UnitedHealth’s Optum to buy Change Healthcare in $13B deal

• The Optum unit of the UnitedHealth Group will purchase Change Healthcare for $ 7.8 billion in cash plus $ 5 billion in a deal expected to close in the second half of the year, the two companies said Wednesday.

• The companies said the agreement aims to simplify certain processes in the areas of payments, administration, and clinical services. Change Healthcare is a technology company that sells a range of services including consulting, software, processing requests, and data analysis.

• Neil de Crescenzo, CEO of Change Healthcare, will become CEO of OptumInsight after the contract and will lead the merged companies.

This decision consolidates Optum’s dominance in the field of health data analytics. UnitedHealth’s business, which includes a PBM and a medical division, has been a constant revenue engine for the largest private insurer in recent years.

SVB Leerink analysts called the move a “logical strategic connection,” as Change and Optum have complementary and overlapping deals, according to a statement released Wednesday.

“We believe the core of the business logic lies in [Change Healthcare’s] close relationships with suppliers and its ability to improve OptumInsight customer relationships,” said analysts at SVB Leerink.

The overall goal is to leverage the substantial amount of data controlled by these two companies to help physicians improve care and ultimately reduce costs.

According to Crescenzo, Change Healthcare has 30,000 customers and processes $ 2 billion in damages claims annually in the United States. This gives the company a meaningful insight into the country’s health system.

In 2019, UnitedHealthcare and Optum processed gross commissions of $ 1 trillion and managed healthcare expenses for clients of over $ 250 billion.

The “Edit Health Data” window is critical to OptumInsight and its initiatives that “rely heavily on data to more effectively manage care and help providers make the transition to health-based care. Values   (a core competency of OptumInsight) “, then SVB analyst Leerink.

Change Healthcare went public in 2019. It was founded in 2017 and was previously part of a joint venture with McKesson.

Optum has announced that it will acquire Change for $ 25.75 per share and Change has 304,452,260 shares outstanding according to its most recent 10-Q filing. The share of the stock closed at $ 18.24 on Tuesday, a 41% payout.

Forex stocks ended the day at 30%.

UnitedHealth Group announced that the deal will increase net income and adjusted earnings per share by approximately $ 0.20 and $ 0.50, respectively, in 2022.

The acquisition strengthens the industry giant as a threat to more than one industry sector.

UnitedHealth Group has conducted some transactions over the years to strengthen the Optum business, which is divided into three units: OptumInsight, OptumRx, and OptumHealth.

More recently, other insurance competitors have gobbled up pharmacy benefit managers as a means of vertical integration to give health plans more control and transparency over more of a member’s medical bills, but also drug costs.

UnitedHealthGroup was on this path years ago. Most recently, the company bought medical groups including Davita Medical Group and Surgical Care Affiliates in 2017.