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.”
Fresh announcements seem to be piling into the retail healthcare snowball on a daily basis, and it looks like Walmart and UnitedHealth Group don’t plan on missing out on the fun.
Walmart and UnitedHealth Group inked a 10-year partnership to deliver care to hundreds of thousands of Medicare Advantage beneficiaries through value-based arrangements, with three pillars supporting most of the collaboration:
- Beginning in January, Walmart and UHG will launch a co-branded MA plan in Georgia, dubbed UnitedHealthcare Medicare Advantage Walmart Flex.
- UHG will provide Optum analytics and CDS tools to Walmart Health clinicians, starting with 15 locations throughout Florida and Georgia.
- Walmart Health’s Virtual Care solution will now be in-network with UnitedHealthcare’s Choice Plus PPO plan, giving ~20M members access to the service.
At first glance, the partnership makes sense for both sides, offering advantages of scale that could only be achieved from a collaboration between the nation’s largest retailer and its largest payor.
- Walmart gains access to UHG’s deep clinical expertise and Medicare Advantage resources, giving it exposure to the upside of risk-based contracts without having to fully enter the complex insurance market.
- In return, Walmart’s expansive footprint provides UHG with healthcare access points all across the country, including in geographies where Optum’s own physician network isn’t active (yet).
UHG and Walmart have a clear recipe for cooking up a big impact: UnitedHealthcare covers more lives under Medicare Advantage plans than any other payor, and 90% of Americans live within 10 miles of a Walmart store. Only time will tell whether the partnership turns into a nationwide success story, but it’s hard to think of another duo that would have a better shot at pulling it off.
UnitedHealthcare made headlines at HLTH by announcing the launch of NavigateNOW, a virtual-first health plan that offers an integrated approach to providing care both virtually and in-person.
- NavigateNOW is a collaborative effort between UnitedHealth’s payor arm and its Optum subsidiary that seeks to capitalize on the industry-wide shift towards hybrid care. The virtual-first health plan is designed to provide patients with a personalized virtual care team for medical and behavioral health services with a seamless hand-off to in-person treatment if needed.
- Availability begins later this year in nine initial markets, with a goal of expanding to large employers and over 25 markets by the end of 2022. NavigateNOW offers members no copays for common services, unlimited 24/7 physician access, and reduces plan premiums by approximately 15%.
- The collaboration leverages Optum’s primary care and behavioral healthcare services, with UnitedHealthcare’s national provider network available for in-person visits. The integrated care model is designed to identify health issues earlier, encourage preventive care, and deliver services in the most appropriate setting.
It’s a strategic priority for UnitedHealth to take advantage of the overlap between Optum and UnitedHealthcare, and NavigateNOW is the first major launch in that initiative. NavigateNOW is UnitedHealth’s first virtual-first primary care plan, and combining Optum’s digital resources with a large clinical footprint gives the service strong value proposition within the digital health market.
Optum, a subsidiary of UnitedHealth, recently began selling prescription medications online directly to patients. The company also began offering telehealth services to provide prescriptions to treat depression, erectile dysfunction, and other common illnesses – directly challenging startups such as Ro and Hims that offer online access to drugs for many of the same ailments.
UnitedHealth is the most profitable US healthcare company, with net income totaling $15.8b in 2020, and Optum is its fastest growing business segment. The company has expanded far beyond its payer roots and now employs or contracts over 50k physicians.
Optum launched its online storefront in November 2020 before adding pharmacy and healthcare services in June. It’s recent redesign and cash payment options make it more friendly to digitally native consumers.
- The Strategy – More Americans are paying directly for healthcare, and by offering cash services to either uninsured or budget-constrained patients, Optum is increasing access to healthcare.
- The Real Strategy – Optum’s entrance into the direct-to-consumer world defends against rising competition from retail giants such as Amazon and Walmart, both of which have launched digital pharmacy options as membership incentives.
UnitedHealth’s largest competitive advantage is its vertical integration. It operates the largest US commercial insurance provider, a substantial pharmacy benefits manager, and is one of the biggest employers of physicians in the country. It’s recent expansion deepens this integration, while keeping patient money in-house amid a sea of new competition.