UPDATE: Feb. 22, 2021: The Department of Justice has until Feb. 27 to sue to block UnitedHealth Group's controversial acquisition of health IT company Change Healthcare, according to an 8-K filing.
UnitedHealth and Change originally agreed with antitrust regulators to not consummate the deal, which would result in a massive tie-up of hospital health IT service providers, until Feb. 22. Under the terms of that agreement, the companies said they would give the DOJ 10 days notice before completing the merger, during which the DOJ could launch a lawsuit to stop it — a process the department has reportedly already begun.
On Feb. 17, UnitedHealth and Change gave the DOJ that 10-day notice, per the 8-K.
- The Department of Justice is preparing a lawsuit to block UnitedHealth from purchasing Change Healthcare, according to a new report, as regulators take a more aggressive stance on checking consolidation in the healthcare industry.
- According to Dealreporter, which cited sources familiar with the matter, UnitedHealth and Change are expected to meet with the DOJ soon for a "last rites" meeting on the proposed deal, first announced early last year. Despite UnitedHealth and Change exploring divestitures to assuage antitrust concerns, the DOJ has not found any that would make the deal acceptable, according to Dealreporter's sourcing.
- The tie-up, which would bring Change Healthcare, a provider of health IT services, under the umbrella of UnitedHealth's health services division, Optum, has been controversial from the start, facing fierce opposition from hospital and pharmacy groups.
Minnesota-based UnitedHealth's proposed acquisition of Change has been mired in regulatory limbo since the DOJ first opened its investigation into the deal in March last year, two months after it was first announced. The transaction for $8 billion in cash and $5 billion in debt was originally expected to close in 2021, but UnitedHealth and Change stretched the timeline in order to meet regulators' requests.
That timing agreement between the companies and federal regulators is set to expire Tuesday.
In December, UnitedHealth pushed back the deadline to complete the deal to April 5 to give it more time to gain regulatory approval. One month prior, the companies agreed to not complete the transaction before Feb. 22.
If the DOJ sues the deal in court, it will be a huge win for hospitals and pharmacists, which quickly opposed the tie-up between UnitedHealth — already a market leader in health IT services to hospitals, and the owner of the biggest private health insurer in the U.S. — and Change, which currently stands as a major competitor to Optum in health IT and revenue cycle management services.
After the deal was announced last January, antitrust watchdogs and trade groups including the American Hospital Association and the National Community Pharmacists Association raised anticompetitive concerns, with the AHA even directly requesting the DOJ to give it a stringent review.
AHA said UnitedHealth might have an incentive to block access of competing insurers to Change's services, that the acquisition would result in less health IT competition in the market and that it would consolidate a massive amount of health data under UnitedHealth, which could distort decisions about patient care, claims processing and denials.
Reports first swirled in August that the DOJ was considering a suit to block Change's sale as it evaluates whether UnitedHealth might have incentive to block access of competing payers to Change's services.
UnitedHealth and Change have said they're open to asset sales to earn regulatory approval. Bloomberg reported in late January that Change was working with advisers on a potential divestiture of its payment integrity business, ClaimsXten.
But it appears those actions may not be enough to win over regulators.
The government has been more active on antitrust cases of late, following criticisms that the DOJ and Federal Trade Commission aren't doing enough to stifle anticompetitive practices and deals. The FTC has said it might even begin unwinding combinations even after the companies consummate the deal, due to a merger backlog.
Regulators have pledged to prioritizing healthcare enforcement over the next decade, and have already begun taking legal action to stop proposed deals in the industry. In June, the DOJ sued to block Aon's proposed acquisition of Willis Towers Watson for $30 billion, resulting in the two insurance brokers terminating the deal in late July.
The Dealreporter report comes just days after Lockheed canceled its $4.4 billion acquisition of Aerojet Rocketdyne, after the FTC in January voted to file a lawsuit to block the transaction.
Antitrust experts expected the DOJ to challenge the UnitedHealth-Change deal, given this rising aggression among antitrust enforcers. However, the companies have said they remain bullish on the tie-up despite the regulatory hurdles, and have stressed that the operations of payer UnitedHealthcare and Change will be kept separate.
UnitedHealth did not respond to a request for comment on a potential DOJ suit by time of publication.