Change Healthcare $2B sale could accelerate UnitedHealth Group’s M&A plans

The news: Change Healthcare is in advanced talks to sell its payment integrity business (ClaimsXten) for more than $2 billion, per Bloomberg.

  • ClaimsXten automates claim reviews and medical code auditing to help insurers provide accurate reimbursement to physicians.
  • The sale will only occur if UnitedHealth Group’s (UHG) analytics arm, Optum, completes its acquisition of Change Healthcare this year.

How we got here: The DOJ has blocked the UHG-Change Healthcare deal over anti-competitive concerns.

In January 2021, UHG’s Optum revealed plans to buy health IT company Change Healthcare in a megadeal valued at $8 billion.

  • Shortly after, the American Hospital Association (AHA) urged the DOJ to investigate the agreement due to competition and reimbursement concerns.
  • The AHA said Optum would have “strong financial incentives to use competitive payers’ data to inform its reimbursement rates.” That would harm hospitals and providers.
  • In February of this year, the DOJ responded to the AHA’s concerns by filing a civil lawsuit to block the merger.
  • UHG agreed to postpone the Change Healthcare deal to the end of 2022.

The problem: The DOJ says the Change-Optum deal would give UHG a monopoly over healthcare data and stifle innovation in the health IT market.

If combined, Optum and Change Healthcare could become a healthcare analytics giant.

  • Change Healthcare processes over $1.5 trillion in healthcare claims annually.
  • That’s over 33% of all US patient records.
  • Optum’s footprint already includes 250 health plans and 100,000 US providers, per UHG. For comparison, insurer and provider network Kaiser Permanente only employs 9,000 physicians, per its website.

The big takeaway: The DOJ could back off if UHG agrees to sell Change’s payment business post-merger, though.

  • ClaimsXten is a large revenue driver for Change, and integrating it into UHG’s business would make it an even bigger competitive threat to rivals like Cigna and Humana.
  • In fact, ClaimsXten brings in $150 million in revenues annually for Change Healthcare.
  • So, selling off the payments business could help convince the DOJ to halt its probe and let UHG complete its Optum-Change deal before the end of this year.