Change Healthcare is reportedly considering selling its $1 billion payment integrity business to persuade regulators to green-light a $13 billion merger with UnitedHealth Group.
The data analytics firm is working with consultants to sell its ClaimsXten business, according to Bloomberg. ClaimsXten is just one part of Change Healthcare’s payment integrity division, according to an analytic report by Credit Suisse, and given the figures provided by Bloomberg, the company may be considering additional services such as a coding advisor, audit and recovery divisions. Potential buyers could include payment integrity company Cotiviti, repricer MultiPlan, or fintech company Zelis Healthcare, the report says.
Change Healthcare and UnitedHealth Group declined to comment on the asset sale.
“If Change Healthcare and UnitedHealth Group are indeed looking into these sales, it likely indicates discussions are moving in the right direction,” Credit Suisse analysts wrote.
Last year, UnitedHealth Group announced that its fastest growing subsidiary, Optum, would pay $13 billion to acquire Change. The country’s largest insurer originally intended to complete the deal last September, though both companies have now pledged to regulators not to complete the deal until February 22. UnitedHealth Group has moved the internal deadline to close the deal to April 5.
A Change Health SEC Registration Last year it was noted that companies could sell assets if required to obtain antitrust approval, although a sale of more than $650 million to UnitedHealth Group would represent an “onerous condition” for the healthcare giant.
And even with the reported Change Healthcare sale, there is no guarantee that regulators will be happy with the deal. The proposed deal has drawn opposition from hospitals and pharmacists, who argue that the merger will reduce competition for healthcare IT providers, lower independent pharmacists’ prices, and increase healthcare costs for consumers. The American Hospital Association accused the companies of having already sold off millions of dollars of assets to avoid scrutiny by antitrust authorities, who are also skeptical of the proposal.
Last summer, there were reports that the US Department of Justice was considering filing a lawsuit to block the sale. The Justice Department did not respond to an interview request about a possible injunction or how the sale of Change Healthcare’s assets could affect its decision to merge. But the agency is hinting at closer scrutiny of these mega-deals.
Last night, the Justice Department’s new antitrust chief said he intends to look at potential mergers with a bounce-back eye, rather than allowing companies like Change Healthcare to carve out certain segments of their business.
The concentration of a few companies has increased in more than 75% of US industries, including healthcare, Jonathan Kanter, assistant attorney general for the antitrust division, told the New York State Bar Association on Monday. The trend is only accelerating, Kanter said, noting that the number of merger notices received by the Justice Department in 2021 hit an all-time high of 3,500 last year.
“I’m concerned that merge defenses other than transaction blocking fall short all too often,” Kanter said. “Complex calculations, whether behavioral or structural, suffer from significant shortcomings. Therefore, in my opinion, when a division concludes that a merger is likely to weaken competition, in most situations we should seek a simple injunction against the transaction.”
On Monday, the Justice Department announced a new initiative to help other federal agencies win cases against industry anticompetitive behavior. Last week, the Justice Department and the Federal Trade Commission also asked for public input on how to strengthen merger oversight, especially on vertical deals such as UnitedHealth Group’s acquisition of Change Healthcare.
“The settlements don’t move the law forward,” Kanter said. “We need new published opinions from the courts that apply the law in today’s markets to bring clarity to the business. courts to reconsider the application of old precedents to these markets.”