Data did not drive acquisition of Change, UnitedHealth says

Photo: Courtesy of UnitedHealthcare

Unsealed briefs in the Department of Justice's case against the UnitedHealth Group and Change Healthcare merger solidify arguments on both sides in the antitrust case.

Federal Judge Carl Nichols grilled the Justice Department on Thursday over its claim that UnitedHealth Group's $13 billion acquisition of Change would suppress competition, according to The Wall Street Journal.

Nichols is expected to release a decision as early as this month but before the end of October.

The basis of the DOJ's case centers on the competitively sensitive data UnitedHealth would gain from its rivals through the acquisition uniting UHG subsidiary OptumInsight and Change, a healthcare technology company.

UnitedHealth argued it would not access this information due to firewalls within the company. It has incentives to protect other payers' data since Optum is a multipayer company, UnitedHealth said. While $92 billion of Optum's revenue came from internal revenue in 2021, $63 billion was from external revenue.

"These two organizations are [at] strictly [an] arm's length relationship," former UnitedHealth Group CEO David Wichmann said of UnitedHealthcare and Optum during last month's trial, according to court documents. Optum works with UHC as a customer, he said, "very similar to the way" Optum works with its other commercial customers.

Current UnitedHealth Group CEO Andrew Witty testified, "So again, first of all, that would be against the tone, the culture, the rules, everything we stand for in the organization. . . . And so I would absolutely not expect that to happen. And again, I would say if it ever did, it would be hugely destructive, not just to our reputation but to our economic interest, because customers are not going to come back to an organization that abuses their data in that way."

But it could happen, the DOJ argued. Once combined, there would be nothing to stop that data sharing, which to the DOJ's argument, represents an illegal merger.

No "firewall," "policy," "commitment" or "culture" would prevent United from using the data rights that it would acquire from Change to benefit itself, to the detriment of competition, the DOJ said in court documents.

The merger would combine UnitedHealth Group, one of the largest companies in the United States and the owner of the nation's largest health insurer, and Change Healthcare, the nation's largest electronic data interchange (EDI) clearinghouse, the DOJ said. Today, Change is independent and has no economic incentives to favor any insurer. 

"By acquiring Change, United would gain control of this critical infrastructure, giving it a long-term proprietary advantage that would distort competition among health insurers for years to come," the DOJ said. 

"In a trial where many facts were disputed, there should be no dispute that United is a profit-maximizing enterprise that will use Change's data assets as much as it possibly can to maximize profits and attempt to justify Change's $13 billion purchase price," the DOJ said in court documents. "This showing is sufficient to establish that the merger is likely to harm competition."

That "things might change" is not a cognizable theory of antitrust harm, UnitedHealth countered. 

UnitedHealth on September 7 asked judgment to be entered for UHG and requested that the divestiture of ClaimsXten to TPG be ordered. 

The DOJ concluded that because the effect of the transaction "may be substantially to lessen competition" and would "tend to create a monopoly," it requested the court order an injunction of the proposed transaction. 

WHY THIS MATTERS

Central to alleviating anti-competitive concerns, UnitedHealth announced in April that it would sell Change's claims editing business, ClaimsXten, to TPG Capital. 

Divestiture does not solve the illegality of the merger, the DOJ said. As a buyer, TPG is incapable of "replac[ing] the competitive intensity" that exists today between United and Change, it said in court documents.

Founded in 1996, Change merged with McKesson Corp.'s Technology Solutions division in 2017. Change currently sells four claims editing solutions: ClaimCheck, ClaimsXten, ClaimsXten Select and ClaimsXten Cloud. All four products are included in the divestiture package.

Once the merger is final, Carolyn Wukitch, Change's SVP and GM, Network and Financial Management, would continue to run ClaimsXten as the business' CEO. More than 50% of Wukitch's compensation would be based on ClaimsXten's performance, court records said.

TPG was first approached about acquiring ClaimsXten in January 2022 and spent more than $10 million on outside consultants (on the "high side" court documents said) to determine the financial viability of the market, its growth and whether the business could be separated from its parent without issues.

TPG will put $1.2 billion of equity into the acquisition, and the remaining $1 billion will be debt financed. 

DATA AND VISION

"United wants to buy Change because of its position at the center of the healthcare ecosystem," the DOJ said in court documents. "Data is the future of healthcare."

The DOJ said, "After the merger, United would have both the ability and a powerful incentive to use data about its rivals to glean competitively sensitive insights that it could deploy to its advantage and to the detriment of its rivals."

United argued that the DOJ did not introduce evidence of a single instance in which OptumInsight – or OptumRx or OptumHealth – has misused external payer data for the benefit of UHC. 

The DOJ also failed to identify a single instance in which OptumInsight used the data in its possession to derive "a specific rival's negotiated rates," "a specific rival's product network design," or "a specific rival's claims edits" and provide that information to UHC based on the multipayer claims data already in its possession.

Optum already receives extensive claims data from external payer customers, UnitedHealth said in court documents. This includes prospective claims data and retrospective claims data.

Other companies have firewalls. For example, CVS Health – which owns Aetna and CVS Caremark, a PBM – has a corporate firewall policy that prohibits sensitive information from one line of business from being shared with another line of business, UnitedHealth argued. 

"Data did not, however, drive the transaction," UnitedHealth said.

The primary purpose of the Change transaction is to minimize the amount of friction between payers and providers, UHG said. The transaction is aimed at addressing the more than $100 billion in administrative waste in the U.S. healthcare system due to inaccuracies in the claims payment system. 

Change's suite of pre- and post-pay payment integrity offerings, broad portfolio of risk and quality solutions and end-to-end collection of revenue cycle technology and services complement Optum's current offerings and enable the transformation envisioned by the company, UnitedHealth said.

Payers would see lower administrative costs from fewer errant claims and increased payment accuracy and providers would realize fewer denials, UnitedHealth said. 

Combining the payment portfolios of Change and Optum would also allow for "the ability to enable the patient at the point of service to be able to know what their obligation is right at the doctor's office, and to do that relatively quickly," court documents said. 

UHG said it sees the integration of Change's and Optum's capabilities as helping the development of its Transparent Network – a nascent "next-generation platform" to align interests and accuracy among payers and doctors.

THE LARGER TREND

On January 6, 2021, UHG announced its agreement to acquire Change for $25.75 per share. 

The American Hospital Association raised antitrust concerns with the DOJ, which in February sued to block the deal.

UnitedHealthcare accounts for between 15.9% and 21.4% of the commercial health insurance market; Anthem for between 10.8% and 13.8%; Aetna for between 10.3% and 16.8%; Cigna for between 8.4% and 10.2%; and Health Care Service Corp. for between 7.7% and 10.5%, according to court documents.

Twitter: @SusanJMorse
Email the writer: SMorse@himss.org