United Health Group Acquisition of Change Healthcare... Healthcare Data Goldmine
Summary
TLDRIn this healthcare-focused video, Dr. Eric Bricker discusses the approval of United Health Group's acquisition of Change Healthcare, a move that faced opposition from the Department of Justice on antitrust grounds. The acquisition grants United access to a wealth of medical data, potentially allowing for more competitive pricing, targeted marketing for Medicare Advantage plans, and the creation of a high-performance network. The video explores the implications of this data acquisition and the strategic interests behind the deal.
Takeaways
- đ The acquisition of Change Healthcare by United Health Group for $7.8 billion was approved by a federal court in Washington DC, despite the Department of Justice's attempt to block it on antitrust grounds.
- đ„ Change Healthcare operates as a billing clearinghouse for the majority of hospitals and doctors in the U.S., processing claims and remittances through its extensive network of connections to insurance payers.
- đ The Department of Justice was concerned about United gaining access to vast amounts of healthcare data, which could potentially give them an unfair advantage over competitors.
- đĄ United Health Group justified the acquisition by stating a desire to diversify its business, although Change Healthcare's revenue is a small fraction of United's overall revenue.
- đ Change Healthcare's earnings growth is significantly lower than that of United Health Group, suggesting the acquisition was not primarily for financial growth but possibly for strategic reasons.
- đ The data that Change Healthcare handles includes patient IDs, provider information, diagnoses, procedures, and billing charges, all of which could be valuable for United in various ways.
- đŒ United could use the data to offer more competitive pricing on fully insured groups by better understanding the health status and costs associated with specific groups of employees.
- đ” With the aging population qualifying for Medicare, United could use Change Healthcare's data to target healthier individuals for Medicare Advantage plans, improving the quality and profitability of their enrollees.
- đ« The acquisition might allow United to avoid quoting on groups with high healthcare costs, by identifying individuals with serious health conditions that could lead to significant expenses.
- đ United could potentially create a high-performance network by identifying and excluding outlier physicians who order an excessive amount of tests and procedures, thus improving cost-effectiveness.
- đ€ The acquisition's true potential and implications are still theoretical, and the actual use of the data will depend on how United Health Group leverages it in practice.
Q & A
What was the main topic of Dr. Eric Bricker's discussion in the video?
-The main topic was the approval of United Health Group's acquisition of Change Healthcare, and the implications of this acquisition in the healthcare industry.
Why was the acquisition of Change Healthcare by United Health Group in Federal Court in Washington, DC?
-The acquisition was in Federal Court because the Department of Justice was attempting to block the acquisition on antitrust grounds.
What was the original name of Change Healthcare before it was acquired by WebMD's electronic billing division?
-The original name of Change Healthcare was not mentioned in the script, but it was a small company that was acquired by WebMD's electronic billing division, which was later renamed to MDOn and then to Change Healthcare.
How does Change Healthcare function in the healthcare billing process?
-Change Healthcare operates as a billing clearinghouse between hospitals, doctors, and health insurance companies, processing and facilitating the billing transactions electronically.
What percentage of hospitals and doctors in America use Change Healthcare for billing?
-The majority of hospitals in America, specifically 5,500 out of approximately 6,500, and about 800,000 doctors, which is around 80% of the total, use Change Healthcare for billing.
Why was the Department of Justice concerned about United Health Group acquiring Change Healthcare?
-The Department of Justice was concerned about the acquisition due to potential antitrust issues, as it would give United access to a vast amount of sensitive billing data from competitors.
What was United Health Group's stated reason for wanting to acquire Change Healthcare?
-United Health Group stated that they wanted to diversify their business, although the acquisition represents a small percentage of their overall revenue.
How could the acquisition of Change Healthcare potentially benefit United Health Group in terms of data?
-The acquisition could provide United with extensive data on patient IDs, provider information, diagnoses, procedures, billing charges, and allowed amounts, which could be used to improve their business strategies.
What are some potential uses of the data that United Health Group could gain from Change Healthcare?
-The data could be used to make more accurate price quotes for fully insured groups, improve targeting in Medicare Advantage marketing, and create a high-performance network by identifying and excluding outlier providers who order excessive tests and procedures.
How could the acquisition affect the competition among health insurance companies?
-The acquisition could potentially give United Health Group an unfair advantage by having access to detailed billing data from competitors, which could be used to underwrite more effectively and target specific markets more accurately.
What is the significance of the acquisition for United Health Group's Medicare Advantage business?
-The acquisition could significantly enhance United's Medicare Advantage business by providing detailed clinical histories of potential enrollees, allowing for more targeted marketing and better risk management.
Outlines
đ„ Acquisition of Change Healthcare by United Health Group
Dr. Eric Bricker discusses the federal court's approval of United Health Group's acquisition of Change Healthcare for $7.8 billion. The acquisition was initially challenged by the Department of Justice on antitrust grounds, fearing the concentration of healthcare billing data. Change Healthcare, previously known as WebMD's electronic billing division, MDOn, is a significant player in the healthcare billing industry, connecting over 5,500 hospitals and 800,000 doctors to insurance payers. The acquisition raises questions about the implications for data privacy and market competition in the healthcare sector.
đ€ The Strategic Interest Behind United's Acquisition
This section delves into why United Health Group might want to acquire Change Healthcare, despite its relatively small revenue contribution to United's overall earnings. The discussion suggests that the acquisition is not primarily about revenue but rather the vast amount of data that Change Healthcare handles, including patient and provider information, diagnoses, procedures, and billing details. This data could potentially be used to improve United's business strategies, such as offering more competitive pricing and creating high-performance networks.
đŒ Utilizing Data for Business Advantage in Medicare Advantage
The third paragraph explores how United could leverage the data from Change Healthcare to enhance its Medicare Advantage business. With the ability to identify healthier individuals before they sign up for Medicare, United could target its marketing efforts more effectively. Additionally, the data could help United avoid insuring high-risk individuals, thus improving the company's financial performance in the Medicare Advantage segment, which is a significant growth engine for United Health Group.
đĄïž DOJ's Concerns and United's Potential Use of Data
The final paragraph addresses the Department of Justice's concerns about the acquisition, which include the potential for United to gain an unfair advantage through access to competitors' data. It also speculates on various ways United could use the data to its advantage, such as creating a high-performance network by identifying and excluding outlier physicians who order an excessive number of tests and procedures. The summary concludes with a reflection on the potential reasons behind United's interest in Change Healthcare and the implications of the acquisition for the healthcare industry.
Mindmap
Keywords
đĄUnited Health Group
đĄChange Healthcare
đĄAcquisition
đĄFederal Court
đĄDepartment of Justice
đĄAntitrust
đĄBilling Clearinghouse
đĄData
đĄMedicare Advantage
đĄPrice Transparency
đĄEOB (Explanation of Benefits)
Highlights
United Health Group's acquisition of Change Healthcare was approved by a federal court in Washington DC in September 2022.
The Department of Justice attempted to block the acquisition on antitrust grounds but the federal judge ruled in favor of United Health Group.
Change Healthcare originated from WebMD's division that allowed electronic billing between healthcare providers and insurance companies.
Change Healthcare, previously known as MDI, is a multi-billion dollar organization that handles electronic billing for the majority of hospitals and doctors in the U.S.
Change Healthcare serves as a billing clearinghouse with connections to over 2,100 insurance payers in America.
Approximately 80% of doctors in America send their professional billing claims through Change Healthcare.
United Health Group's acquisition gives them access to a wealth of data from Change Healthcare, including patient and provider information, diagnoses, and billing charges.
The acquisition could potentially allow United to offer lower insurance premiums by leveraging detailed clinical data.
United may now have the ability to identify and target healthy individuals for Medicare Advantage plans using Change Healthcare's data.
The acquisition could enable United to create a high-performance network by identifying and excluding outlier physicians who order excessive tests and procedures.
The Department of Justice was concerned about United having access to extensive data that could impact competition among health insurance companies.
United Health Group's revenue from Change Healthcare would be a small percentage of their total revenue, indicating the acquisition is not primarily for financial gain.
Change Healthcare's growth rate is significantly lower than that of United Health Group, suggesting the acquisition is driven by strategic rather than growth reasons.
The acquisition could provide United with a competitive advantage in the Medicare Advantage market by allowing for more targeted marketing to healthier individuals.
United could potentially avoid insuring high-risk individuals by analyzing clinical and billing history provided by Change Healthcare.
The acquisition may enable United to create a more cost-effective and less restrictive network by excluding a small percentage of high-test-ordering physicians.
Dr. Eric Bricker suggests that the acquisition of Change Healthcare by United Health Group could significantly impact the healthcare industry by providing United with valuable data insights.
Transcripts
hello this is Dr Eric Bricker and thank
you for watching a healthcare Z today's
topic is United Health Group acquisition
of change Healthcare is approved that's
right now in September of 2022 it was
just announced that the 7.8 billion
dollar purchase of change Healthcare by
United Health Group was just approved by
a federal court in Washington DC and why
was it even in Federal Court Washington
State because the Department of Justice
was trying to block United's acquisition
of change Health Care on antitrust
grounds now apparently the federal judge
did not side with the Department of
Justice and and found with uh in favor
of United so United can now go ahead
with its acquisition of change health
care which begs the question what in the
world has changed health care and why
would the Department of Justice even
care about this and why would United
even want to buy change Healthcare in
the first place let's answer those
questions so I it's a story right
everything in healthcare is complicated
I gotta tell you a story it goes back to
the beginning of the internet back in
the late 90s there was this company
called WebMD and you know they had a
bunch of health information on the
internet you could look up symptoms like
a sore throat or whatever but then they
actually had a division with the win
within WebMD that actually started to
allow hospitals and doctors to
electronically Bill health insurance
companies through the internet because
believe it or not back in the late 90s
you got like an eight and a half by 11
trifold sheet of paper and you put it in
an envelope you had to mail it to the
insurance company in order to get paid I
started out as a hospital Finance
consultant back in the 90s and we had
Stacks and stacks of paper bills and in
fact like Medicare was the only
electronic payer in the country at that
time everybody else it was still hard
copy so with the internet we're like oh
this is incredibly inefficient let's do
it electronically so that's what WebMD
started to do and then they split it off
into two separate companies right
because it was kind of the the
healthcare information company sore
throats on the internet sort of stuff
that was WebMD so then they changed that
electronic billing interface company
they changed that name to mdon and MDI
grew to be a huge multi-billion dollar
organization and then
in 2015 they changed their name to
change health care so change Healthcare
hasn't been around for that long change
Healthcare is a small company mdon
bought change healthcare for more like
135 million dollars so they bought this
little itsy bitsy teeny company and then
they changed their name from their big
huge multi-billion dollar company to
this little bitty company name they just
adopted the name and the reason I know
change Healthcare is because change
Healthcare did price transparency they
were a competitor to my previous company
Compass professional House services and
so then when mbon bought change
Healthcare we're like what's going on
because we're like that's not what mdn
does mdon does all the billing between
the Dotson hospitals and the insurance
companies okay so anyway so MD on now
change Healthcare
is the billing Clearinghouse between 5
500 hospitals in America
800 000 doctors in America
and when they need to send their bills
through to the payers to the health
insurance companies
that
Emma embion change healthcare does that
with two thousand one hundred
connections to the various Insurance
payers in America Blue Cross United
Cigna Aetna their various HMO PPO
Medicare Advantage plans you name it so
what's 5 500 hospitals called the vast
majority of hospitals in America what's
800 000 doctors called the vast majority
of doctors in America there's about a
million doctors in America so that means
eight out of 10 80 about 80 percent of
doctors in America send their
professional billing claims to get paid
through uh change Health Care the
majority of hospitals send their claims
through change Healthcare to the
insurance payers now
that means that it could be Mass General
in New England it could be Jackson
Memorial in Miami it could be
Cedar Sinai in Los Angeles
all these doctors and they're going
through to Blue Cross United Cigna and
Aetna okay so United
is now going to own the claims
Clearinghouse
for all those payers going through
now if I was CVS Aetna and the Blue
Cross plans and Cigna I might be
scratching my head about that because
now all of all the claims from all dogs
have to go through one of my competitors
so and then all the remittances go back
as well in other words it's like okay
you know we paid on this claim we didn't
play in this game we played this much in
this game we played didn't pay that much
which is super helpful right because
then you're gonna know not only the
build chart is coming through but you're
going to know the allowed amounts going
back because again through change
Healthcare the payers have to give
basically it's basically the equivalent
of an EOB back to the hospital system
and back to the doctor to explain why
okay you were building you know you
build a thousand bucks of which we took
a 500 discount off of War paying you 400
and you got to go for a hundred dollars
after the patient right so that's going
to come back through change Healthcare
as well now
why would United want
change Health Care why would they want
it they said in the court the report
from the court was that United wanted to
quote unquote diversify its businesses
that's why I wanted to buy to each other
keep in mind change Healthcare only does
in 2021 they only did 3.1 billion
dollars of Revenue versus United Health
groups 288 billion dollars of Revenue
okay what's that called barely over one
percent change health care when you add
their revenue to United Healthcare it's
like barely one percent okay fine so and
then Not only was it is it one percent I
mean it's like a rounding error in terms
of United's Revenue
change was also growing much more slowly
than United so change healthcare's
earnings growth was only projected to be
about six to eight percent per year and
in fact in the last two quarters their
earnings actually shrunk compared to the
previous year's quarter whereas United
Health groups uh earnings grew by about
13 last year and United's track record
is actually 20 plus percent per year
earnings growth so United is much bigger
and is growing faster and they bought
this little company that is much smaller
and isn't growing nearly as fast so it
must not be about the money so what's it
about well maybe it's about the data
Maybe it's about the data that's going
through there because what do you have
in that data you got the patient IDs I
mean it had it knows that it's
Dr Eric Bricker knows that it's Jane
Smith or John you know it knows who you
are you are okay it also knows the
provider eye
so it knows specifically the hospital
knows specifically the Ambulatory
Surgery Center I mean you name it it
knows which specific facility it's
coming from or Doctor's practice etc etc
it has the diagnosis on there is it for
diabetes is it for gallbladder surgery
and it was the procedures that were done
was it an appendectomy was it a coronary
artery bypass graft was it just a strep
throat swab okay and then it's got the
build charges and it's got the allowed
amount and again it's for all payers so
United's gonna have all that information
and interestingly that was one of the
reasons why the Department of Justice is
like well do we gotta block this for
antitrust purposes we can't have United
knowing all this information for CVS
Aetna and all the Blue Cross plans and
for Signal like he can't let United have
all that information you know what
United's answer was in the lawsuit we
already have that information well hold
on a second hold the boat I'm not sure
that Cigna and CBS Aetna and Blue Cross
would actually agree that United already
had all that information but regardless
what could you do why would United or
any health insurance company be
interested in all that data well there's
a ton of things you can do with it let's
go through some you know potential
things you could do with it now one
it would allow United
to make much lower price quotes on fully
insured groups that they were competing
for let me explain that so right now
when an insurance broker goes out to
quote a group they've got to have the
census for the employees and they've got
to have their zip code and they've got
to have their gender and they've got to
have their age but
United and all the insurance carriers
they don't know hey does this person
have cancer does this person just
diagnosed with breast cancer and they
know they're going to have ongoing
treatment does this person you know have
you know diabetes and they're in the
hospital every month for a non-healing
foot ulcer okay they don't know that but
with that data from change Healthcare
now they do know that and what that
means is is that let's say a group has
Blue Cross fully insured and the broker
goes out and shops that there are a lot
of fully insured groups where the
insurance carrier makes a lot of money
off that fully insured group from the
loss ratio because the people aren't
that sick and so United could come in
and behave for those sick groups we
could actually even offer a lower
premium because we know because we can
we can actually wear it we can
underwrite we know because we know so
much more clinical data about that group
then we can come in with an even more
competitive price than what the existing
health insurance carrier might have you
have much better information than they
do currently when they're quoting fully
insured information okay so that's one
thing that you could use the data for
likewise they could also look at the
data be and you know broker comes out to
them with a quote and they can look at
the group and then look at the clinical
history the billing history for that
group and be like well we're not even
going to quote on this group because
they got crazy sick people and you can
kind of tell by the age and the gender
and the zip code but you get a much more
detailed view when you actually know
who's got cancer and who's got diabetes
etc etc okay next up so for their
Medicare advantagement and that's just
okay that's relevant to
employer-sponsored health plans but
that's not really where the money is for
United Health Group right for the money
for United Health Group is really in
their Medicare Advantage right their
Medicare Advantage business is it's huge
and it's growing really fast and that's
the engine for growth for United it's
really their Medicare advancements holds
true for the the Blue Cross plans and
Cigna and cvsno2 they talk about their
government programs on their investor
earnings call as being the main engine
for their growth and yeah commercial's
still there but it's really government
programs is the main driver of Revenue
and earnings growth for insurance
carriers so how could you use this data
for Medicare Advantage well there are
because all the Baby Boomers are turning
65 you have 10 000 people a day who are
now qualifying for Medicare because
they're turning 65. so right now for
Medicare Advantage you've got this big
black hole where you don't know their
clinical history before they sign up for
a Medicare Advantage plan but if you had
this data then literally buy household
you could find the really healthy people
who are turning 65. and you could
specifically Market to them and Market
to those households and you could much
more Target your sales and marketing
activities to the types of beneficiaries
that you would want to have on your
Medicare advantagement and you can kind
of do that now again based on like zip
code like there's various other
demographics that you could use but you
could actually now look at their
clinical history to figure out if you
would want to go after them for signing
them up for your Medicare Advantage plan
gives you a huge advantage in signing up
Medicare Evangeline likewise if there
are particular people who you know again
you know they're on dialysis you know
they you know but they're on houses but
they're not on Medicare yet you know
maybe they're you know they still have
an opportunity yeah dialysis is a bad
example you know let's say they're super
sick and they're in the hospital all the
time okay so you'd be like okay I don't
want to work into that person because I
don't because I know that whatever I'm
getting from the government thousand
bucks a month in no way is going to be
able to cover that person because
they're on a super expensive medication
and they get hospitalized all the time
they have real bad COPD that's probably
a better example okay so and keep in
mind United
signs up a third of every single new
Medicare Advantage person every year so
that 10 000 is all Medicare folks and
right now it's 50 50. so about 5 000
folks a day are on are signing up for
Medicare Advantage plans and United's
getting a third of that five thousand so
they're still getting thousands tons of
people a day that are signing up on
United and they can specifically Target
them now potentially this is all
theoretical okay and then finally you
could uh United could create a really
high performance Network because not
only do you know the individuals but you
also know how many procedures and tests
you know all of the ordering habits and
the procedure habits and the clinical
practice of all the Physicians right now
United knows that for all the United
claims coming through but it's got big
holes for all the all the claims that
the doctors are sending out to Blue
Cross and Aetna and uh and Cigna and so
now they can see all that and they can
say okay well we know that this
orthopedist over here that like nine
times out of ten they end up taking to
the patient to the or if you see a
gastroenterologist as a new patient this
particular GI doc literally takes them
to get a scope every time or if you go
to see this cardiologist this
cardiologist like literally does a
nuclear stress test for eight grand for
like every single new patient person
that comes into his office those are
extreme and those are the outliers you
know bell-shaped curve but that's where
what if you could take out those two
percent three percent of doctors that
order gobs of tests into God's
procedures that might arguably be too
much well then shoot you'd only have to
narrow that Network a very minuscule
amount like you as a as a patient or as
an employer like you would barely even
notice it like your employees wouldn't
be up in arms about it it wouldn't be a
quote-unquote narrow Network because
you've only gotten rid of like two or
three percent of the doctors but you've
gotten rid of two or three percent of
the doctors that order
the lot you know a vast majority more
tests and procedures than their peers
and so that high performance Network
would be the best of both worlds it
would be more cost effective and it
wouldn't be that narrow so you wouldn't
have to deal with a whole bunch of out
of network doctors so again that's all
theoretical and I'm just getting warmed
up there's gods of other ways you could
use this data if you had the
commercially insured data for every
single commercial life in America to
then analyze and you're a health
insurance company you could do gobs of
things with it and so that's potentially
why this is just in my opinion that's
potentially why United was so interested
in the acquisition of change Healthcare
and why the Department of Justice was
trying to stop it and that's my point
for today thank you for watching a
healthcare Z
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