The American Antitrust Institute sent a letter to the U.S. Department of Justice Antitrust Division outlining concerns that the proposed acquisition of independent digital healthcare technology rival, Change Healthcare, by UnitedHealth Group (UHG) is likely to harm competition and consumers. Such harm could result from the effects of eliminating competition between UHG’s information and technology-enabled health services subsidiary, Optum, and Change Healthcare. AAI’s letter also states the concern that a larger and more powerful Optum could enhance UHG’s incentives to favor its dominant health insurer, UnitedHealthcare, to the disadvantage of rivals. This letter highlights important issues that arise from the unique characteristics of competition in digital technology markets and, more specifically, in digital healthcare technology markets.

The substantive issues of competition and antitrust analytics raised by UHG’s proposed acquisition of Change Healthcare are summarized below. In light of these concerns, AAI’s letter urges the Antitrust Division to apply careful scrutiny. The U.S. healthcare system is under siege by consolidation and concentration. The current matter provides an important opportunity for the Antitrust Division to move the ball forward on protecting competition in critically important healthcare markets, but also in leveraging its knowledge of digital technology markets and the unique challenges they pose for competition.

1. The proposed acquisition is a takeover of an independent, disruptive digital healthcare technology company by the largest, vertically integrated health insurer in the U.S. Consolidation in the digital technology sector more broadly has flown under the antitrust “radar” for two decades, including significant and rapid consolidation involving data analytics and cloud infrastructure that is at the heart UHG-Change Healthcare acquisition. The Antitrust Division has an opportunity here to address the problematic accretion of market power in digital healthcare technology markets.

2. The timing of the acquisition occurs at the intersection of COVID-19 disruption, rapid growth in digital healthcare technology markets, and high and rising concentration in critical healthcare markets. This confluence of factors highlights the high stakes nature of the Antitrust Division’s investigation into the proposed acquisition of Change Healthcare by UHG/Optum that, among other adverse effects, could stifle innovation in a critical sector.

3. UHG’s acquisition of Change Healthcare raises myriad competitive concerns. These include elimination of head-to-head rivalry in digital healthcare technology markets in which UHG’s Optum competes. But competition concerns also include stronger incentives for UHG/Optum to favor its own healthcare insurer, UnitedHealthcare, and disadvantage rivals, thus harming competition. Unique economic aspects of digital technology markets significantly exacerbate these competitive concerns.

4. Given the competitive concerns raised by the acquisition, any efficiencies claims should be viewed with extreme skepticism. Such efficiencies are likely to be achievable without the acquisition. And the many unique features of digital healthcare technology markets that amplify anticompetitive incentives and abilities would likely diminish the purported value of claimed efficiencies. This significantly raises the bar for UHG-Change Healthcare to prove their transaction is not anticompetitive.

5. Structural divestiture remedies, if included in a settlement agreement, would gut the gains from the strategic accretion of market power that motivates UHG’s acquisition of Change Healthcare and likely force the parties to abandon the deal. Given the unique features of digital technology markets, antitrust conduct remedies, applied in the digital healthcare technology markets at issue here, would be highly unlikely to restore competition.

6. The U.S. healthcare system is under siege by consolidation and high and rising concentration, to the proven detriment of consumers and healthcare providers. The current matter presents an important opportunity for the Antitrust Division to advance the ball on protecting competition in critically important healthcare markets, but also to leverage its knowledge of digital technology markets and the unique challenges they pose for competition enforcement.