United Health Group Acquisition of Change Healthcare... Healthcare Data Goldmine

Summary

In 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

• 📈 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.
• 🏥 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.
• 🔍 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.
• 💡 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.
• 📊 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.
• 📝 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.
• 💼 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.
• 👵 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.
• 🚫 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.
• 🔑 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.
• 🤔 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

00:00

🏥 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.

05:04

🤔 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.

10:04

💼 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.

15:06

🛡️ 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.

Keywords

💡United Health Group

United Health Group is a diversified health and well-being company that offers a broad spectrum of services ranging from health insurance to health care services. In the context of the video, it is the acquiring company of Change Healthcare, which is a significant event due to the potential impact on the healthcare industry and competition.

💡Change Healthcare

Change Healthcare is a company that provides technology and services to the healthcare industry, including a billing clearinghouse for hospitals and doctors. The video discusses its acquisition by United Health Group and the implications this has for the healthcare billing process and data management.

💡Acquisition

An acquisition refers to the purchase of one company by another, which is the central event discussed in the video. The acquisition of Change Healthcare by United Health Group is significant because it involves a major player in the healthcare industry gaining control over a large portion of healthcare billing and data.

💡Federal Court

The Federal Court is part of the United States judiciary system and has jurisdiction over cases that involve federal laws or matters between states. In this video, the acquisition was approved by a federal court, indicating the level of scrutiny and potential antitrust concerns associated with the deal.

💡Department of Justice

The Department of Justice (DOJ) is a federal agency responsible for enforcing the law and administering justice in the United States. In the context of the video, the DOJ attempted to block the acquisition of Change Healthcare by United Health Group on antitrust grounds, highlighting concerns about the potential for reduced competition.

💡Antitrust

Antitrust refers to laws intended to promote market competition by preventing the formation of monopolies. The video discusses the DOJ's concern that the acquisition could violate antitrust laws due to the potential for United Health Group to dominate the healthcare billing and data market.

💡Billing Clearinghouse

A billing clearinghouse is a system that processes and routes medical claims between healthcare providers and insurance companies. Change Healthcare operates as a significant billing clearinghouse, which is a key reason for United Health Group's interest in the acquisition.

💡Data

Data in the context of the video refers to the extensive information on patient care, billing, and provider practices that flow through Change Healthcare's systems. The acquisition could potentially give United Health Group access to this data, which could be used to improve services, understand market trends, and gain a competitive edge.

💡Medicare Advantage

Medicare Advantage is a program under the United States' Medicare system that offers an alternative way to receive benefits through private insurance companies. The video suggests that the acquisition of Change Healthcare could enhance United Health Group's Medicare Advantage business by providing better data to target and serve beneficiaries.

💡Price Transparency

Price transparency in healthcare refers to the availability of information about the cost of medical services. Change Healthcare was known for providing price transparency, which was a competitive advantage and a service that could be further developed or utilized by United Health Group after the acquisition.

💡EOB (Explanation of Benefits)

An Explanation of Benefits (EOB) is a statement from an insurance company that details the services, procedures, and medications provided, along with the costs and what the insurance covered. The video mentions that Change Healthcare handles the return of EOBs to healthcare providers, which is an integral part of the billing process and a potential source of valuable data for United Health Group.

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