It’s not often that the American Hospital Association—known for fun lobbying tricks like hiring consultants to create studies showing the benefits of hospital mergers—directly goes after another consolidation in the industry.
But when the AHA caught wind of UnitedHealth Group subsidiary Optum’s plans, announced in January 2021, to acquire data analytics firm Change Healthcare, they offered up some fiery language in a letter to the Justice Department. “The acquisition … will concentrate an immense volume of competitively sensitive data in the hands of the most powerful health insurance company in the United States, with substantial clinical provider and health insurance assets, and ultimately removes a neutral intermediary.”
If permitted to go through, Optum’s acquisition of Change would fundamentally alter both the health data landscape and the balance of power in American health care. UnitedHealth, the largest health care corporation in the U.S., would have access to all of its competitors’ business secrets. It would be able to self-preference its own doctors. It would be able to discriminate, racially and geographically, against different groups seeking insurance. None of this will improve public health; all of it will improve the profits of Optum and its corporate parent.
Despite the high stakes, Optum has been successful in keeping this acquisition out of the public eye. Part of this PR success is because few health care players want to openly oppose an entity as large and powerful as UnitedHealth. But perhaps an even larger part is that few fully understand what this acquisition will mean for doctors, patients, and the health care system at large.
If regulators allow the acquisition to take place, Optum will suddenly have access to some of the most secret data in health care.
UnitedHealth is the largest health care entity in the U.S., using several metrics. United Healthcare (the insurance arm) is the largest health insurer in the United States, with over 70 million members, 6,500 hospitals, and 1.4 million physicians and other providers. Optum, a separate subsidiary, provides data analytics and infrastructure, a pharmacy benefit manager called OptumRx, a bank providing patient loans called Optum Bank, and more. Through Optum, UnitedHealth also controls more than 50,000 affiliated physicians, the largest collection of physicians in the country.
While UnitedHealth as a whole has earned a reputation for throwing its weight around the industry, Optum has emerged in recent years as UnitedHealth’s aggressive acquisition arm. Acquisitions of entities as varied as DaVita’s dialysis physicians, MedExpress urgent care, and Advisory Board Company’s consultants have already changed the health care landscape. As Optum gobbles up competitors, customers, and suppliers, it has turned into UnitedHealth’s cash cow, bringing in more than 50 percent of the entity’s annual revenue.
On a recent podcast, Chas Roades and Dr. Lisa Bielamowicz of Gist Healthcare described Optum in a way that sounds eerily similar to a single-payer health care system. “If you think about what Optum is assembling, they are pulling together now the nation’s largest employers of docs, owners of one of the country’s largest ambulatory surgery center chains, the nation’s largest operator of urgent care clinics,” said Bielamowicz. With 98 million customers in 2020, OptumHealth, just one branch of Optum’s services, had eyes on roughly 30 percent of the U.S. population. Optum is, Roades noted, “increasingly the thing that ate American health care.”
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Optum has not been shy about its desire to eventually assemble all aspects of a single-payer system under its own roof. “The reason it’s been so hard to make health care and the health-care system work better in the United States is because it’s rare to have patients, providers—especially doctors—payers, and data, all brought together under an organization,” OptumHealth CEO Wyatt Decker told Bloomberg. “That’s the rare combination that we offer. That’s truly a differentiator in the marketplace.” The CEO of UnitedHealth, Andrew Witty, has also expressed the corporation’s goal of “wir[ing] together” all of UnitedHealth’s assets.
Controlling Change Healthcare would get UnitedHealth one step closer to creating their private single-payer system. That’s why UnitedHealth is offering up $13 billion, a 41 percent premium on the public valuation of Change. But here’s why that premium may be worth every penny.
Change Healthcare is Optum’s leading competitor in pre-payment claims integrity; functionally, a middleman service that allows insurers to process provider claims (the receipts from each patient visit) and address any mistakes. To clarify what that looks like in practice, imagine a patient goes to an in-network doctor for an appointment. The doctor performs necessary procedures and uses standardized codes to denote each when filing a claim for reimbursement from the patient’s insurance coverage. The insurer then hires a reviewing service—this is where Change comes in—to check these codes for accuracy. If errors are found in the coded claims, such as accidental duplications or more deliberate up-coding (when a doctor intentionally makes a patient seem sicker than they are), Change will flag them, saving the insurer money.
The most obvious potential outcome of the merger is that the flow of data will allow Optum/UnitedHealth to preference their own entities and physicians above others.
To accurately review the coded claims, Change’s technicians have access to all of their clients’ coverage information, provider claims data, and the negotiated rates that each insurer pays.
Change also provides other services, including handling the actual payments from insurers to physicians, reimbursing for services rendered. In this role, Change has access to all of the data that flows between physicians and insurers and between pharmacies and insurers—both of which give insurers leverage when negotiating contracts. Insurers often send additional suggestions to Change as well; essentially their commercial secrets on how the insurer is uniquely saving money. Acquiring Change could allow Optum to see all of this.
Change’s scale (and its independence from payers) has been a selling point; just in the last few months of 2020, the corporation signed multiple contracts with the largest payers in the country.
Optum is not an independent entity; as mentioned above, it’s owned by the largest insurer in the U.S. So, when insurers are choosing between the only two claims editors that can perform at scale and in real time, there is a clear incentive to use Change, the independent reviewer, over Optum, a direct competitor.
If regulators allow the acquisition to take place, Optum will suddenly have access to some of the most secret data in health care. In other words, if the acquisition proceeds and Change is owned by UnitedHealth, the largest health care corporation in the U.S. will own the ability to peek into the book of business for every insurer in the country.
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Although UnitedHealth and Optum claim to be separate entities with firewalls that safeguard against anti-competitive information sharing, the porosity of the firewall is an open question. As the AHA pointed out in their letter to the DOJ, “[UnitedHealth] has never demonstrated that the firewalls are sufficiently robust to prevent sensitive and strategic information sharing.”
In some cases, this “firewall” would mean asking Optum employees to forget their work for UnitedHealth’s competitors when they turn to work on implementing changes for UnitedHealth. It is unlikely to work. And that is almost certainly Optum’s intention.
The most obvious potential outcome of the merger is that the flow of data will allow Optum/UnitedHealth to preference their own entities and physicians above others. This means that doctors (and someday, perhaps, hospitals) owned by the corporation will get better rates, funded by increased premiums on patients. Optum drugs might seem cheaper, Optum care better covered. Meanwhile, health care costs will continue to rise as UnitedHealth fuels executive salaries and stock buybacks.
UnitedHealth has already been accused of self-preferencing. A large group of anesthesiologists filed suit in two states last week, accusing the company of using perks to steer surgeons into using service providers within its networks.
Even if UnitedHealth doesn’t purposely use data to discriminate, the corporation has been unable to correct for racially biased data in the past.
Beyond this obvious risk, the data alterations caused by the Change acquisition could worsen existing discrimination and medical racism. Prior to the acquisition, Change launched a geo-demographic analytics unit. Now, UnitedHealth will have access to that data, even as it sells insurance to different demographic categories and geographic areas.
Even if UnitedHealth doesn’t purposely use data to discriminate, the corporation has been unable to correct for racially biased data in the past, and there’s no reason to expect it to do so in the future. A study published in 2019 found that Optum used a racially biased algorithm that could have led to undertreating Black patients. This is a problem for all algorithms. As data scientist Cathy O’Neil told 52 Insights, “if you have a historically biased data set and you trained a new algorithm to use that data set, it would just pick up the patterns.” But Optum’s size and centrality in American health care would give any racially biased algorithms an outsized impact. And antitrust lawyer Maurice Stucke noted in an interview that using racially biased data could be financially lucrative. “With this data, you can get people to buy things they wouldn’t otherwise purchase at the highest price they are willing to pay … when there are often fewer options in their community, the poor are often charged a higher price.”
The fragmentation of American health care has kept Big Data from being fully harnessed as it is in other industries, like online commerce. But Optum’s acquisition of Change heralds the end of that status quo and the emergence of a new “Big Tech” of health care. With the Change data, Optum/UnitedHealth will own the data, providers, and the network through which people receive care. It’s not a stretch to see an analogy to Amazon, and how that corporation uses data from its platform to undercut third parties while keeping all its consumers in a panopticon of data.
The next step is up to the Department of Justice, which has jurisdiction over the acquisition (through an informal agreement, the DOJ monitors health insurance and other industries, while the FTC handles hospital mergers, pharmaceuticals, and more). The longer the review takes, the more likely it is that the public starts to realize that, as Dartmouth health policy professor Dr. Elliott Fisher said, “the harms are likely to outweigh the benefits.”
There are signs that the DOJ knows that to approve this acquisition is to approve a new era of vertical integration. In a document filed on March 24, Change informed the SEC that the DOJ had requested more information and extended its initial 30-day review period. But the stakes are high. If the acquisition is approved, we face a future in which UnitedHealth/Optum is undoubtedly “the thing that ate American health care.”