In our latest Hot Take, Founder and Managing Director John Moore Jr. sits with us to share his thoughts on what this recent mega-merger means for each of the companies as well as what it portends for the industry.

Transcript (mostly generated by AI – please excuse typos):

[00:00:00] Hello, I’m John Moore, founder of Chilmark Research, and I’m here to talk a little bit about the recent announcement by Optum (part of UnitedHealth Group, NYSE:UNH) that they plan to acquire Change Healthcare (NASDAQ:CHNG) for $8B, plus the assumption of $5B of debt for a total price of $13 billion dollars. That is a very big acquisition.

Change is going to allow Optum to continue to extend its reach in the health care sector. It gives Optum a gateway into multiple providers that it doesn’t do business with today and it is going to be putting continued pressure on other competing solutions to be able to scale up to that capability.

[00:00:30] Change is actually the result of the combination of what was formerly known as Emdeon and McKesson’s health I.T. assets, particularly McKesson’s clearinghouse, while Emdeon had its own clearinghouse.

[00:00:47] And between the two, I think they manage like 14 billion transactions a year through that clearinghouse. They are basically the clearinghouse that can reach out to every single provider and health system in the country. Their reach is that expansive and extensive. That’s not to say that they go out into the nitty gritty of clinical data and everything else. But, you know, this is a clearinghouse and it’s been primarily EDI transactions. So it’s fairly simplistic, but it is a connection. And that connection capability and the relationships that Change already has with a wide range of providers across the country, as well as payers, brings a book of business to Optum that is quite attractive, that Optum can further leverage with its OptumInsight solutions suite, of which Change will fall under, to be able to deliver even more services and extend its ever-growing reach.

[00:02:03] Now, I like to think of Optum as the Godzilla of health care. Everyone talks about what Google is going to do in health care, what Amazon is going to do in health care, et cetera, et cetera. But Optum is the one that’s actually doing things that have a direct impact on the health care sector that is of significance. But it’s important to note that Optum is not a disruptor. They are an enabler of existing health care practices because that’s how they make their money.

[00:02:40] And as everyone – well, many people know – about 40 percent of Optum’s revenue comes directly from United Health Group. So it’s an internal sale as well as external sale. I think Change is going to allow Optum to continue to extend its reach in the health care sector. It gives Optum a gateway into multiple providers that it doesn’t do business with today and it is going to be putting continued pressure on other competing solutions to be able to scale up to that capability. On the other hand, there are a number of payers, as well as providers that compete with the UnitedHealth Group and would rather not give any more money to UnitedHealth Group through its Optum [solutions] than absolutely necessary. I do think that creates an opportunity for some of the more savvy and fully-featured competitors to be able to continue to sell into Blues plans, such as Anthem or Horizon Blue Cross Blue Shield of New Jersey, or Blue Shield in California, which actually is owned by Anthem – you get the idea.

[00:04:02] It does create an opportunity for them to better serve other payers that simply do not want to have to work with Optum if they don’t have to. But they’re going to need to step up their game.

[00:04:12] They’re going to need to do their own acquisitions, be able to provide a suite of services that are comparable and competitive to what Optum Insight will now be able to offer the market.