The deal, announced in January 2021, sought to bring a major provider of healthcare clinical and financial services, including the handling of claims, under UnitedHealth’s Optum health-services arm.
The Justice Department filed its lawsuit in federal court in Washington, saying Change provided key industry technologies that are relied upon by UnitedHealth’s health-insurance rivals, making it a hub for competitively sensitive information. If the deal were allowed, UnitedHealth would have access to data that it could potentially use for its own benefit, at the expense of other insurers, the department alleged.
The department also argued the deal would reduce head-to-head competition in the businesses of insurance claims transmission and review, because UnitedHealth competes with Change in those areas.
“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,” Doha Mekki, a top lawyer in the department’s antitrust division, said in a statement.
The states of Minnesota and New York also joined the suit as plaintiffs.
The lawsuit comes at a time of aggressive antitrust enforcement by the Biden administration. In recent months, the Justice Department also has challenged transactions in the airline, publishing and sugar industries. All of those cases are scheduled for trial this year.
The department and the Federal Trade Commission, which share enforcement authority, both have signaled they are paying particular attention to healthcare markets. Last week, the FTC sued to challenge the merger of two major hospital systems in Rhode Island. And in a July 2021 executive order on competition issues, President Biden called out healthcare markets, including insurance, hospital and prescription drug markets, as a major focus.
UnitedHealth said in a statement that the Justice Department’s “deeply flawed position is based on highly speculative theories that do not reflect the realities of the healthcare system. We will defend our case vigorously.” It said the two companies can “increase efficiency and reduce friction in health care, producing a better experience and lower costs.”
In describing the deal previously, UnitedHealth has said that the combined company could help improve care by getting better information to doctors and reduce waste by speeding and smoothing the healthcare payment process. It agreed to pay nearly $8 billion for Change and assume about $5 billion in debt.
Change said in a statement that it will continue its support of UnitedHealth “in working toward closing the merger as we comply with our obligations under the merger agreement.”
The combination had drawn concerns from the American Medical Association, and strong opposition from the National Community Pharmacists Association and the hospital industry, which argued that the deal would concentrate too much unique data and power in the hands of UnitedHealth and reduce or eliminate competition in some important sectors.
UnitedHealth is a healthcare behemoth, with annual revenue of about $288 billion last year. Its insurance unit, UnitedHealthcare, is the biggest American insurer, covering around 45 million people in the U.S. Optum provides an array of services, including one of the largest pharmacy-benefit managers. It also has a sprawling network of clinics, surgery centers and physician practices, with around 60,000 employed or affiliated doctors, a number expected to continue growing rapidly.
Despite its scale after years of deal making, UnitedHealth has faced only limited antitrust pushback until now. Its more recent acquisitions have often expanded its heft vertically into more segments of healthcare, and added to its provider footprint in new geographies. Many of the company’s deals also have been small enough to draw little national antitrust attention. UnitedHealth didn’t join in as other big insurers attempted to merge with one another in two major deals that both foundered in 2017 after being challenged by the Justice Department.
Change Healthcare provides services that play a little-known but key role in the complex healthcare ecosystem: It acts as a claims clearinghouse, providing an array of services related to healthcare payment processes. The company works for healthcare providers, providing analytics related to finances and billing, as well as key technology tools that help hospitals make decisions about how to care for patients.
UnitedHealth’s Optum unit, for its part, offers many similar information-technology and analytics services, creating potential overlap with Change Healthcare that spurred industry concerns about eliminating head-to-head competition.
Opponents of the deal have also focused on the unique data pool that Change Healthcare can tap, with its broad vantage point on medical decision-making and how money flows in the health system. UnitedHealth is already a dominant player in healthcare data.
An Optum executive said Thursday that the company has safeguarded data drawn from other companies in the past and would continue to do so, and would not use it to advantage UnitedHealthcare against insurance-industry rivals. The company also would offer any services and improvements that it developed to competitors of UnitedHealthcare on an equal footing with its corporate sibling, he said.
UnitedHealth had offered to divest one line of business owned by Change, ClaimsXten, which insurers use to adjudicate claims.
The American Hospital Association applauded the Justice Department’s move, saying the deal would create “a massive concentration of sensitive health care data in the hands of a single, powerful owner with an inherent conflict of interest.” The group had argued that with the deal, UnitedHealth would enhance its already-considerable data power with access to even more unique and secret information about its competitors and other healthcare players with which it might negotiate.
Before the suit, the AMA didn’t officially take a stance against the UnitedHealth acquisition of Change, but it raised similar concerns to the Justice Department about the loss of competition in health IT services and UnitedHealth’s potential data power.