.75% senior unsecured notes due 2028 fell as low as 87.438 to yield 8.147% today, compared to 93.75 to yield 6.893% yesterday (8 November), according to MarketAxess. Its USD 1.05bn 5.5% senior secured notes due 2028 dropped to 97.75 to yield 5.904% today, versus 101 to yield 5.26% yesterday. 

MultiPlan’s shares slipped 3.8% in morning trading to USD 3.80 and a USD 2.491bn market cap. 

MultiPlan’s relationship with United has been the subject of investor angst for some time, with buysiders raising the threat of emerging competition in MultiPlan’s niche of resolving out-of-network claims, when the company looked to price its refinancing deal back in the summer. At the time, sources specified Naviguard — a new product from United — as a risk that could lead to the loss of more customers than just United.

Market alarm around Naviguard was stoked with a November 2020 short-seller report from Muddy Waters. The research claimed that United would convert the majority of its accounts with MultiPlan to in-house Naviguard by the end of 2022, which the fund predicted would cut Multiplan’s 2022 estimated revenue by 35% and slash its levered free cash flow by 80%. MultiPlan’s stock dropped more than 20% on the heels of that report.

The relationship also came under scrutiny when a policy change for United went into effect on 1 July targeting coverage of out-of-network providers and potentially impacting MultiPlan’s future revenue. Market volatility, spurred by the news, triggered a statement from MultiPlan on 9 July that the policy change would not have a material impact on its business when implemented.

On the company’s 3Q21 earnings call on 3 November, MultiPlan president and COO Dale White reiterated, “There was a policy change that was announced by our customer, and it really had to do with a specific set of claim types and specialties that had nothing to do with a member’s sort of selection of a provider in-network or inside their service area. And as I think we said back in July, we didn’t expect to have any impact, any material impact, on our business this year.”

2021 Debtwire

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