Suit Warns of 'Anti-competitive Effects' in Proposed United, Change Healthcare Merger

The DoJ and AGs from New York and Minnesota are hoping to block the proposed acquistion, fearing it will raise costs for consumers.

Venture capitalist Elad Verbin has said, "He who controls the algorithm controls the future." They who control the data behind the algorithm run a close second. Regulators eyeing UnitedHealth Group's (UHG) planned acquisition of Change Healthcare know that. Now, after months of reviewing the $8 billion proposed deal, the U.S. Department of Justice (DOJ)—joined by New York and Minnesota—have sued to block it. The suit claims that the merger would allow UHG to expand its already substantial power, while hobbling competitors, and creating monopolies in multiple markets.

The suit and its claims

In their suit, the DOJ and two State Attorneys General (AG) outline the "anti-competitive effects" of the proposed merger: that it would give UHG unprecedented access to competitor claims data while limiting rivals' access to the claims-editing capabilities that Change Healthcare (Change) provides and/or increasing the costs for those services.

The suit alleges that these factors would help United create a monopoly in three markets: first-pass claims editing, national commercial health insurance accounts, and large-group employer accounts. UHG is the leading provider of claims-editing solutions, second only to Change and its ClaimsXten product.

The suit continues that having access to competitors' proprietary claims-editing would give UHG "the ability to disadvantage its rivals, including by mimicking their innovative policies to make their rivals' healthcare plans less attractive to customers"—adding that "[a]n insurer's custom edits also provide a roadmap to its health plan and reimbursement policies and its risk allocation methodologies."

Concerning electronic data interchange (EDI), the DOJ and AGs note: "Through ownership of Change's EDI pipes, … United would have access and the right to use the claims data of health insurer rivals." The suit suggests that UHG could take the artificial intelligence and machine learning (AI/ML) capabilities that it already applies to its own claims data to that of its competitors.

Anti-trust breeds mistrust

Additionally, and without equivocation, the suit expresses little confidence that UHG would create firewalls for its competitors' data and claims-editing intelligence. "Efforts to cordon off a health insurance rival's competitively sensitive information obtained from Change's EDI clearinghouse and first-pass claims editing solutions through information firewalls would be insufficient to protect against the risk of United accessing and using this information." The suit adds: "This is especially true given … United's longstanding interest in acquiring this competitively sensitive data" and the permeable boundaries between Optum, UHG, and UnitedHealthcare that allow senior executives to move frequently across the companies and engage in "enterprise-wide planning."

In the announcement that New York would join the DOJ's action, State Attorney General Letitia James commented: "New Yorkers need affordable healthcare, not health insurance companies primarily concerned with market dominance."

Strong support from the AHA

Following the DOJ's announcement, the American Hospital Association (AHA) voiced its support. "Challenging this proposed combination was the right thing to do to prevent untold competitive harm for patients and health care providers," noted Melinda Hatton, vice president and general counsel, in the organization's statement. In adding that the UHG-Change merger "would have permitted a massive concentration of sensitive health care data in the hands of a single, powerful owner with an inherent conflict of interest," the AHA continued its ongoing opposition to the deal.

Following the UHG-Change announcement in January 2021, the AHA requested that the DOJ investigate the merger. Following its March 2021 letter, the DOJ requested additional information, which began multiple changes to the merger finalization. Another AHA letter, this one in August 2021, added that "it is highly unlikely that any remedy will preserve the substantial level of competition between the parties."

No remedy in sight

One of the bases for any anti-trust suit is that there are insufficient remedies to prevent a resulting monopoly in impacted markets. Two remedies for the UHG-Change merger would require that another first-claims pass company and/or EDI clearinghouse be able to effectively complete with OptumInsight's new combined company. The suit notes the "high barriers to entry, such as technical capabilities … [and] the resources needed" to create comparable, affordable access to competitor data and claims editing.

Another remedy could have been Change's proposed $1 billion sale of ClaimsXten. The DOJ acknowledges this strategy but concludes overall no remedy is sufficient: "United has proposed divesting Change's ClaimsXten business in an attempt to remedy the anticompetitive effects of this merger. Change has had some discussions with potential buyers but has not entered into a purchase agreement. Defendants have not proposed any remedy that would preserve competition and prevent the anticompetitive effects of this merger."

Awaiting response

Collectively, the DOJ, New York, and Minnesota AGs summarize the merger impact as follows: "United would be in a position to identify and poach profitable innovations in plan design, benefits, provider network design, reimbursement design, and coverage terms from its competitors without bearing the cost and development risks. Faced with this prospect, health insurer rivals would forgo innovation rather than subsidize United in competition against them."

Related: Justice Department, AGs Sue to Block UnitedHealth Group's Acquisition of Change Healthcare