Questioning the motives behind UnitedHealth Group (UHG)’s acquisition of Change Healthcare

https://mailchi.mp/4b683d764cf3/the-weekly-gist-november-18-2022?e=d1e747d2d8

UHG closed its $13B acquisition of data analytics company Change in early October, just weeks after the Justice Department failed in its bid to block the sale on antitrust grounds. In court proceedings, UHG denied it intended to use Change data to give its insurance arm, UnitedHealthcare, a competitive advantage against the rival insurers who use Change as an electronic data interchange clearinghouse.

But a new ProPublica report highlights how communications between UHG and consulting firm McKinsey & Co. point to this potential data advantage as one of the clear upsides from acquiring Change. The McKinsey report was explicitly dismissed by the US District Court judge who, in his ruling in UHG’s favor, was persuaded by testimony from senior executives and evidence of UHG’s history of maintaining internal data firewalls.

The Gist: UHG has a longstanding business interest in maintaining the trust of rival insurers that use its data analytics unit, OptumInsight. Voluntary and internally imposed firewalls between the UHG’s insurance arm and its other businesses are key to maintaining this trust. Although Justice Department lawyers could not provide convincing evidence that UHG has or intends to breach its firewalls, there is still reason to monitor any such activity closely. 

The failure of the McKinsey report to sway the court against the deal illustrates how difficult it is for the Justice Department to challenge vertical mergers, even when there is compelling evidence that such deals may impact competition.

Judge allows United Healthcare Group (UHG’s) Acquisition of Change Healthcare to move forward

https://mailchi.mp/e60a8f8b8fee/the-weekly-gist-september-23-2022?e=d1e747d2d8

On Monday, a federal judge denied the Department of Justice (DOJ)’s attempt to block UHG’s $13B purchase of Change Healthcare, a technology firm specializing in claims processing and data analytics.

The DOJ sought to block the purchase on antitrust grounds, arguing that UHG would have access to technologies that its rivals use to compete, but the judge, writing in a sealed ruling, found the DOJ’s case inadequate. It is unclear at this point whether the DOJ will appeal.

Change will now join UHG’s OptumInsight division, though in response to anticompetitive concerns, the ruling ordered UHG to sell part of Change’s claims payment and editing business, as it had already planned to do. 

The Gist: Antitrust regulators have had much greater success at challenging horizontal healthcare mergers but have struggled to find solid footing to fight vertical deals. 

The UHG-Change case was closely watched in part because of the precedent it would have set in terms of holding “platform” aggregators in check. As UHG and other healthcare titans continue to acquire assets up and down the value chain (physician practices, ambulatory surgery centers, clinics, telehealth capabilities, risk products), it’s increasingly clear that the government will face an uphill climb to question the competitive effects of these vertical M&A activities.

CVS Health considering acquisition of Signify Health

https://mailchi.mp/11f2d4aad100/the-weekly-gist-august-12-2022?e=d1e747d2d8

According to a Wall Street Journal report, CVS is expected to submit a bid to purchase Dallas-based Signify Health, which supports physicians, payers, and health systems with tools and technology to provide in-home care. Signify acquired accountable care organization manager Caravan Health earlier this year. Last week, the Journal reported that Signify, valued at more than $4B, was looking for buyers. While CVS is said to be interested, so are private equity firms and other managed care companies. 

The Gist: CVS CEO Karen Lynch told investors during last week’s earnings call that the company plans to grow its primary care and home health offerings through mergers and acquisitions. The Signify bid, along with reports that CVS considered acquiring concierge primary care company One Medical, suggests that the retail pharmacy and insurance giant is charging ahead with its strategy of creating a vertically-integrated healthcare company.

As several newly public digital health and value-based care companies have seen share prices plummet and capital dry up in a cooling economy, they are becoming targets for large insurers and tech companies who have seen their own fortunes grow during the pandemic. Watch for more announcements from these “platform assemblers” in the months to come.

Amazon to acquire One Medical in $3.9B deal

Amazon plans to acquire virtual and in-person primary care company One Medical, the online retailer said July 21.  

In a cash deal valued at $3.9 billion, the aim is to combine One Medical’s technology and team with Amazon, it said in a news release. The goal of the acquisition, according to the two companies, is to offer more convenient and affordable healthcare in-person and virtually.

“The opportunity to transform healthcare and improve outcomes by combining One Medical’s human-centered and technology-powered model and exceptional team with Amazon’s customer obsession, history of invention and willingness to invest in the long-term is so exciting,” said Amir Dan Rubin, CEO of One Medical, in a company news release. “There is an immense opportunity to make the healthcare experience more accessible, affordable, and even enjoyable, for patients, providers and payers. We look forward to innovating and expanding access to quality healthcare services together.”

Amazon will acquire One Medical for $18 per share.

Completion of the transaction is subject to customary closing conditions, including approval by One Medical’s shareholders and regulatory approval. 

If the acquisition is approved, Mr. Rubin will remain CEO of One Medical. 

Two more hospital mergers scrapped after federal antitrust scrutiny

https://mailchi.mp/3390763e65bb/the-weekly-gist-june-24-2022?e=d1e747d2d8

Steward Health Care is abandoning its proposal to sell five Utah hospitals to HCA Healthcare, and New Jersey-based RWJBarnabas Health dropped its plan to purchase New Brunswick, NJ-based Saint Peter’s Healthcare System. These pivots come just weeks after the Federal Trade Commission (FTC) filed suits to block the transactions, saying they would reduce market competition. The FTC said in a statement that these deals “should never have been proposed in the first place,” and “…the FTC will not hesitate to take action in enforcing the antitrust laws to protect healthcare consumers who are faced with unlawful hospital consolidation.” 

The Gist: These latest mergers follow the fate of the proposed Lifespan and Care New England merger in Rhode Island, and the New Jersey-based Hackensack Meridian Health and Englewood Health merger, which were both abandoned after FTC challenges earlier this year.

Antitrust observers find these recent challenges unsurprising, as all were horizontal, intra-market deals of the kind that commonly raise antitrust concerns. What will be more telling is whether antitrust regulators can successfully mount challenges of cross-market mergers, or vertical mergers between hospitals, physicians, and insurers. 

FTC, Justice Department have new guidelines for vertical mergers

https://www.beckershospitalreview.com/hospital-transactions-and-valuation/ftc-justice-department-have-new-guidelines-for-vertical-mergers.html?utm_medium=email

Trump Administration Updates Vertical Merger Guidelines - Multichannel

Guidance on vertical mergers got its first major overhaul from the Federal Trade Commission and the U.S. Department of Justice in more than 35 years under new joint guidelines published June 30.

Vertical mergers are those that combine firms or assets at different stages of the same supply chain, such as healthcare company CVS Health’s acquisition of insurer Aetna. Previously proposed mergers like that of insurers Humana and Aetna would be considered horizontal.

FTC Chairman Joe Simon said in a news release that the new guidances “are an important step forward in maintaining vigorous antitrust enforcement, and reaffirm our commitment to challenge vertical mergers that are anticompetitive and would harm American consumers.”

Leaders said that the guidelines explain FTC and Justice Department investigative practices and will give the business community clarity about antitrust concerns, such as the type of evidence the FTC and Justice Department review and how they define markets.

To read the full guidelines, click here