The 'Denials for Dollars' Business: How Algorithms and Incentives Shape US Healthcare

The American healthcare system is often described as a battle between providers and payers. However, a recent ProPublica investigation has pulled back the curtain on a third, largely hidden player: the utilization review industry. At the center of this industry is EviCore by Evernorth, a company that manages prior authorizations for over 100 million people—roughly one in three insured Americans.

While prior authorizations are ostensibly designed to prevent unnecessary or harmful treatments, the reality described by insiders and patients is far more cynical. The investigation reveals a business model where profit is directly tied to the ability to deny care, utilizing a proprietary "dial" to manipulate approval rates.

The Mechanics of the 'Dial'

At the heart of EviCore's operation is an AI-backed algorithm used to evaluate prior authorization requests. According to former employees, this algorithm doesn't issue final denials; instead, it acts as a filter. If a request scores below a certain threshold, it is flagged for manual review by in-house nurses and doctors.

This is where "the dial" comes into play. EviCore can adjust this threshold to increase the volume of requests sent for human review. Because human reviewers are tasked with adhering to strict company guidelines, increasing the number of manual reviews statistically increases the probability of a denial.

"We could control that," said one former EviCore executive involved in technology issues. "That’s the game we would play."

Incentivizing Denial: Risk Contracts and ROI

EviCore's financial incentives are not always based on a flat fee for service. The company utilizes "risk contracts," where EviCore takes responsibility for paying claims. If EviCore can keep the total spend on certain procedures below a predetermined figure, it pockets the difference or splits the savings with the insurer.

This creates a direct financial incentive to deny legitimate care. EviCore markets itself to insurers by promising a 3-to-1 return on investment, boasting that for every dollar an insurer spends on EviCore's services, they will save three dollars in medical payouts.

The Human Cost of 'Not Medically Necessary'

The impact of these systemic denials is not merely administrative; it can be fatal. The story of Little John Cupp, a 61-year-old welder from Ohio, illustrates the stakes. Despite symptoms of heart failure and a doctor's recommendation for a heart catheterization, Cupp was denied twice by EviCore. His doctor eventually gave up on the appeal process, opting for a less invasive nuclear stress test instead.

Shortly after the stress test, Cupp suffered a fatal cardiac arrest. While medical experts are divided on whether the catheterization would have saved him, three of four cardiologists reviewed by ProPublica stated the procedure was appropriate and necessary given his diabetic and overweight status.

The 'Sentinel Effect' and Provider Burnout

EviCore and its competitors, such as Carelon Medical Benefits Management, also exert a psychological pressure on physicians known as the "sentinel effect." This occurs when doctors stop requesting certain procedures altogether because the process of fighting for approval is too exhausting and time-consuming.

While Cigna (EviCore's parent company) describes this as doctors adhering to "best practices," medical professionals view it as a deterrent that prevents patients from receiving necessary care. This is compounded by the "peer-to-peer" review process, which physicians on Hacker News have noted is often not conducted by a peer in the same specialty.

"Often I’m fighting with an MD or ‘practitioner’ who is some other field like a gynecologist about hospital medicine services or rehab," noted one physician in the community discussions.

Systemic Failures and Limited Recourse

The investigation highlights a staggering gap between the scale of the industry and the regulatory oversight. In one instance, EviCore was fined only $16,000 for 77 violations found in a review of 196 files—a sum that represents a negligible fraction of the company's revenue.

Furthermore, the legal landscape favors insurers. Lawsuits against employer-funded health plans are often tried in federal court under frameworks that limit the damages patients can recover, making it financially unviable for many to pursue justice.

Conclusion: A Conflict of Interest by Design

The utilization review industry presents a fundamental conflict of interest: the entities paid to ensure "medical necessity" are financially rewarded for finding that care is not necessary. While there are legitimate concerns regarding medical waste and fraudulent billing, the current system leverages AI and risk-based contracting to prioritize profit margins over patient outcomes. As the industry moves toward more automated decision-making, the need for transparent, specialty-specific reviews and meaningful regulatory penalties becomes critical to ensure that "medical necessity" is determined by medicine, not by a dial.