DOJ to investigate UnitedHealth’s $13B Change buy

Dive Brief:

  • The U.S. Department of Justice is embarking on a deeper review of UnitedHealth Group’s $13 billion acquisition of data analytics company Change Healthcare following entreaties from powerful hospital lobby the American Hospital Association over anticompetitive concerns.
  • On Wednesday, the DOJ requested additional information and documents from UnitedHealth and Change in its ongoing review of the merger, effectively pushing back the standard 30-day window for initial investigation. “The parties have been working cooperatively with the DOJ and will continue to do so,” Change said in a Friday filing with the Securities and Exchange Commission.
  • UnitedHealth announced its proposed acquisition of Nashville-based Change in January, for $8 billion in cash and $5 billion in debt. The merger, meant to beef up UnitedHealth’s data analytics arm OptumInsight, could also result in less competition for health IT and revenue cycle management services, and give UnitedHealth’s payer business UnitedHealthcare an unfair edge in contract negotiations with hospitals, AHA said in a letter to antitrust regulators earlier this month.

Dive Insight:

UnitedHealth’s buy of Change was originally expected to close in the second half of this year, though DOJ’s decision to investigate the merger more deeply could extend that timing. The marriage, if approved, is a logical tie-up playing to the strengths of both UnitedHealth’s health services business Optum and Change, and would consolidate Optum’s dominance in the data analytics space, according to analysts.

Optum is one of the largest health IT providers in the U.S. Both its data analytics subsidiary OptumInsight and independent operator Change Healthcare have extensive client lists with thousands of hospitals and payer connections, so marrying the two sparks significant anticompetitive concerns, AHA alleged in its mid-March letter to the DOJ’s antitrust division.

AHA urged federal regulators to give the merger a stringent review, arguing it would reduce competition across a series of health IT services providers use to navigate insurance reimbursement and payment, including claims clearinghouses, payment accuracy, revenue cycle management and clinical decision support.

The lobby, which represents U.S. hospitals and health systems, also aired concerns the $13 billion tie-up would result in a massive consolidation of health data under UnitedHealth, which also operates the nation’s biggest private payer, UnitedHealthcare.

That could distort decisions about patient care, claims processing and denials, while giving the payer a leg up in coverage negotiations. Currently, Change as an independent operator and major competitor is serving as a natural check against this outcome, AHA said.

In response to the anticompetitive concerns, an Optum spokesperson told Healthcare Dive earlier this month that Optum’s and UnitedHealthcare’s operations are kept separate, though they are strategically aligned.

UnitedHealth also said in an early March SEC filing that it would sell assets if regulators required, though divestitures worth more than $650 million in revenue for UnitedHealth Group would be a “burdensome condition” and could result in the Minnetonka, Minnesota-based healthcare behemoth calling off the acquisition altogether.

UnitedHealth did not immediately respond to a request for comment Monday. However, DOJ’s decision to double down on its investigation is likely not a surprise for the company, as UnitedHealth already gave antitrust officials more time for initial review of the complicated deal by pulling and refiling key paperwork in February.

Additionally, President Joe Biden’s administration plans to be more aggressive in antitrust and consolidation review after years of what critics called lax oversight from the Trump administration.