The big are getting bigger after a federal judge denied the DOJ’s attempt to block UnitedHealth Group’s $13B acquisition of Change Healthcare, delivering a huge victory to the healthcare giant as it continues to vertically integrate its business.
As part of the decision, UHG will be required to divest Change’s ClaimsXten service line (it already has TPG Capital set to pick it up for $2B), although not much else is known about the full opinion since it “may contain competitively sensitive information” and is under seal.
UnitedHealth Group needs little introduction, but in case you’re new to the industry, it runs one of the nation’s largest payors, operates a huge pharmacy benefit manager, and employs thousands of physicians through its care centers.
- Change’s claim processing business is now getting rolled into UHG’s OptumInsight analytics arm, which it argued will help improve outcomes and reduce waste by providing better insights to physicians.
- To give you an idea of UHG’s scale, OptumInsight contributed ~$12B to its insane $288B total revenue in 2021. By comparison, Change did about $3.5B in revenue last year, and even that is getting chopped as it sheds ClaimsXten.
UHG’s position as the US’ most profitable healthcare company paints a huge target on its back for antitrust lawyers.
- The DOJ argued that acquiring Change would give UHG access to a treasure trove of data on its payor competitors and create a virtual monopoly in the claims processing space, leading to lower quality and less innovation.
- UHG countered that it already has access to this competitor data, and has never misused it since doing so would create a huge blowback on its business (we’ll also assume they said something about it being unethical). Some version of this argument clearly stuck.
Whether or not it created a monopoly, the Optum-Change combination is now a major powerhouse that doesn’t sound fun to try and compete with. DOJ top brass Jonathan Kanter wasn’t very enthused about the outcome, saying “we respectfully disagree with the court’s decision and are reviewing the opinion closely to evaluate next steps.” That looks to us an awful lot like the DOJ is planning to appeal the judgment, but UHG and Change are moving forward with combining the companies “as quickly as possible.”