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UnitedHealth Group to acquire Equian from New Mountain Capital for $3.2B

By Ben Garber | June 25, 2019

UnitedHealth Group (NYSE: UNH), parent company of the nation’s largest health insurer UnitedHealthcare and the Optum provider network of approximately 36,000 physicians, has agreed to acquire Equian LLC for about $3.2B, per the Wall Street Journal.  Equian is a tech-enabled business services company that provides claims analysis to insurance companies in the healthcare, workers compensation, and property & casualty markets. Equian reviews claims using data analysis and clinical review to identify inappropriate or unnecessary claims.  In a world entwined with increasingly complex insurance contracts, Equian’s services ensure that accurate amounts are being paid, overpayments are identified, and that claims are subrogated to the appropriate payor. For an insurer covering nearly 50 million members and a service provider processing $2.9B in claims annually, payment integrity for the Minnetonka, Minn. based enterprise is a big deal.  

Equian will likely be rolled into the OptumInsights suite of services and enhance the capabilities offered by OptumIQ for payors and Optum360 for providers.  While certainly a strategic consideration for UnitedHealthcare, the cross-selling opportunity will be fruitful as Equian services 9 of the 10 largest healthcare insurers and more than 70% of health plans nationally use Optum technologies to manage their costs.  As I’ve personally heard time and again in meetings with payors and health systems across the country, “All roads lead back to Optum.”

The Equian business today is really a result of several private equity funds’ strategies for mergers and acquisitions in the healthcare payments sector and can trace its lineage back to multiple precedent companies.  The most recent major transaction (prior to this sale) was the 2015 combination of Equian (which New Mountain acquired from Great Point Partners for $225mm(1)), and Trover Solutions, (which was acquired from ABRY Partners and minority investor VSS for an undisclosed amount).  Trover was previously a portfolio company of Tailwind Capital, which had acquired the claims subrogation company through a $27mm take private transaction in 2004(2), and realized $112mm(3) on its investment through the 2010 sale to ABRY for $67mm and $45mm the firm had collected through dividend recaps during its holding period.  Under ABRY’s ownership, Equian had executed tuck-in acquisitions of: data-mining and post-payment recovery company AfterMath Claim Science; audit and clinical review company Nurse Audit; payment integrity technology company T3 Worldwide; cost management software company @Global; subrogation company First Recovery Group; and most recently post-payment audit provider Omniclaim.  VSS had also participated as a minority shareholder in ABRY’s 2010 sale of Executive Health Resources to UnitedHealth Group which became a cornerstone of the Optum platform that was created the following year and will now be the home of Equian. This is an impressive collection of investors and transactions, and a true case study in the “buy and build” strategy employed by private equity investors. Equian achieved both market-leading scale and depth and breadth of solutions, which resulted in a truly strategic valuation with one of the largest buyers in this sector.

The UnitedHealth Group acquisition of Equian is enigmatic of growing market interest in payor services that 7 Mile Advisors has observed and been reported by our investor network.  With the growth of Medicare Advantage and Shared Savings Programs and the shift towards at-risk payor contracts driving increasing complexity in reimbursements, payors and providers alike are increasingly relying on technology-enabled solutions to capture economic incentives and compete effectively in the transforming healthcare landscape.  

We’ve also witnessed investments in the provider side of the reimbursement process. VSS’s investment in Caravan Health and the majority recapitalization earlier this year of Payor Compass lead by Spectrum Equity and Health Enterprise Partners illustrate the evolving competitive dynamics in the market, as both companies support optimizing provider reimbursements. These solutions sit on the opposite side of the table to Optum-supported payors utilizing Equion’s Network & Pricing Optimization tools. We believe these companies, and even more, will look to leverage proprietary data to their advantage in contract negotiations. This should drive future M&A activity for the foreseeable future.


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