AHA urges strict antitrust review of UnitedHealth’s $13B Change buy

Dive Brief:

  • The nation’s most powerful hospital lobby is pushing antitrust regulators to go over UnitedHealth Group’s bid to acquire data analytics company Change Healthcare with a fine-tooth comb, alleging the sale could reduce competition for health IT services to providers.
  • The American Hospital Association urged federal regulators to give the $13 billion acquisition a stringent review in a letter sent the Department of Justice’s Antitrust Division on Wednesday. AHA argued the deal would result in a major consolidation of health data with oversight shifting from Change to UnitedHealth subsidiary Optum, whose parent company owns the largest private payer in the U.S., UnitedHealthcare. That could distort decisions about patient care, claims processing and denials, benefiting UnitedHealthcare at the expense of hospitals, AHA said.
  • UnitedHealth declined to comment directly on anticompetitive concerns on Friday, though an Optum spokesperson argued the two companies have “distinct and complementary capabilities.” DOJ and the Federal Trade Commission have until March 24 to decide whether to let the deal go through or subject it to additional scrutiny.

Dive Insight:

Minnesota-based UnitedHealth announced its proposed $13 billion acquisition of Change in January. The deal, expected to close in the second half of this year, consolidates Optum’s dominance in the data analytics space, analysts said, noting it’s a logical tie-up playing to both companies’ strengths.

However, some antitrust hawks aired concerns with the merger almost immediately, noting the number of markets both UnitedHealth and Change participate in could make it difficult for regulators to define relevant markets in their review.  

Optum, one of the biggest providers of health IT services in the U.S., generates about half of UnitedHealth’s earnings. Its analytics segment OptumInsight services more than 5,000 hospitals and has a network of more than 2,300 payer connections, according to UnitedHealth’s annual report from 2019.

Change, meanwhile, is the biggest independent provider of health IT services targeting insurance reimbursement and revenue cycle management in the U.S. More than 5,000 hospitals rely on Change for health IT services, and its network includes 2,200 payers, according to the company.

Joining the two entities will “result in an anticompetitive loss of head-to-head competition between Optum and Change,” AHA alleged in its letter to Richard Powers, acting assistant attorney general in the Department of Justice’s Antitrust Division. The deal will reduce competition across a series of health IT services providers use to navigate insurance reimbursement and payment, including claims clearinghouse, payment accuracy, revenue cycle management and clinical decision support, AHA said.

Additionally, Change’s current independence from payers sets it apart from the competition. The loss of that independent competitor similar in size to Optum for these services will likely result in higher prices for providers, AHA said.

The hospital lobby, which represents some 5,000 hospitals and hundreds of thousands of affiliated physicians, also argued that bringing Optum and Change’s massive reams of health data under the same roof — one with a major payer — presents antitrust concerns.

In areas like payment accuracy, RCM services and clinical decision support criteria, Optum could manipulate its new datasets to advantage UnitedHealthcare, leading to increased denials and coverage restrictions. As a neutral third-party competitor, Change currently serves as a check against this, AHA said.

Additionally, post-merger, Optum will have access to its competitor’s sensitive payment and denial data through Change’s claims clearinghouse — and would have financial incentives to use this data to inform UnitedHealthcare’s reimbursement rates and set its clinical strategy, AHA said.

That would give UnitedHealthcare more clout in negotiations.

“The parties are well aware that the transaction presents substantial antitrust concerns because the transaction agreement provides that the parties will divest assets that generate hundreds of millions of dollars in revenue in order to obtain DOJ approval,” AHA General Counsel Melinda Reid Hatton wrote in the letter.

For its part, Optum has pledged to maintain an “informational firewall” within the company, and UnitedHealth says its UnitedHealthcare and Optum businesses, though strategically aligned, are kept separate.

In mid-February, UnitedHealth gave antitrust officials more time to review its plan to absorb Change by withdrawing key paperwork, resetting the 30-day clock regulators have to decide whether to further investigate complicated deals or let them go through. UnitedHealth re-filed its notification and report form on Feb. 22, meaning the government must issue a decision on whether to further scrutinize the Change deal in just five days.

The FTC declined to comment on the status of the review and DOJ did not respond to a request for comment by time of publication.

Posted in Law