The Department of Justice filed a lawsuit against UnitedHealth Group on Thursday to protest its planned acquisition of Change Healthcare on the grounds that the two joining will hurt competition in commercial health markets. Further, the DOJ claimed the deal, if allowed to go through, will harm the market for technology, which insurers rely on both to process claims as well as to lower the cots of healthcare, according to the suit.
The companies initially announced the merger in January 2021 in a deal valued at $13 billion. In March of that year, the DOJ opened an investigation. Later in November, UnitedHealth and Change said they met the requirements of the DOJ investigation and had agreed to postpone the merger until February 22 unless the DOJ closed its investigation. Change Healthcare stated last week that the merger would close on February 27 unless the DOJ took action, and indeed it did.
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“If America’s largest health insurer is permitted to acquire a major rival for critical health care claims technologies, it will undermine competition for health insurance and stifle innovation in the employer health insurance markets,” said Attorney General Merrick B. Garland in a news release announcing the lawsuit. “The Justice Department is committed to challenging anticompetitive mergers, particularly those at the intersection of health care and data.”
The complaint includes several reasons to block the merger. First, the DOJ argues that allowing the merger would provide UnitedHealth Group to access an unfair amount of its competitors’ sensitive data, giving it an undue advantage. This data could effectively wipe out the only major rival for UnitedHealth Group in first-pass claims editing technology.
Specifically, the suit stated:
United’s proposed acquisition of Change also would eliminate significant head-to-head competition between United and Change to supply first-pass claims editing solutions, which are software and services health insurers use to help adjudicate claims. Today, United and Change compete to supply first-pass claims editing solutions to health insurers.
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Principal Deputy Assistant Attorney General Doha Mekki of the Justice Department’s Antitrust Division painted an even more dire picture of what would happen should the two be allowed to merge.
“The proposed transaction threatens an inflection point in the health care industry by giving United control of a critical data highway through which about half of all Americans’ health insurance claims pass each year,” said Principal Deputy Assistant Attorney General Doha Mekki of the Justice Department’s Antitrust Division in the suit. “Unless the deal is blocked, United stands to see and potentially use its health insurance rivals’ competitively sensitive information for its own business purposes and control these competitors’ access to innovations in vital health care technology. 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.”
The DOJ alleges in the lawsuit that since Change is marketed as a valuable partner to insurers, if acquired by UnitedHealth, it would no longer be a neutral party in the market. UnitedHealth has stated its intent to blend its Optum subsidiary with Change, should the acquisition go through as intended at the end of the month.
Change and UnitedHealth stated last week the deal would be expected to finalize on February 27, prompting the DOJ to take action. A Change Healthcare spokesperson provided this statement in an email:
“We are aware and disappointed that DOJ has filed litigation to prevent Change Healthcare from closing our merger with UHG. As we previously disclosed, UHG extended our merger agreement through April 5, 2022. We will continue our support of UHG in working toward closing the merger as we comply with our obligations under the merger agreement.”
Optum, the data analytics and health services subsidiary of UnitedHealth Group, struck a more defiant tone in a statement sent by a spokesperson.
“Change Healthcare and Optum together can increase efficiency and reduce friction in health care, producing a better experience and lower costs. The Department’s deeply flawed position is based on highly speculative theories that do not reflect the realities of the health care system. We will defend our case vigorously.”
Photo: AndreyPopov, Getty Images
Update: This post has been updated with comment from Change Healthcare.
