Dive Brief:
-
UnitedHealth Group’s shares dipped for a short time this week before rebounding after the healthcare giant issued its projected 2018 earnings, which were slightly below expectations.
-
On Tuesday, UnitedHealth's Optum announced it is launching Optum Ventures, a $250 million fund to develop healthcare startups. The investments will include digital health firms “that use data and insights to help improve consumers’ access to healthcare services and how care is delivered and paid for, and that make the healthcare system more reliable and easier to navigate,” the company said.
-
The Wall Street Journal reported that UnitedHealth’s shares have more than quadrupled over the past five years. WSJ's Charley Grant questioned whether UnitedHealth’s stock has reached an “unhealthy altitude.”
Dive Insight:
UnitedHealth Group's shares dropped on Monday with word of the 2018 forecast, but rebounded the next day. Its shares closed at $216.14 on Tuesday, an increase of 1.72%.
UnitedHealth said it will adjust earnings to between $10.55 and $10.85 per share and expected revenues between $223 billion and $225 billion for 2018. Analysts predicted earnings of $10.81 per share and $218 billion in revenue.
UnitedHealth has enjoyed a strong year with shares moving upward and the company seeing revenue and earnings growth. Its third-quarter revenue grew by nearly 9% year-over-year (YOY) to $50.3 billion. Third-quarter earnings increased 14% YOY to $4.1 billion.
Despite its positive year, some analysts wonder whether UnitedHealth may see a large share drop.
$UnitedHealth Faces 50% Share Drop Or Worse
— Kirk Spano (@KirkSpano) November 28, 2017
AET $ANTM $CI $HUM $UNH https://t.co/KBdwNe4Ezz
One area of success and further growth for UnitedHealth is Medicare Advantage (MA). UnitedHealth controls about one-quarter of the MA market, and the company is expected to expand its MA footprint. About one-third of Medicare beneficiaries have an MA plan, and UnitedHealth expects that number may eventually grow to 50%. There are thousands of newly eligible Medicare beneficiaries each day, which makes MA a growing market.
Other parts of UnitedHealth are also growing. The company's Optum is acquiring Advisory Board through a merger. Advisory Board stockholders recently voted to approve the merger. The move combines Advisory Board’s research and advisory services with Optum’s products and services.
Optum has been a highlight for UnitedHealth this year. Its revenues increased by 8% YOY to $22.9 billion and operating margins increased 50 basis points YOY to 7.4%. OptumHealth served about 90 million customers in the third quarter, which was 9 million more than last year. Optum was also the biggest highlight of the second-quarter earnings.
It's not all good news for Optum though. It recently got pulled into a legal battle between Anthem and Express Scripts. The case involves Anthem dropping Express Scripts as its pharmacy benefit manager (PBM) and suing the company for $15 billion because the PBM reportedly reaped “an obscene profit windfall” from drug manufacturers. Optum got involved in a related legal case that deals with a pricing proposal that Optum gave Anthem after the payer requested the information. The payer approached Optum for the proposal when Anthem was deciding whether to end its contract with Express Scripts.