The U.S. Department of Justice sued to block UnitedHealth Group's $13 billion proposed acquisition of health IT company Change Healthcare on Thursday, just three days before the healthcare companies promised to complete the deal.
Regulators wrote that UnitedHealth Group's proposed acquisition of data broker Change Healthcare would give its health insurance arm access to proprietary information on what its competitor insurers pay providers, how they construct their health plans and create a monopoly when it comes to claims clearinghouse technology, violating the federal antitrust restrictions outlined in the Clayton Act.
UnitedHealth Group disputed these claims and plans to vigorously defend its case in court, a spokesperson wrote in an email.
"Change Healthcare and Optum—together—can increase efficiency and reduce friction in healthcare, producing a better experience and lower costs," the spokesperson said. "The department's deeply flawed position is based on highly speculative theories that do not reflect the realities of the healthcare system."
Currently, Change's claims editing solution, ClaimsXten, is used by 9 of the nation's 10 largest insurers—all except UnitedHealth Group, which operates its own clearinghouse through OptumInsight—to evaluate and pay claims. UnitedHealth Group's rival product has helped drive business for Change since health plans don't want to conduct business with their competitor, the lawsuit says.
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Change is also the top resource that health insurers rely on to compete with UnitedHealth Group, a senior justice official said. By ensuring accuracy, avoiding overpayments and decreasing administrative waste, Change saves UnitedHealth Group's rivals tens of billions of dollars annually, while also reducing healthcare costs for employers and patients.
If the merger went through, United would control more than 75% of the claims editor market, and leave other insurers unable to avoid the company's grip on the market. Because Change is the leading electronic data interchange clearinghouse among providers, payers would be unable to bypass the company—even if they switched clearinghouses, as their insurance data would still flow through Change's network, according to a senior justice official.
"The proposed transaction threatens an inflection point in the healthcare industry by giving United control of a critical data highway through which about half of all Americans' health insurance claims pass each year," said Doha Mekki, principal deputy assistant attorney general of the Justice Department's Antitrust Division, in a news release. "The department's lawsuit makes clear that we will not hesitate to challenge transactions that harm competition by placing so much control of data and innovation in the hands of a single firm."
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UnitedHealth Group announced its plan to purchase Change Healthcare for $13 billion last March, with the aim of adding the company to its Optum health services and provider division. At the time they entered into the agreement, United and Change also inked a separate contract requiring United to immediately increase its purchases of Change products, ensuring that if the transaction fails to proceed, United will still pay Change about $60 million more annually than before the agreement was signed.
In the year since the deal was announced, hospital, pharmacy and antitrust advocates have spoken out against the acquisition, saying that it would ultimately create a monopoly for Change Healthcare's services and raise costs for providers, pharmacists and consumers. The American Hospital Association and National Community Pharmacists Association both said they applauded the DOJ's move to block the deal, despite proposed divestitures from UnitedHealth Group and Change Healthcare.
To appease critics and regulators, the companies teased selling certain parts of their businesses, with UnitedHealth Group saying it could divest up to $650 million worth of assets, and Change reportedly looking to offload its $1 billion payment integrity operation.
Last week, the companies said they planned to finalize the deal by this Sunday. Change Healthcare will now continue working with United to close the deal by April 5, a spokesperson wrote in an email.
"We will continue our support of UHG in working toward closing the merger as we comply with our obligations under the merger agreement," the spokesperson said.
