Managed Care Outlook 2023

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In 2022, the Biden administration and its antitrust enforcement agencies – the Federal Trade Commission (FTC) and the Department of Justice’s (DOJ) Antitrust Division – have backed up their considerable talk about vigorously enforcing the antitrust laws, particularly in the health care sector. We expect this trend to continue in 2023.

Payor mergers

On February 24, 2022, the United States, through the DOJ Antitrust Division, and two states sued in federal court in the District of Columbia to block the acquisition of Change Healthcare (Change) by UnitedHealth Group (United).

United is one of the 10 largest U.S. companies by revenue and owns the largest health insurer in the United States. United’s subsidiaries include one of the largest pharmacy benefit managers in the country, OptumRX; a large provider network, Optum Health; and a health care technology business, OptumInsight. Relevant to the government’s theory, OptumInsight offers a claims-editing product and operates an electronic data interchange (EDI) clearinghouse, both of which largely are used in-house by United, though the claims-editing product is sold and used by several competitors.

Change was an independent health care technology company based in Nashville. According to the DOJ, Change provided “health care analytics, software, services, and data to providers, insurers and other” firms in the health care space. Change’s offerings included the leading first-pass claims-editing solution, ClaimsXten, which the DOJ says has allowed insurers to realize $12 billion in annual savings. Change also operated the largest EDI clearinghouse, which the DOJ described as the “pipes” that connect providers to insurers for electronic claims processing purposes. Its clearinghouse connected 5,500 hospitals and 900,000 physicians with 2,400 government and commercial insurers. Change held data on the claims that flowed through its system going back to 2012 and for 211 million unique patients.

The case went to trial in August 2022. The DOJ relied on two core theories: one based on more traditional antitrust principles and the other more nuanced. First, the DOJ attempted to prove that the merger would give United a monopoly share of the market for first-pass claims editing. The principal difficulty with this argument for the DOJ was that United reached an agreement with TPG, a private equity firm, to divest ClaimsXten contingent on the closure of the merger, which remedied any potential anticompetitive effects of the merger. The second, less straightforward theory was that the acquisition of Change would give United an unfair competitive advantage in the market for the sale of commercial insurance to national accounts and large groups. The DOJ contended that even though Change had a vertical relationship to the participants in the sale of health insurance, Change played such a key role in the flow of data in that market that if it were acquired by United, United could stifle competition in those commercial health insurance markets. According to DOJ, United could accomplish this using its “vast trove of competitively sensitive data” to gain insights into its competitors’ innovations, reduce innovative products Change would have developed and made available, and generally raise costs for competitors.

On September 19, 2022, the U.S. District Court for the District of Columbia rejected the DOJ’s theories across the board. The court concluded that the agreed-upon divestiture of ClaimsXten effectively resolved the DOJ’s horizontal claim. On the vertical theory, the court found that the government failed to introduce sufficient facts to carry its burden to prove that United’s Optum entities would gain access to the claims data of United’s health insurer rivals, that such data would then be shared with United’s health insurer subsidiary, and that sharing of such information would have a chilling effect on rivals that would reduce innovation and harm competition. Simply put, the court found the DOJ’s vertical theory to be too speculative and not sufficiently supported by facts. The DOJ filed a notice of appeal to the D. C. Circuit on November 21, 2022. United and Change closed their deal on October 3, 2022.

Key takeaways
  • FTC and DOJ have backed up aggressive antitrust enforcement talk with action.
  • Although results have been mixed, expect the antitrust enforcement agencies to challenge mergers that may not have been challenged in the past.
  • Managed care organizations are critical players—whether as witnesses and providers of information or as merging entities—in this active antitrust enforcement environment.
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