Dive Brief:
- UnitedHealth is bullish on completing its controversial acquisition of data analytics firm Change Healthcare, despite legal action from the Department of Justice to block the deal.
- UnitedHealth's extended agreement with Change "reflects our firm belief in the potential benefits of this combination to improve healthcare and in our ability to successfully overcome the challenge to this merger," Chief Operating Officer Dirk McMahon told investors on a Thursday morning call regarding first-quarter financial results.
- The Minnetonka, Minnesota-based healthcare behemoth beat Wall Street expectations for earnings and revenue in the quarter, with a topline of $80.1 billion, up 14% year over year due to double-digit growth at health services arm Optum and payer business UnitedHealthcare. Net earnings were $5.1 billion, up 3% year over year. UnitedHealth raised its full-year guidance following the results.
Dive Insight:
Optum expected to close a $13 billion acquisition of data analytics firm Change Healthcare earlier this year, but the DOJ halted the deal over anticompetitive concerns in February. UnitedHealth and Change had until April 5 to decide to walk from the deal or continue to pursue a merger in court.
The companies elected for the latter option. Change is exploring a potential sale of its payment integrity business ClaimsXten in a bid to resolve antitrust concerns, even after the DOJ sued to block the deal, according to a recent Bloomberg report. The DOJ trial to block the deal is scheduled to begin Aug. 1.
Management comments Thursday illustrated UnitedHealth's commitment to seeing the acquisition through. McMahon highlighted the potential of combining Optum and Change to connect core administrative and payment processes across the healthcare ecosystem. That's also been a major criticism of the deal, with hospital and pharmacy groups arguing the merger will result in fewer choices for services like revenue cycle management.
In the first quarter, UnitedHealth saw "considerable variation in care patterns" due to COVID-19 cases peaking early in the quarter, CFO John Rex told investors. In January, the payer's COVID-19 hospitalizations reached a peak of 40,000 — the highest of any month in the pandemic. By March, that figure dropped to 2,000.
By the end of the quarter, utilization was largely back to normal levels, with the exception of a few metrics like emergency room and pediatric visits that were below baseline, Rex said.
The payer saw "really no signs of deferred care" bouncing back and affecting utilization or outcomes in the quarter, UnitedHealthcare CEO Brian Thompson said.
UnitedHealthcare's medical loss ratio was 82%, compared to 80.9% the same time last year.
The health insurance segment brought in $62.6 billion in revenue, up 14% year over year. Operating earnings declined to $3.8 billion, down from $4.1 billion the same time last year when the pandemic stifled utilization, spurring payer profits.
Membership grew by 1.5 million people compared to a year ago, to cover almost 51 million medical members. The payer saw continued growth in Medicare Advantage, a key focus area for UnitedHealthcare, along with dual special needs plans and in the broader Medicaid market, while commercial membership dipped slightly.
It's a continuation of the coverage shift kicked off in 2020 by COVID-19, as the pandemic's economic recession disrupted job-based coverage and led to more people joining the Affordable Care Act exchanges, or being added to Medicaid safety-net rolls.
UnitedHealth still expects states to resume eligibility checks for Medicaid when the public health emergency lapses, resulting in "modest net attrition," Rex said.
Optum's revenue grew 19% year over year to $43.3 billion, while its operating earnings jumped about 20% to $3.2 billion.
Optum Health is accelerating the expansion of its value-based care initiative. Its delivery arm, OptumCare, now expects to move 600,000 patients into full-risk capitated arrangements by year's end, up from its initial outlook of 500,000.
The additional 100,000 risk lives is a "notable driver" of additional revenue growth, Jefferies analyst David Windley said in a note on the results. "The push into full cap at OptumCare is central to the UNH revenue growth thesis."
Looking forward to 2023, UnitedHealth also plans to expand virtual care offerings in its health plans and in-home testing and screening services for its members.
