Dive Brief:
UnitedHealth Group lowered the top end of its adjusted profit guidance for 2024 on Tuesday as the healthcare giant continues to deal with the fallout from a cyberattack on subsidiary Change Healthcare.
The company decreased its adjusted net earnings outlook to $27.50 to $27.75 per share for this year, compared with its previous $27.50 to $28 range. The updated guidance includes $0.75 per share in impacts from the cyberattack on technology firm and claims professor Change, about a $0.10 per share increase from UnitedHealth’s estimate last quarter.
But the insurer still beat investor expectations on revenue and earnings per share in the third quarter, driven by expansion in people served in UnitedHealthcare and its health services unit Optum.
Dive Insight:
The high-profile cyberattack against Change, which held up payments to providers and disrupted other key healthcare operations for weeks starting in late February, continues to take a bite out of its parent company’s finances.
The insurer has recorded $2.5 billion in total impacts from the attack through the nine months ended Sept. 30, including $1.7 billion in direct response costs, according to UnitedHealth’s third quarter earnings.
Executives said on a Tuesday call with investors that Change has made good progress on restoring its systems after the incident. The business unit is now focused on bringing customers back after they sought alternative vendors during the outage.
Still, executives said Change hasn’t fully recovered yet.
“What we’re seeing is their volume isn’t coming back to pre-attack levels,” Roger Connor, CEO of UnitedHealth’s Optum Insight unit, said on the call.
UnitedHealth faced other headwinds during the third quarter, including increased medical utilization. The company’s medical loss ratio — a marker of spending on patient care — was 85.2% during the period, flat from the second quarter but up from 82.3% last year.
Payers have noted growing medical spending in Medicare Advantage this year as seniors sought out more care following the pandemic, though UnitedHealth said in an earlier earnings call that the company had planned adequately for increased utilization in the segment.
But care patterns like increased coding intensity by hospitals and more prescriptions of expensive specialty medications persisted at higher levels than expected during the third quarter, chief financial officer John Rex said during the earnings call.
Rex also called out a “mismatch” between payment rates in Medicaid and the health needs of beneficiaries in the safety-net program, a concern recently echoed by other payers.
During the pandemic, states kept beneficiaries continuously enrolled in Medicaid, but they began rechecking their eligibility for the program last spring. Millions of people were disenrolled, potentially leaving behind sicker enrollees who need more healthcare services.
“States often use care activity data that is well over a year old when setting their rates,” Rex said. “That typically has minimal impact when member mix levels are relatively stable, but with eligibility redetermination significantly shifting, both the number and average acuity of people covered has changed.”
UnitedHealth’s topline reached $100.8 billion, compared with $92.4 billion during the same period last year. The healthcare giant recorded profit of $6.1 billion, up from $5.8 billion during the third quarter in 2023.
