• Revenue: $101 billion, a growth of more than 9% over the prior year.

• OptumHealth Revenue: Grew by over $2 billion, approaching $26 billion.

• Optum Rx Revenue: Increased by over $5 billion to more than $34 billion.

• OptumInsight Revenue: Stable, approaching $5 billion.

• Revenue Backlog: Nearly $33 billion, increased by more than $1 billion from last year.

• Domestic Commercial Business Growth: Added more than 2.4 million people through the third quarter.

• Cash Flows from Operations: $14 billion in the quarter, 2.2 times net income; nearly $22 billion year-to-date.

• Shareholder Returns: $9.6 billion returned via dividends and share repurchase year-to-date.

• Investment in Strategic Opportunities: More than $11 billion invested.

• Adjusted Earnings Outlook for 2024: Narrowed to a range of $27.50 to $27.75 per share.

• Warning! GuruFocus has detected 6 Warning Sign with STT.

Release Date: October 15, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• UnitedHealth Group Inc (NYSE:UNH) reported strong revenue growth of over 9% year-over-year, reaching $101 billion, driven by both Optum and UnitedHealthcare divisions.

• The company successfully added more than 2.4 million people to its domestic commercial business through the third quarter.

• OptumHealth revenues grew by over $2 billion, driven by an increase in care services offered and patients served, especially in home care and complex needs.

• Optum Rx revenues increased by over $5 billion, attributed to growth in pharmacy care offerings and pharmacy benefits management.

• UnitedHealth Group Inc (NYSE:UNH) remains committed to long-term growth objectives, with a focus on value-based care and technological innovation, including the use of AI to improve efficiency and consumer experience.

Negative Points

• The company faced challenges from the CMS Medicare rate cuts and state-driven Medicaid member redeterminations, impacting member mix and financial performance.

• There was a rapid acceleration in the prescribing of high-cost specialty medications, influenced by the Inflation Reduction Act, which was more pronounced than anticipated.

• The Change Healthcare cyberattack resulted in business disruption costs estimated at $0.75 per share for the full year 2024, impacting earnings.

• UnitedHealth Group Inc (NYSE:UNH) noted persistent aggressive coding intensity by hospitals, adding unnecessary cost burdens to the health system.

• The company anticipates stepping out more conservatively for 2025 due to concurrent timing of CMS Medicare rate cuts and Inflation Reduction Act impacts, affecting earnings growth potential.

Q & A Highlights

Q: Can you discuss the rapid acceleration in prescription drugs and its impact on 2025? A: Andrew Witty, CEO, explained that the acceleration was unexpected and tied to the Inflation Reduction Act. John Rex, CFO, noted that the increase was primarily in specialty drugs and was anticipated for 2025 but occurred earlier. Brian Thompson, CEO of UnitedHealthcare, assured that they are adequately priced for 2025 despite the surprise in 2024. Patrick Conway, CEO of Optum Rx, highlighted the growth in specialty services and new products that manage specialty spend effectively.

Q: How do you view the growth potential for Medicare Advantage amid current challenges? A: Andrew Witty emphasized the importance of Medicare Advantage as part of a diversified business strategy. Tim Noel, CEO of UnitedHealthcare Medicare & Retirement, stated that their strategy remains focused on long-term planning, consumer stability, and value creation through partnerships with value-based care providers. They aim to provide stability in benefits and leverage new technologies to enhance efficiencies.

Q: What are the main factors affecting the Medical Loss Ratio (MLR) in Q3, and how do you plan to address them? A: John Rex noted that the MLR was impacted by coding intensity, Medicaid rate mismatches, and specialty drug costs. Brian Thompson added that aggressive coding by hospitals has persisted, and they remain focused on evaluating and managing this practice to reduce costs for consumers.

Q: How is the OptumHealth business performing, and what are the growth drivers? A: John Rex highlighted OptumHealth's strong performance, driven by care delivery and value-based care. Amar Desai, CEO of Optum Health, mentioned their focus on medical cost management, clinical engagement, and diversified growth in services. They are seeing increased interest from payers for capitated arrangements and have engaged a high percentage of their members.

Q: What is the outlook for OptumInsight, especially post-cyberattack? A: Roger Connor, CEO of Optum Insight, reported progress in recovering from the cyberattack, with a focus on reconnecting customers. The core business outside of Change Healthcare is performing well, with opportunities in payer and provider markets. They are leveraging AI to innovate and enhance their product offerings.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.