Update roundup: Change Healthcare sale to UnitedHealth Group/Optum may hinge on divesting, Oracle on Cerner exec departure packages up to $22 million

It looks likely that Change Healthcare will have to do some divesting in order to be bought by UnitedHealth Group. Bloomberg reported that ClaimsXten, part of Change’s Payment Integrity (PI) business, may be sold to facilitate the purchase. Sale price may be as high as $1 billion. Credit Suisse‘s analysis points out that ClaimsXten is only one part of the PI business, and more may have to be sold in PI or possibly in other lines of business. It also may not be enough to facilitate the sale though the move may be a hopeful one in the face of multiple challenges. UHG has already pushed the date forward to 5 April as we noted back in December, when it was barely noticed in the major shakeup at fellow payer Centene. Seeking Alpha

Cerner has disclosed additional details in an SEC Schedule 14D-9 on lead executive and associate compensation as part of the sale to Oracle, and it’s eye-blinking. Non-employee directors and executive officers will receive payments for their shares and cashed out compensatory awards in the Table of Equity Related Payments.  HISTalk calculated total ‘golden parachute’ packages and severances for the following:

  • President and CEO David Feinberg $22 million (company tenure – less than four months)–$17 million alone termed a ‘golden parachute’
  • EVP/CFO Marc Erceg $11 million (company tenure – less than one year)
  • EVP/CTO Jerome Labat – $11 million (company tenure – 19 months)
  • Former Chairman and CEO Brent Shafer — $21 million

Only two executives listed, CEO David Feinberg and CTO Jerome Labat, have waived ‘change of control’ separation payments as they will be continuing with Oracle [TTA 21 Jan].

If you’re an ordinary associate, from the wording, your vested shares will be cashed out (typical in change of control) and unvested shares will be rolled over to Oracle equivalents and not cashed out. Change of control benefits go only so far down the line. There is no language covering the status of unvested shares if you are one of the unlucky ones terminated due to the merger.

HISTalk also distilled a timeline from the background and board recommendation of how Cerner became open to purchase. There were risks from competition, retention of key technical employees, the risks in government contracting, and making their business goals.

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