Change Healthcare is reportedly considering selling its $1 billion payment integrity business as a way to convince regulators to green-light its $13 billion merger with UnitedHealth Group.
The data analytics company is working with advisers to sell its ClaimsXten business, according to Bloomberg. ClaimsXten represents just one portion of Change Healthcare's payment integrity arm and, given the figures noted by Bloomberg, the company may be considering additional services, such as its coding adviser, audit and recovery units, according to an analyst report from Credit Suisse. Potential buyers could include payment integrity company Cotiviti, repricer MultiPlan or fintech Zelis Healthcare, the report said.
Change Healthcare and UnitedHealth Group both declined to comment on the reported asset sale.
"If Change Healthcare and UnitedHealth Group are indeed exploring these divestitures, it likely indicates the discussions are moving in the right direction," Credit Suisse analysts wrote.
UnitedHealth Group announced last year that its fastest-growing subsidiary, Optum, would pay $13 billion to acquire Change. The nation's largest insurer had initially aimed to complete the deal last September, although now both companies have promised regulators not to finish the transaction before Feb. 22. UnitedHealth Group has pushed its internal deadline for closing the acquisition to April 5.
A Change Healthcare SEC filing last year noted that the companies may sell assets if required for antitrust approval, although divestitures worth more than $650 million for UnitedHealth Group would represent a "burdensome condition" for the health giant.
And even with Change Healthcare's reported divestiture, there's no guarantee that regulators will be satisfied with the transaction. The proposed deal has attracted opposition from hospitals and pharmacists, which claim the merger would reduce competition in health IT services for providers, undercut independent pharmacists on price and increase healthcare costs for consumers. The American Hospital Association has accused the companies of already selling off millions of dollars in assets to ward off scrutiny from antitrust regulators–who are also skeptical of the proposal.
Last summer, reports surfaced that the U.S. Department of Justice was considering a lawsuit to block the sale. The DOJ did not respond to an interview request about a possible injunction, or about how Change Healthcare's asset sale could influence its decision about the merger. But the agency has been hinting at greater scrutiny of these megadeals.
On Jan. 24, the Justice Department's new antitrust chief said he intends to review prospective mergers with an eye toward denials, rather than allowing companies like Change Healthcare to carve out specific segments of their business.
Concentration of a few companies has increased in more than 75% of U.S. industries, including healthcare, Jonathan Kanter, assistant attorney general for the antitrust division, told the New York State Bar Association on Jan. 24. This trend is only accelerating, Kanter said, noting that the number of pre-merger notifications the Justice Department received in 2021 reached an all-time record high last year of 3,500.
"I am concerned that merger remedies short of blocking a transaction too often miss the mark," Kanter said. "Complex settlements, whether behavioral or structural, suffer from significant deficiencies. Therefore, in my view, when the division concludes that a merger is likely to lessen competition, in most situations we should seek a simple injunction to block the transaction."
On Jan. 24, the Justice Department announced a new initiative aimed at helping other federal agencies win cases targeting industry-specific, anti-competitive conduct. Last week, the DOJ and Federal Trade Commission also asked for public input on how to bolster merger oversight, particularly for vertical deals, such as UnitedHealth Group's acquisition of Change Healthcare.
"Settlements do not move the law forward," Kanter said. "We need new published opinions from courts that apply the law in modern markets in order to provide clarity to businesses. This requires litigation that sets the boundaries of the law as applied to current markets, and we need to be willing to take risks and ask the courts to reconsider the application of old precedents to those markets."
