Healthcare giant UnitedHealth Group beat analyst expectations for the fourth quarter of 2022 with revenue of $82.8 billion, up more than 12% year over year, according to results released premarket Friday.
Industry experts have expressed concern about potential recessionary pressures and upset care utilization patterns headed into 2023. But UnitedHealth's earnings, which are considered a bellwether for the health insurance sector's performance, may prove to be a positive sign for payers.
In a call with investors Friday morning, UnitedHealth CEO Andrew Witty characterized the state of the company as bringing “a ton of momentum into 2023.” Looking forward, UnitedHealth expects standout trends for the company to include growth of UnitedHealthcare’s membership rolls, an increase in fully capitated lives in value-based care business Optum Health and an acceleration of Optum Insight’s integration with Change Healthcare.
UnitedHealthcare’s revenue grew 12% year over year to top $63 billion in the quarter. The health insurance segment ended the year with 51.7 million members, a growth of more than 1.2 million over the year, led by UnitedHealthcare’s community-based and senior offerings.
Witty said UnitedHealthcare anticipates adding another “million plus” members by the end of 2023.
The payer’s medical loss ratio of 82.8% was slightly higher than analyst expectations, partially due to a high respiratory season.
“We certainly saw that [flu] spike. We have now seen that start to wane for I think five consecutive weeks here moving forward,” UnitedHealthcare CEO Brian Thompson told investors.
UnitedHealthcare is “sort of out of the zone of these unknowns” and back to expectations it had pre-pandemic when it comes to seasonal trends, Thompson said.
“There was a bit more flu and respiratory disease but really I’d say immaterial,” Witty said. “The little elevation we saw was somewhat in the range of what you’d expect to see in a normal Q4.”
Optum, UnitedHealth’s health services business, reported revenue of $47.9 billion, up 17% and higher than analysts expected. Value-based care unit Optum Health drove the bulk of the performance, while data analytics arm Optum Insight came in slightly below expectations.
Optum Health’s revenue per customer served increased by 29% in 2022, as value-based care contributed to Optum’s revenue growth.
“Optum Health margin upside was notably large, despite the strong flu season ([value-based care] risk bearing would theoretically be hit by that),” Jefferies analyst David Windley commented in a note on the results.
Optum Health plans to add new regions and deepen its presence in existing areas in 2023, as UnitedHealth makes significant investments in its clinical network, care coordination, home capabilities and more, COO Dirk McMahon said.
Optum Health has seen “really rapid growth of value-based fully capitated lives,” Witty said. The CEO said he expects the number of lives in fully capitated arrangements to “more than double” by the end of 2023.
Meanwhile, UnitedHealth plans to accelerate its investments in healthcare technology to bolster Optum Insight, CFO John Rex told investors, adding that he expects the company to make a significant portion of investments in the first half of 2023.
The unit is currently integrating Change Healthcare, which UnitedHealth bought in a $13 billion deal that closed in October. The buy encountered regulatory scrutiny and is now facing an appeal from the Department of Justice.
UnitedHealth plans to actively pursue M&A across the board in 2023, according to the CEO. “We have a substantial number of transactions in progress as we speak,” Witty said.
CFO John Rex declined to comment on what areas of M&A the company is pursuing, only that deals would be in line with ongoing company priorities like value-based care capabilities.
For full-year 2022, UnitedHealth brought in revenue of $324.2 billion, up 13% year-over-year. Profit of $20.6 billion — UnitedHealth’s highest bottom line ever — was up 16%. The Minnetonka, Minnesota-based company on Friday affirmed its 2023 outlook set at its November investor conference, expecting full-year revenues between $357 billion and $360 billion.
