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Securing the Healthcare Payment Maze

What happens when over 90% of all payments in an industry that processes $4.5 trillion annually suddenly stop?

On Feb 21, a massive ransomware attack on ChangeHealth has compromised a payments rail that moves the majority of insurance claims, including payments to hospitals, doctors, pharmacies, labs, and all other healthcare providers. Billions of dollars have either stopped or slowed to a slow trickle.

Almost all insurance companies in the US use ChangeHealth to submit claims and send payments. ChangeHealth adjudicates and processes billions of dollars a week. The attack exposes a stark vulnerability in our national healthcare infrastructure.

CTO and Co-Founder of Nomi Health, Boe Hartman knows how vital payments are to a functioning economy. At Goldman Sachs, he created Marcus, and the Apple Card. At NOMI Health, he is tackling the issues with medical payments and trying to modernize and fix a broken healthcare payments system. Describing the scope of the problem, he said:

'So in the United States, the healthcare industry is a $4.5 trillion industry, just the United States alone. Just to level set everyone.. The healthcare industry is four times our national defense budget and is also on its way to be a $5 trillion market by 2025. Now, inside of that market, you have one major player that does majority the claims adjudication in there, which is ChangeHealthcare, which was purchased by Optum, which is owned by UnitedHealth. So that is the basic equivalent of JPMorganChase owning MasterCard, Visa, and The Clearinghouse.'

Without electronic billing available, healthcare providers are relying on cash reserves, and are finding themselves overstretched and worrying about keeping their doors open. Pharmacies can’t fundamentally operate. At least one healthcare facility has shuttered due to lack of funds. It is estimated that the delays are costing providers anywhere from$100 million to billions of dollars of each day.

According to a report by NPR, the American Hospital Association is calling the attack “the most significant and consequential incident of its kind against the U.S. healthcare system in history.” ChangeHealth has said they will restore the system by “mid-March”, but some sources anticipate an even longer time period. The breach's staggering scope, with six terabytes of sensitive data at stake and daily medical transactions grinding to a halt, paints a dire picture. The ramifications extend beyond the disruption of services, as providers are forced back to archaic paper claims and the financial stability of entire systems hangs in the balance.

On March 5, Health and Human Services released a statement announcing immediate steps the Centers for Medicare & Medicaid Services (CMS) is taking to assist providers to continue to serve patients. They have instructed Medicare providers to “change clearinghouses that they use for claims processing during these outages”.
Also, UnitedHealth says that most providers have established workarounds, but the specifics of these are unclear. As this goes on, it seems unlikely that it won’t necessitate Congressional or Executive actions to provide emergency funds until systems are back up, and healthy supply lines are re-established.

With the industry holding its breath for a potential Congressional lifeline, there are a number of questions that are still unanswered:

The most basic question is why is there only one major payment rail in the United States for such a vast network of a necessary infrastructure to a necessary industry? It smacks of monopoly, which has led to extreme vulnerability and a desperate need for innovation.

Healthcare is vital to every society, and positioning ourselves to have greater options in the healthcare payments space can only help provide greater security. This is why the DOJ objected to the acquisition of Changehealth by Optum in 2022. The issue was around a monopoly of payments.

All the focus in the current media has been around preventing the attack, but any smart supply system not only defends against attack, but diversifies the ability to deliver supplies. So why were all our proverbial eggs in one very big unchallenged basket?

While it is important to address the very urgent problem of fixing the ChangeHealth system and supporting healthcare providers, it is equally important that policy and investment can’t propagate the insanity of maintaining the system as is.

There is a recklessness to not recognizing the vital need to deter monopolization and to increase the competition in the healthcare payments market. We plan to discuss what kind of changes we should be looking for, and why it is vital to open opportunities across this payments frontier.

Tune in to the MoneyPot episode on Securing The Healthcare Payment Maze