Just days before the deal was set to close, the US Department of Justice has filed a suit against UnitedHealthGroup to halt its planned acquisition of Change Healthcare, arguing that it could hurt competition between commercial health plans and undercut the market for claims processing technology. The suit was joined by Minnesota Attorney General Keith Ellison and the State of New York.
Back in March 2021, a couple of months after the two parties announced the $13 billion merger plan, the DoJ opened an investigation of the transaction, according to reports appearing in MedCityNews. Later that year, UnitedHealth and Change announced that they had agreed to postpone the merger until February 22 unless the DOJ closed its investigation. Recently, Change announced that the deal would close on February 27th unless the DoJ put a stop to it, which is obviously what happened.
UHG, which owns the largest health insurer in the U.S, is already a titanic force in the health insurance business, but Change could give it even more power. According to the DoJ suit, United’s health insurance rivals generally use Change technology to manage healthcare claims, reduce administrative waste and avoid overpayments. Change operates the largest electronic data interchange clearinghouse in the U.S. (with 50% of all medical claims in the U.S. passing through) and also sells licenses to claims editing technology allowing health plans to process millions of claims per day.
Because it serves a large number of US health plans, Change has access to huge stores of competitively sensitive data about United’s rivals, including data revealing how the plans are designed and how they calculate payments to providers.
Part of what’s driving the DoJ’s complaint is the fact that UHG has been upfront about its plans to gain access to the bulk of US claims transactions, with executives having “repeatedly expressed because business documents that the Change purchase was motivated by the desire to acquire Change’s rights to claims data,” the complaint says. The filing notes that UHG’s own research had found that Change had secondary-use rights over 60% of the claims data that passes through its EDI clearinghouse.
Just as importantly, UHG’s merger with Change would also eliminate a major source of head-to-head competition between the two to supply first-pass claims editing solutions. Right now United’s OptumInsight subsidiary sells a first-pass claims editing solution that competes with Change’s solution, but that competitive tension would of course be eliminated if the merger is completed.
If the buyout goes through, United’s health plan competitors wouldn’t be able to prevent their data from being routed through Change. Given access to this data, United would be able to undercut its rivals’ innovations and discourage them from even developing the innovations in the first place, the DoJ contends.
According to the DOJ filing, UHG has been salivating over the prospect of acquiring Change since at least 2015. It’s hard to argue that such a move makes sense for the company and that the price it is willing to pay for these assets may be justified.
However, it’s also clear that the DOJ is right that this merger could have a very substantial effect on the commercial health insurance marketplace. Where you come down on whether this is an acceptable level of impact may differ depending on your public policy views, but I think it’s at least fair to say that these challenges to the deal should not be taken lightly.
