UnitedHealth Group Inc. proposed purchasing Change Healthcare Inc. for $ 7.8 million, ran into rough weather after the U.S Justice Department filed a complaint against the takeover.
As per Bloomberg News, the Justice Department argued in Washington Federal court that the purchase would allow UnitedHealth to control sensitive data of rivals and hurt competition in the market.
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According to Attorney General Merrick Garland, the largest health insurer in America can acquire technology for critical healthcare claims, and it would squeeze innovation in the health insurance sector.
While shares of Healthcare were up by 0.5 %, UnitedHealth shares declined by 1.5% to $452.65 in New York Thursday after the complaint was filed.
The antitrust enforcers to challenge corporate deal-making underscores the administration to toughen consolidation. The merger of the largest healthcare giant, UnitedHealth, which owns insurance and service arms, and Change Healthcare payments and technology expertise, would fuel the growth of UnitedHealth.
UnitedHealth has defended the deal saying that the merger would help increase efficiency in health care, improve customer experience, and lower costs. Eric Hausman, the spokesman of UnitedHealth, noted that the DOJ position was flawed and based on speculations that do not reflect the healthcare system’s realities. Change Healthcare did not comment.
The two companies announced the merger deal in 2021, saying that it would simplify the treatment, administration, and payment process, and expected the deal to close by 2021. UnitedHealth had agreed to $25.75 per share for Change Healthcare.
The American Hospital Association had objected to the deal and urged regulators to investigate in its letter in March last year. The industry observed that the merger would reduce competition and higher pricing. Both UnitedHealth and Change Healthcare operate back-end services for medical providers, including claims to insurance companies.
On February 17, Change Healthcare, in its securities filing, said that the companies had informed the DOJ about their intention to close the deal, and it gave the department ten days to block the deal.
The Minnetonka, Minnesota-based UnitedHealth wants to merge Change Healthcare with its Optum Insight Division that deals in consultancy and sells data and technology to health care customers, including hospitals.
Change Healthcare, based out of Nashville, Tennessee, had questioned antitrust hurdles in its security filings last year. According to the filing, the legal advisors discussed how far UnitedHealth would go to get approvals from the authorities during the negotiations.
The board of Change Healthcare had said at one point that it would not continue with the deal unless UnitedHealth committed to getting the antitrust approvals. The agreement mentioned that both could sell assets if required for approvals. The divestitures that account for more than $ 650 million annual revenue would be a condition that UnitedHealth is not bound by.
