UnitedHealth was too 'optimistic, in hindsight' about the impact of Change Healthcare cyberattack: CEO
UnitedHealth Group (UNH) is managing a slower-than-expected recovery from the cyberattack on its subsidiary Change Healthcare earlier this year — and providing new guidance related to greater-than-anticipated financial impacts.
The company said it expects an additional hit of $0.30 per share for the year for a total impact of $0.60 per share related to the hack. UNH said the cyberattack has cost it $1.1 billion in earnings in the second quarter alone. UHG previously estimated a total impact of $1.6 billion for the entire year; it has now pushed the estimate as high as $2.3 billion for 2024.
CEO Andrew Witty said on UHG's second quarter earnings call Tuesday that the company did not correctly predict the impact of the attack.
"I think we were a little optimistic, in hindsight, at the pace at which we thought people would come back" once the system was safely reconnected, Witty said.
He added that the pace of business has recovered in the past several weeks to a more normal level.
Change Healthcare is one of UHG's payments processing systems, handling payments for providers as well as health information for patients.
A ransomware group identified as BlackCat, or ALPHV, infiltrated Change's systems and stole potentially millions of its patients' data in February — the exact figure hasn't been revealed. UHG became aware of the attack a couple of days later and shut down the system. The company subsequently paid a $22 million ransom to get the data back from the group.
The attack created a backlog of payments for providers and interrupted patients' prescriptions for weeks.
Witty said the company is back on track and in a good position for the rest of the year.
Despite the impact of the attack, UHG's revenues grew in the second quarter ended June 30 by $6 billion to $99 billion, about a 7% increase compared to the same quarter in 2023. The company reported earnings per share of $6.80, just barely beating Wall Street estimates of $6.63.
UHG's stock began the day trading down but reversed course and was up more than 4% after the earnings call, trading at $536 per share.
Meanwhile, the company is doubling down on its use of technology and said digitization is helping it become more efficient.
The company reported operational cost ratio — the ratio of operating costs compared to revenue — reached 13.3% in the second quarter, compared to $14.9% in the same quarter last year.
Witty said the company is now using AI in a number of ways, but did not specify in which areas.
"The first wave of those are essentially allowing us to do things much more quickly, much more reliably, much more efficiently than humans can do them," Witty said.
One such example has been allowing AI to handle patient claims in the Medicare Advantage population. (The company is already in hot water over claims denials.)
But Witty said the company wasn't using generative AI so much as basic AI — a digitization of tasks. That includes onboarding of new clients onto its pharmacy benefit manager platform, OptumRx, which has seen strong growth year to date. Revenue for the division grew 13% in the second quarter compared to the prior year, and the number of drug prescriptions processed grew to 400 million compared to 380 million in the same quarter last year, a 5% increase.
"We actually spent 9% less this year in the onboarding of that record volume than we did the prior year," Witty said. "And it's something we obviously expect to continue to sustain over many, many quarters and years," he added.
Anjalee Khemlani is the senior health reporter at Yahoo Finance, covering all things pharma, insurance, care services, digital health, PBMs, and health policy and politics. Follow Anjalee on all social media platforms @AnjKhem.
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