- UnitedHealth Group handily beat Wall Street expectations for earnings and revenue in the second quarter, reporting revenue up 15% year over year to $71.3 billion, leading the Minnesota-based healthcare behemoth to increase its full-year guidance following the results.
- The jump was spurred by double-digit percentage growth in both of its main businesses: health services segment Optum and payer arm UnitedHealthcare. UnitedHealth brought in net income of $4.3 billion, beating analyst forecasts but down significantly compared to $6.6 billion at the same time last year, when COVID-19 dampened service utilization, resulting in unprecedented payer profits.
- On a morning call with investors, UnitedHealth leadership said they were waiting on more information before making a coverage decision regarding Aduhelm, Biogen's expensive new drug for Alzheimer's disease priced at an average cost of $56,000 per year.
After a historically profitable 2020, UnitedHealth kicked off earnings season for the quarter ended June 30 on Thursday, reporting revenue well above expectations. Though profit was down year-over-year, it was largely stable compared to the first quarter this year, which saw similar utilization trends, CFO John Rex told investors Thursday.
COVID-19 testing and treatment costs were highest in April — actually trending up from what UnitedHealth saw in March — before falling "pretty rapidly" in May and June, Rex said.
Service utilization was slightly above baseline in the payer's commercial markets and several percentage points below baseline in its public sector markets, though overall use progressed over the quarter as vaccination rates advanced.
However, UnitedHealth expects both utilization and service acuity to trend up progressively in the back half of 2021.
"We haven't observed that yet, but it's probably too early to say," Rex said.
The second quarter results led the healthcare giant to up its 2021 guidance. UnitedHealth now expects to bring in earnings per share between $17.35 and $17.85, up from its previous estimate of between $17.15 and $17.65.
Factored into that EPS guidance is an estimated $1.80 in unfavorable impacts from COVID-19, with the vast majority expected to come into play in the second half of the year as utilization and acuity increase, with rising testing and treatment costs potentially being offset by elective care deferrals.
"There's still a ways to go, and there are uncertainties within that," CEO Andrew Witty told investors.
But management is "looking increasingly conservative" with COVID-19 headwinds like health system capacity and the looming Delta variant, as UnitedHealth's guidance increase was notably lower than the second quarter upside, Jefferies analyst David Windley pointed out in a note on the results.
UnitedHealth's medical loss ratio — a marker of how much spends for patient care — of 82.8% was higher than analysts expected, given that conservatism, Windley said. It's also significantly up from the same time last year, when UnitedHealth's MLR of 70.2% illustrated plummeting service utilization during COVID-19.
UnitedHealthcare reported revenue up 13% year over year to $55.5 billion. The payer segment's risk and self-funded commercial enrollment fell slightly on a quarter-over-quarter basis, while its Medicare Advantage enrollment — a key growth priority for the company — was in line with analyst expectations, and Medicaid outperformed them, helped by new contract wins in Hawaii and Ohio.
Overall, UnitedHealthcare's membership has grown by nearly 1.2 million since the end of 2020, including 150,000 in the second quarter alone.
UnitedHealth's health services segment, comprised of physician business OptumHealth, data analytics segment OptumInsight and pharmacy benefit manager OptumRx, saw its revenue hike 17% year over year to $38.3 billion, the comapny said.
OptumInsight has been building out its relationships with hospitals, in the quarter inking a new client in Bassett Healthcare Network to streamline its back-end administrative and clinical capabilities.
"We expect to continue to add new partnerships like this," Chief Operating Officer Dirk McMahon said, noting OptumInsight's sales have been seeing strong momentum.
One of UnitedHealth's core strategies is developing more joint products from Optum and UnitedHealthcare, along with building out technology and its consumer focus. One example is a virtual primary care offering quarterbacked by Optum, with UnitedHealthcare's physician network as a backup for any in-person needs. Management and analysts said the offering is in line with new trends toward home-based care and telemedicine observed in UnitedHealth's members and the market as a whole.
"We're hoping it'll aid with UnitedHealthcare's commercial growth," McMahon said, sharing UnitedHealth plans to roll out the new product in eight or nine existing markets this year.
However, UnitedHealth's growing focus on the overlap between its businesses has raised eyebrows, especially among regulators and antitrust hawks.
Currently, the Department of Justice is investigating UnitedHealth's planned $13 billion acquisition of data analytics Change Healthcare after hospitals raised concerns the buy could result in less competition for health IT and revenue cycle management services, and give UnitedHealthcare an unfair edge in contract negotiations with providers.
UnitedHealth leadership also said Thursday they were waiting on more information from CMS before deciding whether to cover Aduhelm, Biogen's new drug for Alzheimer's disease. The decision is an important one for access, as UnitedHealthcare is the largest payer in the country after the federal government.
The Food and Drug Administration's controversial approval of the drug — the first Alzheimer's treatment ever meant to address the disease's underlying cause — sent Biogen's stock soaring, and was met with jubilation from patients and swift criticism from many physicians and regulators. Many fear Aduhelm could add tens of billions of dollars to spending in Medicare, a program already flirting with insolvency, with little evidence it moves the needle on patient outcomes.
"From where we stand today, there's still a lot of information we need to make decisions," Witty said, adding UnitedHealth is waiting on guidance from Medicare. "I think we're not the only ones looking for clarity in this arena."
Earlier this week, CMS kicked off a process to decide whether it will set a universal policy for Aduhelm, called a national coverage determination. The agency plans to collect public input through comments and meetings this month, before posting a proposed policy for further stakeholder feedback and eventually reaching a final determination. CMS estimates the process, which is supported by patient advocacy groups and insurers, will take up to nine months.