A federal judge unsealed his opinion on Wednesday in the case that allows UnitedHealth Group to buy Change Healthcare in a $13 billion deal that expands the healthcare giant’s reach in the sector.
Judge Carl Nichols said each step of the DOJ’s arguments had “serious flaws” and that it relied on “speculation” rather than real-world evidence to prove its antitrust claims.
The most serious flaws were failing to prove that UnitedHealth is likely to misuse Change Healthcare’s data to advantage the company, a move that would ultimately chill innovation among rivals, Nichols, a former President Donald Trump appointee, said.
The 58-page document details Nichols’ reasoning behind his Monday order that ruled against the Department of Justice’s bid to block the deal from moving forward over antitrust concerns that it would harm patients and UnitedHealth’s rivals.
Nichols’ opinion was initially placed under seal to protect potentially competitively sensitive information. A redacted version was later made available on the public docket, explaining Nichols rationale for siding with UnitedHealth.
After a thorough trial that lasted more than two weeks, included more than two dozen witnesses and tallied more than 1,000 exhibits, the DOJ failed to prove the transaction is likely to substantially lessen competition, Nichols said in his opinion.
Healthcare providers use Change’s technology to submit claims to health insurers, who also use the technology to evaluate and process these claims. The DOJ sued to stop the purchase in February.
The case hinged on how the acquisition would affect two technologies that are vital to processing payments for medical services.
In one of its claims, the DOJ argued UnitedHealth’s purchase of Change Healthcare would create a monopoly of what’s known as first-pass claims editing solutions. The technology allows insurers to process millions of claims per day by applying a payer’s coverage policies or “edits” to a claim, quickly determining whether it should be covered.
Change Healthcare’s technology, ClaimsXten, controls nearly 70% of the market for first-pass claims editing.
The DOJ argued the combination with UnitedHealth would unite the two leaders of the space, giving the pair a 90% market share and eliminate head-to-head competitors.
To alleviate regulatory concerns, UnitedHealth agreed to divest ClaimsXten to a private equity group TPG Capital.
But the DOJ argued that ClaimsXten would be less competitive if purchased by TPG.
Nichols disagreed. The divestiture will maintain and may even improve the firm’s “competitive edge,” Nichols said. A key executive and 375 other people will continue working with ClaimsXten as part of the divestiture, he added.
In its second argument, the DOJ claimed the acquisition would give UnitedHealth access to competitively sensitive data that passes through Change and that UnitedHealth would misuse it by mining rival insurers’ strategies and practices.
But this claim rests on “speculation rather than real-world evidence,” Nichols said. He was swayed by “convincing testimony” from senior UnitedHealth executives who said it would be against the company’s practices — and risk its credibility — to share Optum’s client data to advantage the payer arm of the business, UnitedHealthcare.
The evidence produced at trial shows that “for it to be likely that the proposed acquisition would substantially lessen competition, United would have to uproot its entire business strategy and corporate culture; intentionally violate or repeal longstanding firewall policies; flout existing contractual commitments; and sacrifice significant financial and reputational interests,” Nichols said.