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Technology
Cybersecurity

CANCER CLINICS FACE CASH CRUNCH AFTER HACK ROCKS US HEALTH CARE

The Change Healthcare cyberattack brought the routine flow of billions of
dollars in payments to a halt, putting medical practices under pressure
nationwide

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A cyberattack against a division of UnitedHealth Group Inc. caused a nationwide
outage of a computer network that’s used to transmit data between health-care
providers and insurance companies.

Photographer: Gabby Jones/Bloomberg
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By John Tozzi, Ike Swetlitz, and Riley Griffin
March 13, 2024 at 11:00 AM GMT+1
Updated on
March 13, 2024 at 7:13 PM GMT+1
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Doctors across the US are stretching to keep their practices afloat as a
debilitating cyberattack on a once little-known company at the center of the
health-care system continues to cause havoc.

The Feb. 21 attack against Change Healthcare, a subsidiary of the largest US
health insurer by market value, UnitedHealth Group Inc., has seized the
health-care system for three weeks and counting, halting the normal flow of
billions of dollars in payments between doctors, hospitals, pharmacies and
insurers. The paralysis is tilting some clinics into financial peril.

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Relief After Cyberattack

“I can’t believe we’re in this mess,” said Kathy Oubre, chief executive officer
of Pontchartrain Cancer Center in southeast Louisiana. “It’s going to take us
months to dig out.”

US health authorities said on Wednesday that they are investigating whether the
cyberattack involved a breach of personal health information. UnitedHealth said
it was cooperating with the investigation.

Among the hardest-hit providers are smaller centers that give patients
chemotherapy or infuse medication for other illnesses, and count on timely
insurance payments to cover their drug purchases. Several cancer practices said
that they’re concerned about their ability to pay for drugs as cash flows dry
up. Some said that pharmaceutical wholesalers have been allowing them to delay
payments — a sign that the effects of the hack are seeping into new corners of
the $4.5 trillion US health-care industry. Change has said it processes $2
trillion in health-care claims each year.

The Pontchartrain Cancer Center is bringing in just 40% of its typical payments,
Oubre said. The group, which treats about 6,000 patients a year, is applying for
relief from Medicare, but if the problem persists for four to six more weeks, it
may need to ask its owners to personally guarantee a loan — or turn some
patients away, she said.

Read More: US Health Regulators Open Probe in UnitedHealth Cyberattack

The financial pressure on health clinics is growing as expenses and unpaid bills
accumulate. At a community health center in east Texas and Arkansas, the billing
team is working weekends and the clinic is mailing paper claims to health
insurers, running up a tab for printing and postage. Some physicians in New
Mexico are forgoing their paychecks to help make ends meet.

“Practices by and large are still not getting paid, and it is a disaster,” said
Jesse Ehrenfeld, president of the American Medical Association and an
anesthesiologist in Milwaukee.

Money meanwhile is piling up at insurers who continue to collect premiums but
aren’t receiving claims that used to travel on Change Healthcare’s networks.
That’s up to 20% of inbound claims for Humana Inc., which provides medical
benefits for almost 17 million people. Some insurers can’t send payments because
they relied on Change for that, too.

Biden administration leaders asked UnitedHealth CEO Andrew Witty and leaders of
other health insurers to make more emergency funding available to providers
during a meeting on Tuesday, according to a statement from the Department of
Health and Human Services, echoing requests the agency made in a letter over the
weekend.

A representative for UnitedHealth declined to comment on the meeting. Shares of
the company had declined 6.3% since the hack last month through Tuesday’s close.

Expand

UnitedHealth Group CEO Andrew WittyPhotographer: Steven Ferdman/Getty Images

UnitedHealth said last week that some services for pharmacies have been
restored. Its payments platform should return on Friday, the company said, and
testing on the medical-claims network will begin next week. Yet with backlogs of
billions of dollars in claims payments growing, no one knows how long it will
take for things to fully get back to normal.

“I can’t make an estimate,” UnitedHealth Chief Operating Officer Dirk McMahon,
who is leading the company’s response, said in a March 7 interview.

PRECARIOUS PRACTICES

While larger hospitals are expected to withstand the crisis, the outlook is less
clear for smaller medical practices with weak finances that rely on Change’s
services, according to Moody’s. Much of the response so far has relied on
insurers and vendors agreeing to waive the normal ways they do business to keep
practices running.

Still, improvised solutions in some cases have provided only limited lifelines
for strapped providers. Barbara McAneny, the CEO of New Mexico Oncology
Hematology Consultants, a 27-physician group, said she asked drug distributor
Cencora Inc. for 60 more days to pay her drug bills. Cencora offered to extend
her due date by two weeks without late fees, she said.

“That’s not sufficient,” McAneny said. “I’m not going to get paid in two weeks.”

McKesson Corp., a Cencora competitor, has also been giving medical practices
greater flexibility to pay their drug invoices, according to practice executives
and communications reviewed by Bloomberg News.

Cencora is giving some independent providers and pharmacies more time to pay
their bills, and allowing them to order more drugs than usual, spokesperson Mike
Iorfino said. The flexibilities will be in place through March 31. He didn’t
comment on McAneny's situation. McKesson didn’t respond to requests for comment.

The pharmaceutical industry is also taking note. Bristol Myers Squibb Co. is
“working to offer a temporary adjustment in payment terms” for cancer medicines
and blood disorder drugs, a spokesperson said.

CENTRAL HUB

Cyberattacks happen all the time in health care. Hackers pilfer records to sell
on the dark web. Ransomware gangs lock up hospital computers. Most breaches
don’t make headlines, yet the BlackCat hacker group that UnitedHealth said
breached Change Healthcare’s networks landed on a critical nexus that links the
people who provide medical care with the entities that pay for it.

UnitedHealth touted Change's extensive reach — to more than 200 million people a
year — when the insurer announced its purchase of the company for $7.8 billion
in 2021. US officials estimate billions of dollars in payments are being
affected by the disruption to Change’s networks each week, according to a senior
Biden administration official, who asked not to be named describing private
assessments.

The wide-reaching impact of the Change hack “is proof positive” that significant
single points of failure exist online across the 16 sectors identified as US
critical infrastructure, said Mark Montgomery, senior director of the Center on
Cyber and Technology Innovation at the Foundation for the Defense of
Democracies, a think tank focused on national security. The US must identify
those weak points and help them establish minimum standards of cybersecurity,
Montgomery said in an interview.

Leading up to Change's outage were decades of acquisitions that built a complex
apparatus reaching into every corner of the US health-care system.

Mostly invisible until the hack, Change Healthcare was designed to replace
mountains of health-care paperwork with more efficient electronic transactions.
Its predecessor, Emdeon, launched in the mid-1990s and rode the tech bubble to
an initial public offering. At one point, it operated the WebMD website.

Private equity giant Blackstone Inc. bought the company for $3 billion in 2011
and in 2017 combined it with some technology assets that belonged to McKesson.
The drug wholesaler took a majority stake in the new entity, by then branded
Change Healthcare, a name one former executive said evoked the company’s
aspiration to cut down on waste and administrative friction.

Change made more than a dozen acquisitions between 2008 and 2018, according to
data compiled by Bloomberg. In that period, new companies weren’t
well-integrated, former employees said. One former executive said Change could
address any problems payers or providers had, but outdated technology sometimes
impeded sales. Another former employee said there was little coherent strategy
behind Change’s acquisitions. Waves of layoffs contributed to a toxic culture,
the former employee said.

A representative for UnitedHealth didn’t respond to a request for comment about
the former employees’ accounts.

Change went public again in 2019. UnitedHealth said it would buy Change in early
2021, drawing an antitrust challenge from the US Department of Justice.
Regulators said the deal would put too much data about customers and competitors
in the hands of UnitedHealth.

After a two-week trial in Washington, a federal judge disagreed and allowed the
acquisition to proceed.

SHIFTING GEARS

Following the Change hack, UnitedHealth offered workarounds, including some run
by its own Optum subsidiary. The largest competing clearinghouse, Availity,
opened a free service that was adopted by more than 300,000 new providers and
dozens of health systems and payers. Claims traveling on its network jumped 40%
over typical levels, CEO Russ Thomas said.

Yet companies that had relied on Change’s services couldn’t just flip a switch.
Changing payment clearinghouses normally requires months of planning, and even
practices that have alternatives have been processing less than their usual
amount of business, with inbound claims diminished. One health-insurance
executive said inbound claims were still down 20% to 30%, and payments to the
company’s providers remained frozen.

US officials have repeatedly urged UnitedHealth to communicate more
transparently, speed up its fixes and provide more flexibility to its customers,
according to three Biden administration officials familiar with the matter, who
asked not to be named as the details are private. Top Biden health authorities
told insurers to loosen rules that can keep patients from getting care while
Change systems are down.

Over the weekend, Medicare said it plans to let cash-strapped providers seek
advance payments, but they won’t be automatic advances like the agency made
during Covid disruptions. Officials also encouraged private insurers to float
funds to providers while claims are bottlenecked.

UnitedHealth has announced two programs intended to supply financial lifelines
to providers facing cash crunches, and said last week it would act as a funder
“of last resort” on a case-by-case basis. The company called on other insurers
to offer relief, but none of its largest rivals have publicly said they will.

At Tuesday’s meeting, US officials said further guidance would be forthcoming on
how states can support Medicaid providers.

UnitedHealth committed on a recent call with clients to release a forensic
report being done by Alphabet Inc.’s Mandiant subsidiary, according to a
health-insurance executive who asked not to be named discussing private
information. UnitedHealth representatives didn’t respond to questions about the
Mandiant report.

Wired reported that the hackers received a $22 million bitcoin payment, and
posts on ransomware forums indicate that four terabytes of data may have been
stolen, according to the Krebs on Security website. UnitedHealth hasn’t said
whether it paid a ransom or what data was compromised. If health information is
breached, companies have 60 days to report it to the government.

— With assistance from Katrina Manson

(Adds US investigation of breach in fourth paragraph.)

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