Understanding the Role of Middlemen in Healthcare

"Pharmaceutical firms and hospitals attract much of the public ire for the inflated costs. Much less attention is paid to a small number of middlemen who extract far bigger rents from the system’s complexity. Over the past decade these firms have quietly increased their presence in America’s vast health-care industry. They do not make drugs and have not, until recently, treated patients. They are the intermediaries—insurers, chemists, drug distributors and pharmacy-benefit managers (PBMs)—sitting between patients and their treatments. In 2022 the combined revenue of the nine biggest middlemen—call them big health—equated to nearly 45% of America’s health-care bill, up from 25% in 2013. Big health accounts for eight of the top 25 companies by revenue in the S&P 500 index of America’s leading stocks, compared with four for big tech and none for big pharma. Big health began as a constellation of oligopolies. Four private health insurers account for 50% of all enrolments. The biggest, UnitedHealth Group, made $324bn in revenues last year, behind only Walmart, Amazon, Apple and ExxonMobil, and $25bn in pre-tax profit. Its 151m customers represent nearly half of all Americans. Its market capitalisation has doubled in the past five years, to $486bn, making it America’s 12th-most-valuable company. Four pharmacy giants generate 60% of America’s drug-dispensing revenues. The mightiest of them, CVS Health, alone made up a quarter of all pharmacy sales. Just three PBMs handled 80% of all prescription claims. And a whopping 92% of all drugs flow through three wholesalers. [..] The Affordable Care Act of 2010 limited the profits of health insurers to between 15% and 20% of collected premiums, depending on the size of the health plan. But it imposed no restrictions on what physicians or other intermediaries can earn. The law created an incentive for insurers to buy clinics, pharmacies and the like, and to steer customers to them rather than rival providers. The strategy channels revenue from the profit-capped insurance business to uncapped subsidiaries, which in theory could let insurers keep more of the premiums paid by patients. [..] Research by Neeraj Sood of the University of Southern California and colleagues found that intermediaries in the health-care supply chain earned annualised excess returns—defined as the difference between their return on invested capital and their weighted-average cost of capital—of 5.9 percentage points between 2013 and 2018, compared with 3.6 for the S&P 500 as a whole. [..] Even Haven, which covered its backers’ 1.2m American employees and their families, didn’t command enough market power to compel lower prices from health-care firms. Amazon’s pharmacy business has yet to break into America’s top 15 chemist chains. Big tech may be powerful. But for now even it bows before big health." I used to work for UnitedHealthcare. I still own stock in the company.

“When the Bridge Fall “ Role of Middle managers in successful health care system. the middle manager is often the make-or-break layer between strategy and reality. At a high level, middle managers (department heads, unit supervisors, clinical leads) translate executive vision into frontline action while simultaneously carrying the voice of frontline staff upward. That dual accountability is what makes their role so pivotal—and so complex. Here’s how their impact shows up in real outcomes: 1. Translating Strategy into Practice Senior leadership may define priorities—quality improvement, patient safety, digital transformation—but middle managers are the ones who operationalize them. They: Turn policies into workflows Align daily tasks with strategic goals Ensure compliance with protocols If they misunderstand or poorly execute strategy, even the best plans fail. 2. Driving Patient Safety and Quality Middle managers directly influence adherence to clinical standards and safety practices. They: Monitor clinical performance Enforce protocols and guidelines Address near-misses and incidents A strong middle manager reduces variability in care—one of the biggest risks in healthcare systems. 3. Shaping Team Culture and Morale Culture is not created in boardrooms—it’s shaped on the floor. Middle managers: Set the tone for accountability and compassion Influence burnout, engagement, and retention Manage conflict and build trust In healthcare, where emotional load is high, this role becomes even more critical. 4. Enabling Communication Flow They are the communication bridge: Downward: explaining decisions, changes, and expectations Upward: escalating risks, constraints, and frontline realities When this bridge breaks, organizations suffer from: Misalignment Delayed decisions Strategic blind spots 5. Managing Resources Under Pressure Healthcare systems constantly operate under constraints. Middle managers: Allocate staff and schedules Balance workload and patient demand Optimize limited resources Their decisions directly affect efficiency, waiting times, and patient experience. 6. Leading Change (or Blocking It) Whether it's digitalization, new clinical pathways, or accreditation: Strong middle managers enable change adoption Weak ones resist or passively delay it Most transformations fail not at the top—but in the middle layer. 7. Developing Future Leaders They are the pipeline for leadership: Identify high-potential staff Mentor and coach teams Build succession readiness A weak middle layer leads to long-term leadership gaps. The Reality (Hard Truth) If you hire incompetent middle managers: Strategy becomes theoretical Quality becomes inconsistent Staff become disengaged Patients experience fragmented care But when you get this layer right: Execution becomes reliable Culture becomes resilient Outcomes improve sustainably

Middlemen have been taking power from US physicians and patients for years. It's getting worse. The result is higher healthcare prices, worse patient outcomes, & lower compensation for those delivering care. Health Affairs article, "The Incursion Of Profit-Enhancing Middlemen In US Health Care," outlines how the middlemen are winning at the expense of patients and clinicians. Excerpts: The U.S. health care system, by and large, does not regulate the prices providers charge in the commercial market, nor oversee private insurer claims decisions, particularly denials. Combined with the accelerating corporatization of health care delivery, this regulatory vacuum has fostered an ever-growing market for intermediary businesses to help clinicians navigate the processes of filing claims and maximizing reimbursements. At the same time, insurers increasingly contract with intermediary businesses in an effort to manage utilization and up their own margins. These competing “profit-enhancing middlemen” are likely increasing costs for consumers and spending in the private sector health system as a whole. --- Commercial insurers deny enrollee claims at astonishingly high rates, as post-claims utilization management remains the primary tool they wield to contain health care spending. A KFF survey found that, in the last 12 months, 20 percent of adults with private health insurance experienced a claims denial for care they thought was covered by their insurer. This is twice the denial rate of those with Medicare coverage. In a separate study of 2021 data from insurers participating in the Affordable Care Act nongroup insurance Marketplaces, claims denial rates ranged from a low of 2 percent to a high of 49 percent, with 10 percent of insurers denying at least 30 percent of claims (17 percent of total claims were denied). --- In addition to engaging in aggressive claims denial practices, some insurers seek to reduce provider reimbursements while increasing their own revenue by engaging affiliated or external middlemen to “reprice” out-of-network claims. These repricers, including companies such as MultiPlan, determine how much to pay for a service and act as the insurers’ proxy in negotiations with out-of-network clinicians... The market strength of MultiPlan’s contracted plans has led to allegations of “collusion” and has spurred legal accusations of a re-pricing “cartel.”  --- Health care consolidation has accelerated, and corporate players such as private equity have broadened their involvement in health care, seeking large and fast returns on investment. These developments have catalyzed a complex web of profit-enhancing middlemen, which in turn create demand for more counter-balancing middlemen. The end result is a vicious cycle of repeated third-party claims adjudication. #emergencymedicine American College of Emergency Physicians American Academy of Emergency Medicine (AAEM) Society for Academic Emergency Medicine Linda Blumberg, Kennah Watts

𝗥𝗲𝘁𝗵𝗶𝗻𝗸𝗶𝗻𝗴 𝘁𝗵𝗲 𝗦𝘁𝗿𝗮𝘁𝗲𝗴𝗶𝗰 𝗥𝗼𝗹𝗲 𝗼𝗳 𝗠𝗶𝗱𝗱𝗹𝗲 𝗠𝗮𝗻𝗮𝗴𝗲𝗿𝘀 𝗶𝗻 𝗛𝗲𝗮𝗹𝘁𝗵𝗰𝗮𝗿𝗲 𝗜𝗺𝗽𝗿𝗼𝘃𝗲𝗺𝗲𝗻𝘁 Despite ongoing investment in #KnowledgeTranslation and #QualityImprovement, #HealthSystems often struggle to connect evidence with frontline practice. A key reason? 𝗧𝗵𝗲 𝘀𝘁𝗿𝗮𝘁𝗲𝗴𝗶𝗰 𝗽𝗼𝘁𝗲𝗻𝘁𝗶𝗮𝗹 𝗼𝗳 𝗺𝗶𝗱𝗱𝗹𝗲 𝗺𝗮𝗻𝗮𝗴𝗲𝗿𝘀 𝗮𝘀 𝗸𝗻𝗼𝘄𝗹𝗲𝗱𝗴𝗲 𝗯𝗿𝗼𝗸𝗲𝗿𝘀 remains under-recognized and under-utilized. This is the central problem addressed in the critical interpretive synthesis presented in this paper. The authors examine a wide range of empirical studies to explore how middle managers act as crucial intermediaries in healthcare organizations, connecting strategy to delivery, evidence to action, and leadership to implementation. Rather than viewing middle managers as passive conduits or administrative buffers, the paper reframes them as 𝗮𝗰𝘁𝗶𝘃𝗲 𝗸𝗻𝗼𝘄𝗹𝗲𝗱𝗴𝗲 𝗯𝗿𝗼𝗸𝗲𝗿𝘀. The paper's core argument is that middle managers perform 4 distinct but interconnected roles: 🔹 𝗞𝗻𝗼𝘄𝗹𝗲𝗱𝗴𝗲 𝗠𝗮𝗻𝗮𝗴𝗲𝗿𝘀 – synthesizing and translating evidence into usable forms 🔹 𝗟𝗶𝗻𝗸𝗶𝗻𝗴 𝗔𝗴𝗲𝗻𝘁𝘀 – building relationships across teams and professional groups 🔹 𝗖𝗮𝗽𝗮𝗰𝗶𝘁𝘆 𝗕𝘂𝗶𝗹𝗱𝗲𝗿𝘀 – mentoring, supporting, and mobilizing staff 🔹 𝗦𝘁𝗿𝗮𝘁𝗲𝗴𝗶𝗰 𝗖𝗼𝗻𝘁𝗿𝗶𝗯𝘂𝘁𝗼𝗿𝘀 – aligning evidence use with organizational priorities The authors demonstrate that these roles are not uniform or automatic; instead, they are shaped by institutional context, leadership culture, and the resources available. Their synthesis highlights the need for deliberate strategies to support, develop, and position middle managers to influence both care processes and outcomes. For practitioners and system leaders, this paper offers a shift in perspective: 𝗶𝗺𝗽𝗿𝗼𝘃𝗶𝗻𝗴 𝗰𝗮𝗿𝗲 𝗶𝘀 𝗻𝗼𝘁 𝗼𝗻𝗹𝘆 𝗮𝗯𝗼𝘂𝘁 𝗰𝗹𝗶𝗻𝗶𝗰𝗮𝗹 𝗶𝗻𝗻𝗼𝘃𝗮𝘁𝗶𝗼𝗻 𝗼𝗿 𝘁𝗼𝗽-𝗱𝗼𝘄𝗻 𝗿𝗲𝗳𝗼𝗿𝗺; 𝗶𝘁 𝗮𝗹𝘀𝗼 𝗵𝗶𝗻𝗴𝗲𝘀 𝗼𝗻 𝗲𝗺𝗽𝗼𝘄𝗲𝗿𝗶𝗻𝗴 𝘁𝗵𝗲 𝗼𝗳𝘁𝗲𝗻-𝗼𝘃𝗲𝗿𝗹𝗼𝗼𝗸𝗲𝗱 𝗮𝗴𝗲𝗻𝘁𝘀 𝗶𝗻 𝘁𝗵𝗲 𝗺𝗶𝗱𝗱𝗹𝗲. #OpenAccess

For too long, Medicare Advantage has treated brokers as transactional middlemen. That misses their real value. At SCAN, we’re launching a new model that reframes brokers as health navigators—trusted partners who help members actually access care, not just choose a plan. As recently covered by Fierce Healthcare, this program equips brokers to support things that truly move the needle: -Welcome calls that drive early engagement -Annual wellness visits -Preventive care like flu shots -Ongoing navigation of the healthcare system And importantly — compensation tied to real health actions, not just enrollment volume. This is what value-based thinking should look like. If Medicare Advantage is going to justify its role as a public-private partnership, it has to deliver: -Better experiences -Better outcomes -Not just better marketing Brokers already sit at the center of trust in many communities. The opportunity is to align that trust with health. This is one small but meaningful step toward an MA ecosystem focused less on transactions and more on impact. https://lnkd.in/gHs7epR2

No one who actually works in healthcare is shocked by the The Wall Street Journal story about UnitedHealth Group's CEO making private investments in healthcare startups. Not the undisclosed investments. Not the affiliated entities. Not even the emails suggesting certain involvement was better kept out of writing, but could be communicated "verbally." Anyone who has spent time in this business knows none of this requires much imagination. Dinner and drinks with a payer executive, a startup CEO whose model depends on coverage expansion, a private equity sponsor looking for scale, and a policymaker in the room; all talking about where reimbursement is going, what policies are likely to move, which services are about to become “standard of care,” and what that means for business. They don't whisper. Its not a conspiracy. Just people with aligned incentives discussing the future of the market. There are so many versions of this dinner. Hospital mergers announced alongside extraordinary exit packages for retiring executives, sold as expanded access and efficiency. Coverage expansions framed as breakthroughs for patients that also happen to align perfectly with existing investments. Startups that succeed or fail based on access to distribution, reimbursement, or the right strategic relationship rather than clinical value. Walk someone through how healthcare business actually gets done - how access to the market is controlled, how claims move through layers of intermediaries taking their cut, how companies that call themselves competitors work together in order to keep the economics working. There’s usually a moment where they say, "Surely, this can' be legal?!" Its not, not legal. But when you hear it described plainly, it often sounds like it should be. UnitedHealth Group's Hemsley recently testified before Congress that his company's most important goal is to make healthcare "more accessible and more affordable."  He is now worth nearly a billion dollars, wealth built almost entirely from this company and this industry. I’m not opposed to people succeeding. But at some point we should be honest about what success in this industry reflects. It is rarely the result of making care more accessible or affordable. More often, it comes from understanding how the system works and benefiting from the complexity itself. Call it a market if you want. Many people who work inside it would use a different word. Peter HayesJustin LeaderPreston AlexanderShawn GremmingerCora OpsahlDoug AldeenMarsha SimonMarilyn BartlettJulia PosackiJulie SelesnickLee LewisNelson GriswoldAshleigh Gunter Thomas CampanellaGe BaiVivian HoJohn TozziPatient Rights Advocate https://lnkd.in/erk2kBPN

𝐓𝐡𝐞 𝐦𝐢𝐝𝐝𝐥𝐞𝐦𝐚𝐧 𝐢𝐬𝐧’𝐭 𝐬𝐚𝐯𝐢𝐧𝐠 𝐲𝐨𝐮 𝐦𝐨𝐧𝐞𝐲. 𝐓𝐡𝐞𝐲’𝐫𝐞 𝐭𝐡𝐞 𝐫𝐞𝐚𝐬𝐨𝐧 𝐢𝐭’𝐬 𝐞𝐱𝐩𝐞𝐧𝐬𝐢𝐯𝐞. A patient takes a 10-minute telehealth call. The total bill sent through insurance comes out to $400, leaving the patient to cover the vast majority out of pocket. When the patient pushes back, the clinic reveals a loophole: bypass the insurance framework entirely, pay cash upfront, and the price instantly drops to $120. This isn't an isolated glitch. It is the natural outcome of a complex system where administrative layers and institutional intermediaries inflate baseline costs simply to justify their own existence. When paying directly out-of-pocket is significantly cheaper than utilizing the premium safety net you already pay for, the infrastructure is no longer serving the consumer. It is serving the network. #𝐇𝐞𝐚𝐥𝐭𝐡𝐜𝐚𝐫𝐞 #𝐒𝐲𝐬𝐭𝐞𝐦𝐬 #𝐄𝐜𝐨𝐧𝐨𝐦𝐢𝐜𝐬 #𝐔𝐒𝐇𝐞𝐚𝐥𝐭𝐡𝐜𝐚𝐫𝐞 #𝐏𝐚𝐭𝐭𝐞𝐫𝐧𝐬

Last month, I wrote an article encouraging us to understand our healthcare system. This week, I was reminded why it's so important… The Federal Trade Commission released a report this week about “Specialty Generic Drugs: A Growing Profit Center for Vertically Integrated Pharmacy Benefit Managers”. Yes, I read it, and by the end of the first page of the introduction, I was already fired up.  This post is regarding the first of several findings within the report. "The big 3 PBMs marked up numerous specialty generic drugs by more than 1,000%." Yes, you read that right—1,000% markup on drugs that are supposed to be affordable – “generic”, if you will. For those unfamiliar, PBMs (Pharmacy Benefit Managers) are middlemen in the healthcare industry that claim to lower drug costs by negotiating discounts with manufacturers and insurers. Sounds great in theory, right? But in reality, they wield immense power, determining which drugs make it onto insurance formularies and what you pay at the pharmacy counter. Why this matters: As a policyholder, you’re not just paying premiums in order to have access to a benefit—you’re trusting the system to work for you, not against you. Yet here we are, seeing PBMs prioritize their own profits over the people they’re supposed to serve. This behavior exacerbates the healthcare affordability crisis, leaving patients and employers to pick up the tab in higher medical bills and higher policy premiums. This also matters because if you are considered a fiduciary of the plan according to ERISA, a company and/or their representatives can be found liable to restore any losses to the plans they offer. Translated – If you’re an HR representative involved in the selection and administration of your company’s benefit plans, you could personally be sued for breach of fiduciary duties. My overall take: This kind of pricing practice is not just unacceptable; it’s a breach of trust. It underscores the urgent need for transparency and regulation in how PBMs operate. Without checks and balances, the most vulnerable populations will continue to be priced out of life-saving treatments. And that’s just the beginning of the report… Snark alert: When did “managing benefits” start meaning “managing to make record profits at everyone else’s expense”? Asking for 300+ million friends. #HealthcareCosts #PBMs #FTCReport #AccountabilityInAction #healthcare #benefits #BeTheChange

Direct-to-consumer platforms for selling drugs have their place, but not as a comprehensive method for improving access for most Americans. And it seems that by emphasizing DTC sales initiatives, we're introducing yet another patchwork, complicated set of pathways to "solve the problem of the middlemen." Aside from the arbitrariness regarding which drugs are included, and which aren't, these are just not systematic solutions. And by way of their design, they may induce problems of their own having to do with insurance and the deductible space. It's a common refrain in some circles these days to lay all of the blame of our healthcare system's ills on insurers and pharmacy benefit managers. While these intermediaries are not faultless, coverage gaps can be an area of concern, and perverse financial incentives sometimes prevail, payers have a crucial role to play in both the private and public sectors for the majority of pharmaceuticals. Also, there are many good reasons for us to have insurance, however imperfect that insurance is. And without insurers - whether Medicare, Medicaid, or commercial - we'd be in a situation in which the degree that ability to pay is a deciding factor as to who gets treatment is enhanced. Furthermore, from some of the examples provided publicly, I have no idea what "bypassing the middlemen" entails, if anything. Let's take an example from the TrumpRx and most favored nation policy, Xeljanz. How does the announced drop in price to $3,600 per prescription help practically anyone? Even some of the other drugs that have been mentioned still would cost American consumers hundreds of dollars out of pocket for each monthly prescription; money most do not have. Moreover, the current situation with respect to DTC outlets for obesity drugs leaves a lot to be desired, too. Several of these medications are now for sale directly to the patient at $499 per month. The problem is, who's willing to spend that kind of money? Some, to be sure. But not the majority. Willingness-to-pay surveys suggest perhaps up to 35% of the population, but that leaves most without real access. The $499 deals count for something, as they're more affordable than the list prices. But the issue of a tiered healthcare system becomes entrenched in a DTC environment.

When did billion-dollar drug companies decide they needed to cut out the very people who keep patients safe? Direct-to-consumer drug selling sounds shiny. “Convenient.” “Modern.” “Disruptive.” But let’s call it what it really is: A bypass of pharmacists. A bypass of oversight. A bypass of the safety net patients don’t even realize they depend on. Because here’s the truth Pharmacists aren’t middlemen. We’re the last line of defense. ✅ We catch dosing errors ✅ We flag dangerous drug interactions ✅ We educate patients who never got a full explanation from prescribers Take that away, and you’re not selling convenience. You’re selling risk. If billion-dollar companies can mail out drugs without the “inconvenience” of pharmacists, ask yourself: 👉 Who protects the patient when something goes wrong? 👉 Who steps in when the therapy doesn’t fit the patient? 👉 Who keeps health systems and employers from drowning in costs? Pharmacy isn’t just about pills. It’s about people. And when you strip pharmacists from the process, patients lose more than they know. Direct-to-consumer drug sales may sound like the future. But without pharmacy, it’s a shortcut no healthcare system can afford.