UnitedHealth's Optum to buy Change Healthcare in $13B deal
- UnitedHealth Group's Optum unit is buying Change Healthcare for $7.8 billion in cash plus $5 billion in debt in a deal that is expected to close in the second half of the year, the two companies said Wednesday.
- The companies said the deal is aimed at simplifying certain processes in payments, administrative and clinical services. Change Healthcare is a technology company that sells an array of services, including consulting, software, claims processing and data analytics.
- Change Healthcare's CEO Neil de Crescenzo will become CEO of OptumInsight after the deal closes and will lead the combined companies.
The move consolidates Optum's dominance in the healthcare data analytics space. The UnitedHealth venture, which also includes a PBM and doctors' unit, has been a consistent driver of revenue for the biggest private insurer in recent years.
Analysts with SVB Leerink characterized the move as a "logical strategic tie-up" as Change and Optum have complementary and overlapping businesses, per a note released Wednesday.
"We believe the crux of the deal logic is based on [Change Healthcare's] deep relationships with providers and its ability to enhance OptumInsight’s client relationships," SVB Leerink analysts said.
The overall goal is to leverage the significant amount of data these two companies control to help clinicians improve care and ultimately lower costs.
Crescenzo has said that Change Healthcare has 30,000 customers and processes $2 trillion worth of healthcare claims every year in the U.S, giving the company significant insight into the country's health system.
In 2019, UnitedHealthcare and Optum processed a $1 trillion in gross billed charges and managed more than $250 billion in healthcare spending for clients.
The window into Change Healthcare's data is key for OptumInsight and its initiatives "which depend heavily on data to more effectively manage care, and by extension, to help providers transition toward value-based care (a core competency of OptumInsight)," SVB Leerink analysts said.
Change Healthcare went public in 2019. It was founded in 2017 and previously part of a joint venture with McKesson.
Optum said it will acquire Change for $25.75 per share, and Change has 304,452,260 in outstanding shares, according to its latest 10-Q filing. Change's shares closed Tuesday at $18.24 — making the payment a 41% premium.
Change's shares ended the day up about 30%.
UnitedHealth Group said the deal will add to its net and adjusted earnings per share by about $0.20 and $0.50 respectively in 2022.
The acquisition bolsters the industry giant as a threat to more than just one sector of the industry.
UnitedHealth Group has executed on a series of deals over the years to bolster its Optum business, which is divided into three units: OptumInsight, OptumRx and OptumHealth.
More recently, other insurance competitors have gobbled up pharmacy benefit managers as a means to vertical integration, giving health plans more control and visibility into more than just a member's medical spend but their pharmacy spend as well.
UnitedHealthGroup was already on that path years prior. More recently, it has purchased medical groups in 2017, including Davita Medical Group and Surgical Care Affiliates.