DOJ, states end fight over $7.8B UnitedHealth-Change Healthcare deal

The U.S. Department of Justice, as well as the states of Minnesota and New York, early this week dropped plans to appeal a judge’s ruling that allowed UnitedHealth Group to close its acquisition of Change Healthcare. All parties agreed to voluntarily dismiss the case and assume any costs incurred by the appeal.

UnitedHealth proposed to buy Change Healthcare in 2021 to incorporate its data-processing capabilities for insurance claims and integrate the business into its Optum arm. A federal district court judge approved the deal in September, and the two companies formally combined the following month. Change Healthcare is now a part of UHG’s Optum subsidiary.

During bench trials to block the merger, the Justice Department had argued that UnitedHealth’s acquisition of Change would disadvantage rivals and result in higher costs and lower quality of commercial health insurance.

“Quality health insurance should be accessible to all Americans,” Attorney General Merrick Garland said. “If America’s largest health insurer is permitted to acquire a major rival for critical health-care claims technologies, it will undermine competition for health insurance and stifle innovation in the employer health insurance markets. The Justice Department is committed to challenging anticompetitive mergers, particularly those at the intersection of health care and data.”

Related: DOJ has eye on UnitedHealth’s $8 billion acquisition of Change Healthcare

UnitedHealth leaders, including current CEO Andrew Witty and former chief David Wichmann, testified that Optum already has access to other insurers’ data and misusing that information would be hugely harmful to that business. The district court ruled that the deal could move forward if Change sold off ClaimsXten, its claims editing business

Judge Carl Nichols said in his opinion that the government’s arguments had “serious flaws” and that they relied on “speculation” rather than real-world evidence to prove the department’s antitrust claims. The Justice Department filed a notice about its intent to appeal in November but had not made a move since then. At the time, UnitedHealth said an appeal was “entirely without merit.” Executives at competitors such as Aetna, Cigna and Elevance Health told the court that the deal would not stifle innovative ideas at their companies.

The court document does not specify why the parties chose to abandon their legal challenge to the deal. The attempt to block the merger between UnitedHealth and Change was the cornerstone of the Biden administration’s antitrust agenda and coincided with a major challenge to a merger deal in the publishing industry.