Regulators put UnitedHealth-Change Healthcare Merger on Life Support

The Department of Justice’s antitrust enforcers have set their sights on yet another deal: this time UnitedHealth Group’s $13 billion acquisition of Change Healthcare, Inc. Announced back in January 2021, the healthcare services companies’ union was touted as a boon for consumers that would “effectively connect and simplify core clinical, administrative and payment processes – resulting in better health outcomes and experiences for everyone, at lower cost.” 

Structured as an all-cash reverse triangular merger, the deal aimed to combine Change Healthcare with United Health’s OptumInsight segment, in order “to provide software and data analytics, technology-enabled services and research, advisory and revenue cycle management offerings to help make health care work better for everyone.”

This follows the current trend in the healthcare industry: an aggressive focus on technology. In one of the many ramifications of the covid-19 pandemic, healthcare companies have turned to technology to streamline their processes and more efficiently provide their services – in everything from bill collection to telehealth (the percentage of consultations that were carried out remotely surged from 0.1% to 43.5% during the lockdowns of 2020). The pandemic brought to the forefront many of the healthcare system’s antiquated processes as hospitals struggled to keep up with demand, administrators faced severe staff shortages, and providers abruptly switched to telehealth as patients “sheltered in place.” 

The Healthcare Information and Management Systems Society’s survey found that 80% of healthcare providers will increase their investments in technology during the coming five years. Not only have technology companies flocked to the space, but traditional healthcare companies have likewise shifted their focus to digital solutions to the woes they faced. 

By combining the technologies of the two companies, the UnitedHealth-Change Healthcare merger was expected to simplify the complex administration of healthcare services. The companies publicized this new streamlined system as promising to both reduce costs and improve healthcare because it would “help clinicians make the most informed and clinically advanced patient care decisions, more quickly and easily.”

But the Department of Justice has filed suit to block the deal. Politics have shifted markedly since the deal was announced over a year ago. Since taking office mere weeks after the deal was announced, President Biden has vowed further antitrust actions, blaming rising prices in healthcare and other area of the economy on a lack of competition. His Administration has followed through by appointing enforcement-minded individuals to head the Federal Trade Commission and the Justice Department’s Antitrust Division. 

The DOJ claims that the deal will enable healthcare giant UnitedHealth to trample competitors, arguing that “[u]nless 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.” UnitedHealth’s insurance segment is the largest insurer in the U.S. The company has been acquisitive over the past few years but has never encountered significant regulatory pushback until now. 

According to Matterhorn’s comprehensive M&A database, which harnesses AI to track current and historical deals, Change Healthcare was advised by law firm Simpson Thacher & Bartlett LLP and financial advisor Goldman Sachs. UnitedHealth was advised by law firm Sullivan & Cromwell and financial advisor Bank of America.