- UnitedHealth Group expects its planned $ 13 billion acquisition of data analytics firm Change Healthcare, which the DOJ review delayed to close “in the early part of 2022,” Chief Operating Officer Dirk McMahon told investors in a call Thursday morning.
- The news is likely to enrage hospital groups, which have expressed concern, some directly to regulators, that the deal could reduce competition from healthcare IT and generate UnitedHealthcare an unfair advantage in contract negotiations.
- The news comes as the diversified healthcare giant beat Wall Street expectations in both earnings and revenue. in the third trimester, with a top line of $ 72.3 billion, up 11% year-over-year, due to double-digit percentage growth in its paying arm, UnitedHealthcare, and your health services business, Optum. Profits were $ 4.2 billion, an increase of 29% compared to the third quarter of last year. As a result, UnitedHealth, based in Minnetonka, Minnesota, outperformed its guidance for the full year.
Thanks in part to its diversified portfolio, UnitedHealth had a strong financial performance last year even as volatility from COVID-19 hit other healthcare operators. The company posted historic revenue in 2020 as many private payers benefited from the delay in patient care.
Some analysts warned that the trend could hit insurers again, if patients flocked to providers for deferred medical needs, increasing claims. It appears that now those fears may have been overstated, as payers reported in the first half of the year that they stabilized patient utilization without exceeding normal levels.
For its part, United Health saw a slight year-on-year drop in earnings in the second quarter as volumes inched toward normal levels. However, revenue was largely stable during the first and second quarters, due to similar utilization trends during the first half of 2021.
In the July earnings call, management said they expected both utilization and service acuity to trend upward in the second half of the year.
Now in the third quarter, UnitedHealth, often viewed as an indicator of the industry’s financial performance given an earnings release date earlier than its peers, has approximately 5,000 members currently admitted to hospitals for COVID treatment. -19, CFO John Rex told investors. That’s about half the numbers of hospitalized patients seen during the peak of the third trimester.
UnitedHealth continues to see commercial members consume elective care more actively than recipients of government programs.
“They are general trends similar to what we observed in the second quarter, just changing due to the prevalence of COVID. [outpatient] reducing a bit in terms of COVID prevalence, but then really offset by COVID [volume]”the CFO told investors.
UnitedHealthcare CEO Brian Thompson noted that elective care is approaching baseline for a year without COVID-19.
“What we’ve seen is a pretty steady return to normalcy,” Thompson said.
The payer saw a medical loss ratio of 83% in the quarter, slightly lower than the 83.6% expected by analysts, but significantly higher than the 81.9% in the same period last year amid widespread postponements of the attention.
UnitedHealth increased its targeting for 2021 following the results. The company now expects earnings per share between $ 17.70 and $ 17.95, up from the previous guidance of $ 17.35 to $ 17.85, although UnitedHealth reiterated that it expects COVID-19 to reduce its EPS by approximately $ 1.80.
Volume stabilization trends led the payer to forecast a slightly less adverse COVID-19 impact in 2022 than the industry experienced this year, “but the current situation is unprecedented,” Rex noted. UnitedHealth plans to offer a more detailed outlook for 2022 on its November Investor Day.
In the quarter, United Healthcare paying arm revenue grew 11% year-over-year to $ 55.9 billion. United Healthcare saw strong risk-based Medicaid membership growth as well as strong business membership growth, analysts said, with 1.5% sequential growth in their business risk book and growth of 1, 1% on your ASO business membership.
“This represents a positive development and turnaround,” said Whit Mayo, analyst at SVB Leerink, as Medicaid membership continued to improve with a sequential increase of 5.3%.
The lucrative Medicare Advantage program is also a key investment area for the payer, management reiterated. UnitedHealthcare is on track to grow by more than 900,000 additional people in private Medicare plans this year.
Meanwhile, Optum, a growth segment for UnitedHealth, posted quarterly revenue of $ 39.8 billion, up nearly 14% year-over-year. Optum is comprised of medical company OptumHealth, data analytics segment OptumInsight, and pharmaceutical benefits manager OptumRx.
Each of the three companies contributed to earnings growth in the quarter, led by OptumHealth, the leadership said.
Optum, which has been strengthening its relationships with hospitals, signed another revenue and data cycle management contract last week. The decade-long agreement with nonprofit SSM Health, Optum’s largest partner to date, will see Optum support some of SSM’s administrative functions, including hospital care management, revenue cycle management and other digital needs.
Previously Announced Hospital Partners Include Giant Nonprofit Dignity health (now operating as CommonSpirit), John muir in the California Bay Area, Bassett Health Care Network in downtown New York and Boulder Community Health in Colorado.
In addition to developing its technology and data science platform and focusing on the consumer experience, one of UnitedHealth’s core strategies is to develop more joint UnitedHealthcare and Optum products. That raised the eyebrows of regulators and the screams of hospital groups concerned about the overlap between the largest private payer in the US and a healthcare company with a long list of hospital clients could create problematic financial incentives in the future.
The Justice Department has been investigating UnitedHealth’s $ 13 billion acquisition of data analytics company Change Healthcare, after hospital groups argued the purchase could reduce competition for revenue cycle management services. and Health IT, and giving UnitedHealthcare an unfair advantage in contract negotiations with providers.
But despite anti-competitive concerns, United Health now expects the transaction to close in early 2022.
“We continue to work diligently to meet regulatory requests,” McMahon said.
Shares of UnitedHealth, which are up 15% so far this year, were up nearly 5% in Thursday morning trading with the results.
The company expects to generate between $ 16.9 billion and $ 17.15 billion in profit in 2021.