Data did not lead to Change acquisition, says UnitedHealth


Photo: Courtesy of UnitedHealthcare

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

Federal Judge Carl Nichols questioned 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 make a decision as early as this month but before the end of October.

The basis of the DOJ case centers on the competitively sensitive data that UnitedHealth would obtain from rivals through the acquisition of UHG subsidiary OptumInsight and Change, a health technology company.

UnitedHealth argued that it would not access this information due to firewalls within the company. It has incentives to protect other payers’ data because Optum is a multi-payer company, UnitedHealth said. While $92 billion of Optum’s revenue came from internal revenue in 2021, $63 billion came 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 client, he said, “very similar to how” Optum works with its other clients.

Current UnitedHealth Group CEO Andrew Witty testified, “So first of all, it would be against the tone, the culture, the rules, everything that we represent in the organization… And so I absolutely would not expect that to happen, and again I would say that if it ever did, it would be extremely destructive, not only to our reputation but also to our economic interests, because customers will not return to an organization that abuses their data in this way.

But it could happen, the DOJ argued. Once combined, nothing would prevent this sharing of data, which the DOJ argues represents an illegal merger.

No “firewall”, “policy”, “commitment” or “culture” would prevent United from using the rights to the data it acquires from Change for its own benefit, to the detriment of competition, said the DOJ in court documents.

The merger would combine UnitedHealth Group, one of the largest companies in the United States and owner of the largest health insurer in the country, and Change Healthcare, the largest electronic data interchange (EDI) center in the country, said the DOJ. Today, Change is independent and has no economic incentive to favor an insurer.

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

“In a lawsuit where many facts have been disputed, there should be no doubt that United is a profit maximizing company that will use Change’s data assets as much as possible to maximize profits and attempt to justify the $13 billion purchase price of Exchange,” the DOJ said in court documents. “This demonstration is sufficient to establish that the merger is likely to harm competition.”

That “things could change” is not a known theory of antitrust harm, UnitedHealth countered.

On September 7, UnitedHealth filed for judgment for UHG and requested that ClaimsXten’s divestiture to TPG be ordered.

The DOJ concluded that because the effect of the transaction “could substantially lessen competition” and “would tend to create a monopoly”, it asked the court to order an injunction of the proposed transaction.

WHY IT’S IMPORTANT

Central to alleviating anticompetitive concerns, UnitedHealth announced in April that it would sell Change’s claims publishing business, ClaimsXten, to TPG Capital.

The divestiture does not resolve the illegality of the merger, the DOJ said. As a purchaser, TPG is unable to “replace[ing] the competitive intensity” that exists today between United and Change, he said in court documents.

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

Once the merger is finalized, Carolyn Wukitch, Senior Vice President and General Manager, Network and Financial Management at Exchange, would continue to lead ClaimsXten as CEO of the business. More than 50% of Wukitch’s compensation is based on ClaimsXten’s performance, according to court records.

TPG was first approached to acquire ClaimsXten in January 2022 and spent more than $10 million on outside consultants (on the “high” side, according to court documents) to determine the financial viability of the market, its growth and whether the company could be separated from its parent without problem.

TPG will invest $1.2 billion of equity in 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: “Post-merger, United would have both the ability and a powerful incentive to use data on its rivals to glean competitively sensitive information which it could deploy to its advantage and detriment. of his rivals.”

United argued that the DOJ had not presented evidence of a single instance in which OptumInsight — or OptumRx or OptumHealth — misused external payer data to benefit CSU.

Nor has the DOJ identified a single instance in which OptumInsight used data in its possession to derive “a specific rival’s negotiated rates”, “a specific rival’s product network design” or ” changes to a specific rival’s claims” and provide such information to UHC based on the multi-payer claims data already in its possession.

Optum already receives extensive claims data from external paying customers, UnitedHealth said in court documents. This includes prospective claims data and historical 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 being shared with another line of business, argued UnitedHealth.

“However, the data did not lead to the transaction,” UnitedHealth said.

The primary goal of the Change transaction is to minimize friction between payers and providers, UHG said. The transaction aims to address more than $100 billion in administrative waste in the US healthcare system due to inaccuracies in the claims payment system.

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

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

The combination of Change and Optum’s payment wallets would also enable “the ability to allow the patient at the point of care to know what their obligation is at the doctor’s office, and to do so relatively quickly,” according to court documents. .

UHG said it sees the integration of Change and Optum’s capabilities as helping to grow its transparent network — an emerging “next-generation platform” to align interests and precision between payers and payers. doctors.

THE GREAT TREND

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

The American Hospital Association raised its antitrust concerns with the DOJ, which in February filed a lawsuit to block the deal.

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

Twitter: @SusanJMorse
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