• This is an excerpt from a story delivered exclusively to Business Insider Intelligence Payments Briefing subscribers.
  • To receive the full story plus other insights each morning, click here.

UnitedHealth Group, parent company of major US health insurer UnitedHealthcare, is reportedly planning to acquire payments firm Equian for $3.2 billion, per The Wall Street Journal.

Annual National Health Spending in the US

Equian, which is currently owned by private-equity group New Mountain Capital, offers payments processing services for healthcare companies and insurers; it analyzes claims both before and after they’re paid to find inappropriate or unnecessary bills and blocks or recovers overpayments.

UnitedHealth will likely integrate Equian into Optum, its health-services arm that caters to insurers, hospitals, and other healthcare companies.  

Here’s what it means: Healthcare payments are still largely hampered by manual and paper-heavy processes, indicating gaps in the space that need streamlining.

  • Inefficient payment processes are a persistent and costly problem for healthcare providers. Sixty-five percent of healthcare providers’ primary method of collecting payments is by mailing statements, according to an InstaMed study. But automating claims transactions could save the US healthcare industry over $9.8 billion annually on costs that stem in part from the volume of manual transactions and the time it takes to process them.
  • And we’ve seen players angling into the healthcare space to fix this problem. National health spending in the US is projected to grow at an average rate of 5.5% annually from 2018 to 2027 to reach nearly $6 trillion by 2027, according to the Centers for Medicaid and Medicare Services. And payments players have been pursuing this massive opportunity via partnerships and acquisitions, or by offering point-of-sale (POS) hardware or software for the industry and processing solutions catered to specific needs of healthcare providers. Square, for example, expanded its partnerships with healthcare providers and is considering building out support for more complex healthcare payments. And more recently, JPMorgan Chase acquired healthcare payments tech firm InstaMed for over $500 million to help disentangle the notoriously knotty healthcare payments system.

The bigger picture: This acquisition could ultimately cement Equian as a leader in the healthcare payments space.

  • Equian will gain an unrivaled reach that could substantially boost its payments volume. UnitedHealth is valued at about $235 billion and UnitedHealthcare is the largest health insurer in the US. So, while several major payments players are moving into the healthcare space, Equian is likely to have a strong competitive advantage. 
  • And UnitedHealth can tap into Equian’s healthcare payments expertise to streamline processes and cut costs, while branching into new areas.Equian handles more than $500 billion in healthcare claims annually and serves nine of the 10 largest healthcare companies. Together, the firms could develop solutions to streamline healthcare payments to capitalize on the growing opportunity. And, because Equian serves insurers outside the healthcare industry, it could allow UnitedHealth to extend Optum’s offerings beyond healthcare, per The WSJ.

Interested in getting the full story? Here are two ways to get access:

1. Sign up for the Payments Briefing to get it delivered to your inbox 6x a week. >> Get Started

2. Subscribe to a Premium pass to Business Insider Intelligence and gain immediate access to the Payments Briefing, plus more than 250 other expertly researched reports. As an added bonus, you’ll also gain access to all future reports and daily newsletters to ensure you stay ahead of the curve and benefit personally and professionally. >> Learn More Now

Join the conversation about this story »