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Our Take: New DOJ investigation into UnitedHealth Group, Optum focuses on potential antitrust practices

Mar 04, 2024

The U.S. Department of Justice has been investigating UnitedHealth Group to determine whether the company and its subsidiaries may have violated antitrust regulations, The Wall Street Journal and The Examiner News reported early last week.  

Investigators with the DOJ have been interviewing “representatives” in sectors of the health care industry in which UnitedHealth competes, including physician groups, The Journal reported on Tuesday, citing people with knowledge of the meetings. 

According to those sources, questions asked during the interviews pertained to certain relationships between UnitedHealthcare, UnitedHealth Group’s health insurance subsidiary, and Optum, which now employs approximately 90,000 physicians nationwide. The line of questioning centered on whether and how Optum’s ownership of physician groups may affect Optum’s and UnitedHealthcare’s competitors, as well as consumers. 

The Examiner News article, published last Monday, said an internal email sent to corporate executives at UnitedHealth Group in October by Rupert Bondy, the company’s chief legal officer, referred to a “non-public antitrust investigation into the company” by the DOJ. According to the article, Bondy said in the email that the investigation was in its early stages and the DOJ had not issued any “specific allegations of wrongdoing.”

According to The Journal, DOJ investigators have asked the people they’ve interviewed whether UnitedHealthcare showed bias in favor of Optum’s physician groups in its contracting practices, which could have prevented rival physicians from participating in certain types of payment arrangements. It could also have had an impact on provider networks for competitors of UnitedHealthcare.  

The DOJ has also inquired about the company’s Medicare billing practices, The Journal reported, and whether the relationships between UnitedHealthcare and Optum’s physician groups may have affected the insurer’s compliance with medical loss ratio requirements.

Under the Affordable Care Act, health plans are required to spend a certain percentage of the premiums they collect on clinical services and quality improvement efforts (80% in most cases; 85% for large group health plans). If they spend less than that, they are required to issue premium rebates for the difference.

But in a situation like UnitedHealth Group’s, where the same company owns the health insurer and the business that employs the health providers, it’s possible that the company may “absorb” more than the allowed amount of 15% to 20%, The Journal noted. 

Neither UnitedHealth Group nor the DOJ have confirmed or commented on the investigation. 

Our Take:  UnitedHealth Group is making money hand over fist. 

The company reported revenue of $371.6 billion for 2023 — an increase of nearly 15% from a year earlier. UnitedHealthcare had revenue of $281.4 billion, up 12.7% from 2022. Optum had revenue of $226.6 billion, a year-over-year increase of 24%. 

And UnitedHealth Group dominates nearly every business in which it engages.

According to the American Medical Association, as of December, UnitedHealth Group had the largest share of the commercial health insurance market share, at 14%. It also had the largest share of the Medicare Advantage market, at 28%. 

Optum is the largest physician employer in the U.S. — the company added almost 20,000 physicians just last year. As of late November, Optum had nearly 90,000 employed or affiliated physicians and another 40,000 advanced practice clinicians. 

Optum Rx is *only* the third largest pharmacy benefit manager, with a 22% share of that market as of last May. (CVS Health’s Caremark led with a 33% market share. Cigna’s Express Scripts wasn’t much ahead of Optum Rx, though, with 24% of the market.) 

And UnitedHealth Group keeps expanding its reach. 

The company paid $13 billion in 2022 to buy Change Healthcare, the largest electronic data clearinghouse for health insurance claims, and combine it with Optum — an acquisition the DOJ tried to stop on the grounds that UnitedHealth would gain access to data on its competitors’ health plans and could use that to its advantage. After a federal judge ruled in UnitedHealth’s favor, the company quickly closed the deal. 

A year ago, UnitedHealth Group bought home health provider LHC Group for $5.4 billion and combined it with Optum. A few months later, UnitedHealth announced that it had agree to pay $3.3 billion for home health and hospice provider Amedisys. The DOJ asked for more information on that transaction in August and has yet to give the deal its blessing. If the acquisition is completed, Optum would be the largest owner of home health assets in the country, according to Home Health Care News.

In light of UnitedHealth’s growth, particularly through the acquisitions of not just large companies in the health care sphere but also substantial provider groups — like the $2 billion purchase of Kelsey-Seybold last year — it’s little wonder that the DOJ has decided to take a closer look at UnitedHealth’s business practices and what impact they’re having on markets across the country. 

Emanate Health, a nonprofit health system in California’s San Gabriel Valley, filed a lawsuit in November accusing Optum of engaging in anticompetitive practices. Depending on what the DOJ investigators find, that lawsuit may turn out to be the tip of the iceberg. 

What else you need to know
Northwell Health and Nuvance Health plan to combine, forming a regional health system with 14,500 providers and more than 1,000 sites of care, including 28 hospitals, according to the announcement. Northwell, based in New Hyde Park, N.Y., has 21 hospitals and is New York’s largest health care provider. Danbury, Conn.-based Nuvance, which was created in 2019 when Western Connecticut Health Network merged with Health Quest, has seven hospitals in the Hudson Valley area and western Connecticut. Specific financial terms were not disclosed, though Northwell has agreed to make “significant investments” in Nuvance.

Like most nonprofit health systems, Northwell and Nuvance have had their financial challenges the past few years. Northwell, in particular, appears to be doing somewhat better, reporting a $157.1 million net loss in its third quarter but a $449.2 million net gain for the first nine months of 2023. Nuvance reported a $121.5 million net loss for its 2023 fiscal year, which ended Sept. 30; that compares with a net loss of $153.3 million a year earlier. The announcement did not provide details regarding leadership of the combined health system. Michael Dowling is CEO of Northwell, and Dr. John Murphy is CEO of Nuvance. Provided regulatory approval is granted, the health systems expect to close the transaction by the end of this year. 

Montefiore’s Albert Einstein College of Medicine received a $1 billion donation from Ruth Gottesman, who chairs the Einstein board of trustees and is a Montefiore Health System board member. The money is to be used for free tuition in perpetuity for all medical school students at Einstein. Gottesman began her 55-year association with Albert Einstein College of Medicine at in 1968 at the Children’s Evaluation and Rehabilitation Center. Today, she is Clinical Professor Emerita of Pediatrics at Einstein. Her husband, David “Sandy” Gottesman, bequeathed a portfolio of Berkshire Hathaway stock to Ruth when he died in 2022, according to The New York Times, with the instructions to do with it whatever she thought was right. She said the donation would let new physicians start their career without the burden of medical school debt and hoped it would bring students to Einstein who otherwise would not be able to afford to earn a medical degree, the Times reported.    

The Change Healthcare network outage continued to disrupt pharmacy services more than a week after UnitedHealth Group, the parent company of Optum and Change Healthcare, stated in a Feb. 21 Securities and Exchange Commission filing that “a suspected nation-state associated cyber security threat actor” had gained access to some Change Healthcare IT systems, leading Optum to isolate and disconnect the affected systems. As of Friday, an updated notice on Optum’s website still said “some applications are experiencing connectivity issues.” Reuters reported on Feb. 28 that a Russia-based ransomware group known as both BlackCat and ALPHV claimed to have stolen millions of sensitive records in the attack, though the news agency was unable to verify it. Optum confirmed the identity of the “threat actor” the following day. Change Healthcare is the largest commercial prescription processor in the U.S., providing technology services for more than 67,000 pharmacies, according to Healthcare Dive.   

Chicago-based Vale Health launched last week with 16 health systems backing the new online wellness marketplace. Consumers begin by taking an assessment, which Vale Health uses to direct them to personalized recommendations for products and services that have been vetted by experts from the various health systems who serve on Vale Health’s platform advisory boards. Froedtert & the Medical College of Wisconsin health network is the first of the 16 health systems to go live with the new platform. Other founding health system partners include Baylor Scott & White Health, Cone Health, Memorial Hermann, Novant Health, and Ochsner Health, according to the press release. Vale Health is starting with products for better sleep and will add other categories such as weight management, mental wellness, skin care, pregnancy, and digestive health in the months ahead.  

A bipartisan group of 39 state attorneys general sent a letter to minority and majority leaders of Congress earlier this month urging them to take action on pharmacy benefit manager reform. They specifically requested passage of three proposed bills that would strengthen federal laws and permit state and federal regulators to “better meet their shared responsibility to hold PBMs accountable.” The proposed legislation would limit PBMs from increasing drug prices without justification and mandate steps to increase transparency. The AGs said federal action is necessary because PBMs “routinely try to evade state law and obstruct state regulatory efforts by refusing to disclose data to state regulators and their own clients.” Apparently, PBMs are not complying with the feds, either. Lina Khan, chair of the Federal Trade Commission, responded to an inquiry from Sen. Chuck Grassley regarding the status of the FTC’s probe into PBM business practices. “To date, no company has turned over sufficient documents and data to be in full compliance with [compulsory orders issued in 2022 and 2023],” Khan wrote in the letter, adding that FTC staff continues to push PBMs to produce the information “as quickly as possible.”


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