UnitedHealth to Pay $8 Billion for Medical Billing Systems Company

UnitedHealth Group Inc. has agreed to acquire Change Healthcare Inc., a medical billing and health care price information services company, for about $8 billion in cash.

UnitedHealth has also agreed to assume about $5 billion Change Healthcare debt.

The companies said they hope to close on the deal sometime between July 1 and Dec. 31.

The Companies

UnitedHealth is a Minnetonka, Minnesota-based health insurance and health care data analysis giant that provides or administers health coverage for 48 million people, including 43 million people in the United States.

Change Healthcare is a Nashville, Tennessee-based company that offers health care providers financial analysis and management systems along with billing and collections services.

Emdeon, a health care provider technology company that was once part of WebMD Corp., and later was owned by The Blackstone Group, acquired Change Healthcare, a patient technology firm, in 2015. Emdeon took Change Healthcare's name.

McKesson Corp., a medical supply company, formed a joint venture with Change Healthcare in 2016. The joint venture ended up controlling a business that included Change Healthcare's operations and some of McKesson's technology operations.

The McKesson-Change Healthcare joint venture sold a stake in the Change Healthcare business to the public through an initial public offering (IPO) in June 2019. The IPO share price was $14.60 per share.

Change Healthcare's stock trades on Nasdaq, under the symbol CHNG.

Blackstone still owns a 20% stake in the company, according to the UnitedHealth-Change Healthcare deal announcement.

Change Healthcare bought control of the company from the McKesson-Change Healthcare joint venture in March 2020.

Change Healthcare has a fiscal year that starts April 1. Its earnings report for the second quarter, which ended Sept. 30, 2020, shows a $43 million net loss for the quarter on $756 million in revenue.

The company reported $62 million in net interest expense for the quarter, on $5 billion in debt, and $4.1 billion of its $10 billion in assets was classified as goodwill. Goodwill is the difference between what a company has paid to acquire other companies and the apparent fair value of the acquired companies.

The Deal

UnitedHealth said it plans to combine Change Healthcare with its own OptumInsight health care data analytics unit.

Change Healthcare has good systems for getting information to health care providers, and extensive information about the medical claims flowing through its systems,, and OptumInsight has good tools for analyzing the transaction information, the companies said.

Combining the companies' systems "will simplify financial interactions among care providers, payers and consumers and accelerate the movement to a more modern, real-time and transparent payment system," they said.

Neil de Crescenzo, the chief executive officer of Change Healthcare, will become the CEO of OptumInsight, the companies said.

Motives

In the spring, many health care providers reduced the amount of ordinary care they provided, in an effort to save capacity for patients with COVID-19, and to avoid spreading COVID-19.

UnitedHealth and other large insurers said they were making special efforts to pay health care providers quickly, to help providers cope with the cash crunch caused by pandemic-related reductions in use of ordinary care.

Meanwhile, policymakers in Washington have been preparing to impose extensive price transparency rules on health care providers.

The Centers for Medicare and Medicaid Services (CMS) already requires hospitals to post detailed pricing information online. In October 2020, CMS completed final regulations that will require health plans to post physician care cost estimators online by 2023.

The new Consolidated Appropriations Act 2021 (CAA 2021) has built health care price disclosure requirements into federal law.

UnitedHealth and Change Healthcare did not cite COVID-19, CAA 2021 or the new CMS price regulations as reasons for their deal, but Change Healthcare talks about its COVID-19 and price transparency services in its latest earnings release and on its website.

Change Healthcare said in the earnings release that it has developed a program that encourages pharmacies to provide COVID-19 testing, by making billing for COVID-19 testing similar to billing for prescriptions and flu shots.

Change Healthcare says on its website that its digital patient experience manager system gives patients pre-procedure pricing, to help lower the risk of bad debt by reducing what patients will have to pay for procedures out of their own pockets.

— Read Health Plans Must Post Doctor Care Cost Estimators by 2023: Federal Regulators, on ThinkAdvisor.

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