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spk23: Good morning and welcome to the United Health Group first quarter 2024 earnings conference call. A question and answer session will follow United Health Group's prepared remarks. As a reminder, this call is being recorded. Here's some important introductory information. This call contains forward-looking statements under U.S. federal securities laws. These statements are subject to risk and uncertainties that could cause actual results to differ materially from historical experience or present expectations. A description of some of the risks and uncertainties can be found in the reports that we file with the Securities and Exchange Commission, including the cautionary statements included in our current and periodic filings. This call will also reference non-GAAP amounts. A reconciliation of the non-GAAP to GAAP amounts is available on the Financial and Earnings Reports section of the company's Investor Relations page at www.unitedhealthgroup.com. Information presented on this call is contained in the earnings release we issued this morning and in our Form 8K dated April 16, 2024, which may be accessed from the Investor Relations page of the company's website. I will now turn the conference over to the Chief Executive Officer of UnitedHealth Group, Andrew Witte.
spk17: Good morning, and thank you for joining us today. We have a lot to cover. First, we'll discuss the status and impact of the Change Healthcare cyberattack. Then we'll turn to the performance of our businesses, which continue to grow and perform well. It's important to underscore at the outset that even as we have devoted significant attention to addressing the Change Healthcare attack, the vast majority of the 400,000 people of this enterprise have remained, as usual, intensely focused on delivering for all those we serve. That dedication is reflected in our overall performance this quarter. Directly as a result of their hard work and the broad performance of our diversified businesses, we're able to reconfirm our full-year adjusted earnings outlook, even as we absorb 30 to 40 cents per share in business disruption impacts related to change healthcare. Now, turning to change healthcare, this was an unprecedented attack by a malicious actor on the U.S. health system. We promptly disconnected the affected services and turned our focus to two main areas, restoration and support. The attack disrupted the ability of care providers to file claims and be paid for their work. We moved quickly to fill this gap. Fortunately, we were able to bring to bear the substantial resources of UnitedHealth Group to drive the recovery and begin to mitigate the impact. resources which a standalone change healthcare would not have had access to on its own. These are the resources and the philosophy that underpinned our remediation of healthcare.gov back in 2013 and our distribution of CMS COVID emergency relief funds to care providers in 2020. Here, we assisted care providers in financial need, providing over $6 billion in funding, all at no cost to them. We rapidly deployed resources to develop alternative solutions and moved promptly to restore claims and payment services. We've made substantial progress, and we will not rest until care providers' connectivity needs are met. And to help care providers mitigate workflow disruptions and help ensure the uninterrupted delivery of care, for a period of time, we suspended some care management activities. I'm immensely grateful for our colleagues who continue to work tirelessly day and night to restore services, free up funds for providers, and protect the broader health system. Let me touch on two more items we know are of interest to you. First is care activity. The central point is that overall care patterns are consistent with what we anticipated last year heading into 2024 and within the outlook we shared with you in November. The second item is the essential value of Medicare Advantage to seniors. Here are what we see as some of the core facts regarding Medicare Advantage. It drives better health outcomes, provides a higher value, significantly more comprehensive benefit for people, all at a lower cost to beneficiaries and taxpayers, and is more popular with and valuable to seniors than traditional Medicare. Medicare Advantage consumers spend on average 45% less on premiums and out-of-pocket costs than those in traditional Medicare. That translates into nearly $2,400 in savings annually and several times more for the country's most underserved and medically challenged populations. That's one of the many reasons why more than half of seniors choose Medicare Advantage today versus 30% 10 years ago. and why we believe these offerings will continue to grow strongly for years to come. 2025 is the second year of the significant three-year phase funding reductions to Medicare Advantage introduced by CMS last year. Here, in early 2024, we're at the beginning of our thoughtful, responsible three-year plan we developed last year to adapt to those changes. Our strategy continues to focus on providing as much stability as possible in the reduced funding environment, improving outcomes and experiences for the consumers we're privileged to serve, and delivering the performance you expect from us. We believe our long-term perspective and the deliberate multi-year approach we began last year is serving us well, putting us into a position of sustainable, competitive strength. Among a handful of notable business developments to share, UnitedHealthcare was honored to secure major Medicaid wins in Virginia, Texas, and Michigan. While we were disappointed in the outcome in Florida, we'll be seeking to better understand the process and considerations there. There is a substantial pipeline of Medicaid RFPs, and we're confident that our offerings will resonate in other states as well. UnitedHealthcare's commercial benefits continued their momentum from last year, growing to serve 2 million more people in the first quarter, the largest increase in years. This growth was across UHC's commercial customer segments, from individuals up through the largest of employers. This is further evidence of our innovative and consumer-centric products have established the footing for sustained growth. We also see continued momentum at OptumRx, coming off last year's record selling season with a recent win in Hawaii and the renewal of our contract with the Department of Veteran Affairs. We're grateful for the opportunity to support them. And Optum Health is tracking well to achieve its objective of growing to serve another 750,000 patients in value-based arrangements this year in partnership with many payers. Before I turn it over to John Rex, our president and chief financial officer, I want to acknowledge Dirk McMahon, recently retired after more than 20 years of service. I'd like to thank him for his leadership and partnership. Dirk has left an indelible mark on this company through the example he set and the many of our leaders he has mentored. John. Thank you, Andrew.
spk09: This morning, I'll first provide color on some of the unique items in the quarter directly related to the change healthcare cyber attack, followed by care activity trends, business updates, and finally thoughts on the remainder of 24. But first, let me start at the most fundamental level. The United Health Group businesses continue to grow and perform well during the quarter, and we are encouraged by the momentum and the many opportunities to serve we're seeing across the enterprise. On the change healthcare cyber attack, as Andrew noted, our guiding focus throughout has been to make sure patient care is delivered and care providers' access to funding is secured as we work to bring back services fully. The cyber impacts in the quarter totaled about 870 million or 74 cents per share. At this distance, we estimate the full year impact will be $1.15 to $1.35 per share. Let me break that down into its key components. Of the 870 million about 595 million were direct costs due to the clearinghouse platform restoration and other response efforts, including medical expenses directly relating to the temporary suspension of some care management activities. For the full year we estimate these direct costs at 1 billion to 1.15 billion or 85 to 95 cents per share. It's important to note these direct costs are included in net earnings, but are excluded from adjusted earnings per share. The other component affecting our results relates to the disruption of ongoing change healthcare business. This is driven by the loss of revenues associated with the affected services, all while incurring the support and costs to keep these capabilities fully ready to return to service. Notably, these effects are not excluded from adjusted earnings. In the first quarter, this impact was about 280 million, or 25 cents per share. At this distance, we currently estimate the business disruption at 350 to 450 million, or 30 to 40 cents per share for the year. This, of course, will depend on the ultimate timing of service and transaction volume restoration. These elements are broken out for you in the supplemental tables provided with our press release this morning. Of course, we will provide regular updates on our progress and outlook throughout the course of the year. While much of Change Healthcare's functionality and services have been restored, we are working hard to restore more. And the objective we all share is for an even stronger Change Healthcare to be fully returned to expected performance levels next year. I'll come back to some of these elements in more detail in just a moment. Turning to underlying care patterns, the headline is that these continue within our expectations. Outpatient care activity among seniors remains consistent with the elevated levels we began seeing in the first half of 23 and for which we planned. So we continue to be comfortable with the outlook we established last June when we filed our 2024 Medicare Advantage benefit offerings. The winter seasonal activity we discussed with you in January, particularly related to strong vaccine uptake, higher respiratory illness incidents, and related physician office visits, has subsided. Overall inpatient care activity also remains within our expectations. The first quarter medical care ratio at 84.3% included roughly 40 basis points, or about 340 million, related to the temporary suspension of some care management activities. These have been recently reinstated. The majority of the remaining $325 million of full-year medical expense impact included in our outlook will land in the second quarter. Notably, we did not reflect any favorable earnings impacting medical reserve development in the quarter. Out of prudence, due to the potential for the cyberattack to affect claims receipt timing, we reflected an additional $800 million of claims reserves. We'll continue with a judicious view as we progress over the next several quarters. Turning to the performance of our businesses, the most important takeaway is they are growing and performing at a level which allows us to maintain the adjusted earnings per share objectives we established last November, even while taking on the business disruption impacts of the change healthcare attack. At UnitedHealthcare, revenues of $75.4 billion grew nearly $5 billion. Within our domestic commercial membership, we're off to a strong start, powered by disciplined growth, serving 2.1 million new consumers in the first quarter. We are encouraged by the momentum and positive customer response to our differentiated offerings and look forward to building further upon that momentum heading into 2025. For Medicare Advantage, As you would anticipate, we are deeply into our 25 planning activities. As we finalize our 25 benefit designs over the next several weeks, we will build competitive offerings that once again appropriately reflect the funding and cost environment. We approached this last year with a deliberate three-year plan, which continues firmly on track and positions us well going into 25. Our Medicaid business ended the first quarter with 7.7 million members. As Andrew noted, key wins in Texas, Virginia, and Michigan demonstrate the value state customers see in our offerings. In Virginia, UHC was the highest scoring plan with particular strength in member-centric care, benefits and service delivery, quality and value-based payments. In Texas, UHC was awarded the maximum number of possible service areas, expanding the number of people we will have the opportunity to serve. And in Michigan, UHC achieved perfect scores in such critical consumer-centric areas as social determinants of health and health equity, further solidifying our value proposition. Optimum Health's revenues grew by 16% to $26.7 billion as we increased the number of patients served and are on track to approach 5 million patients in value-based care by year end. For the most complex patients that OptumHelp serves, we have engaged 75% through the first quarter this year, a significant increase in the number of patients engaged over last year. This reflects progressively earlier connectivity with patients and the ability to improve their health outcomes and experiences more rapidly. OptumRx revenues grew 12% to $30.8 billion, driven by new client starts, continued expansion within existing partnerships, and growth within pharmacy services. OptumInsight, as you know, is where the change healthcare business resides. In the quarter, about 500 of the $870 million total impact is within OptumInsights. Just under half of this are direct response costs. Think clearinghouse restoration activities, which we have excluded from adjusted earnings. And slightly over half are the business disruption effects, which are not excluded from adjusted earnings. For many of the impacted change healthcare services, transaction volume drives revenues. So the effect of the attack in the period is one of keeping all the lights brightly burning at full readiness to resume services while revenue production was essentially suspended. To be clear, the OptumInsight team did the critical and right thing, promptly shutting off services and finding any method possible to keep the care system working, including helping clients find alternative solutions. Coming out of this incident, the team will be working tirelessly with customers to recover transaction volumes and demonstrate that Change Healthcare is ready to serve and is more valuable than ever. Beyond Change Healthcare, the OptumInsight revenue backlog increased to nearly $33 billion, growth of over $2 billion from a year ago, driven by health system partnerships to provide business process and information technology services. A couple of other items of note that were affected by the cyber attack. Today's claims payable in the first quarter were 47.1 compared to the 47.9 in the fourth quarter, 23, and 47.8 a year ago. The accelerated payments to care providers and the Brazil sale reduced what would have been our reported measure for the quarter by about three days. The medical cost payable balance increased $1.6 billion from year end 23 to $34 billion. The change reflects a $3 billion increase in the incurred but not yet reported component, or IBNR. This is the result of the prudent ongoing claims receipt assessment, offset by a $1.6 billion reduction in the fully processed claims component due to care provider payments accelerations. Cash flows from operations in the quarter were $1.1 billion, impacted by about $3 billion due to the funding acceleration to care providers and collection extensions to affected customers, and were additionally impacted by the timing of some public sector receipts. To summarize, a continued focus on better serving patients and the health system underpins our mission and growth drivers, which remain strong. And as we move further into this year, the broadly strong performance across our enterprise allows us to continue to expect full-year adjusted earnings per share in the range of $27.50 to $28, even as we incorporate the $0.30 to $0.40 per share of business disruption impacts. Now I'll turn it back to Andrew.
spk17: Thank you, John. As we look out over the next several years, we, like many others, see a health care environment in need of improvements in quality, value, simplification, and consumer responsiveness. While we're a comparatively small part of the $5 trillion US health system, United Health Group's strategy is focused on helping to meet those very needs, and we're well positioned to do so. Our focus on understanding opportunities to align incentives notably led via our value-based care offerings, demonstrates what can be achieved through partnership and realignment of ways of working. Our commitment to improving all we do for consumers stimulates our drive to help bring care to patients where they need and want it, at prices, and with an experience worthy of the 2020s. We have a proven commitment to making available our insights and innovations widely and quickly throughout the market alongside our relentless multi-payer orientation at Optum. We remain committed to partnering with others throughout healthcare to help make the health system more modern and responsive. Our success depends on enabling partners and customers outside our company to succeed. The combination of this strategic design, strengths, and behaviors underpins our high confidence in our ability to navigate the inevitable environmental change and challenge. and it reinforces our confidence in our ability to perform and grow strongly, as you have come to expect from us. With that, operator, we'll turn to questions.
spk23: Thank you. The floor is now open for questions. At this time, if you have a question or comment, please press star 1 on your touch-tone phone. You may remove yourself from the queue by pressing star 2 on your touch-tone phone. We ask you to limit yourself to one question. If you ask multiple questions, we will only be answering the first question so we can respond to everyone in the queue this morning. And we'll go first to Lisa Gill with JP Morgan.
spk03: Thanks very much and thanks for all the comments. I just want to go back to your comment around your three-year plan as it pertains to V28. Does the 2025 final bid change anything around that plan? And how do I think about the impact in the quarter of V28 in both OptumHealth as well as on the UnitedHealth side?
spk17: Lisa, thanks so much for the question. Yeah, you know, as we've said a few times and certainly repeated this morning, we've looked at the changes that CMS finalized last year really thoughtfully, and we see this as a three-year strategy in response. Obviously, it's phased in over three years. We want to make sure we don't do anything that chases short-term outcomes growth, for example, but puts at risk long-term sustainability. What you're also not going to see from us is a kind of knee-jerk reaction between growth and margin. We want to be very focused on ensuring that year in, year out, we're a super reliable performer in this environment. As you look at the most recent final rate, I don't think it really changes the story. Obviously, it's a little disappointing that we don't think CMS really reflected what we've seen over the last year in terms of actual in-market medical trend. But in reality, it's just a little extra pressure for 25 on top of what we'd already seen previously. We're well positioned for that in terms of all the work we've been doing really from the get-go last year, really from February last year, we've been getting ourselves lined up for this. You're seeing that reflected in Q1 in a few really key features, right? So you're seeing really strong cost control inside the company, as you'd absolutely expect us to do. making sure that we're not incurring any expense that we don't need to to support our members and patients on the outside of the organization. You saw us take a very thoughtful bid strategy last year. And, of course, we continue to focus on how to make sure that we manage medical costs as effectively as possible, ensuring quality of care delivered and avoiding waste. All of that plays through. I'm very, very pleased with how this first quarter has played out in that respect. If you look at the performance of OptumHealth and our MA business within UnitedHealthcare, both very strong performers during this quarter, despite the pressure that's been incurred on them from the rate notice last year. And I think that bodes super well for the rest of this year and the strategy we've laid out for the next three. Thanks, Lisa. Next question.
spk23: Well, the next two, Josh Raskin with Nefron Research.
spk12: Hi, thanks. Good morning. Can you just explain what medical costs you categorized as accommodations to support care providers? I think the UM management that you guys are talking about, what puts a certain medical expense in that bucket? And then when you look at your actual claims received or claims processed inventories, what percentage of a normal or expected quarter did you actually see in the quarter versus how much did you just sort of put into IPNR?
spk17: Josh, thanks so much. I'm going to ask Brian Thompson in a second just to give you a little bit more color on the first part of your question. Listen, I think by the time we got to the end of the quarter, we had the overwhelming majority of what we'd anticipate in receipt in terms of claims received into the organization. Of course, it's always a little bit tricky to be absolute about that because you're kind of comparing against what you would have expected. And as you obviously know, every quarter you see corrections both up and down in terms of of actual claims submissions catching up with what you may have estimated, and that's been obviously the feature of this marketplace. But overall, I would say UHC claims receipt was very, very close to normal by the time we closed the court. But maybe, Brian, you could give a little more color commentary on how you would characterize some of that relief we gave.
spk10: Sure. I appreciate the question. Yeah, Josh, I believe we started March 8th, and what we did, I call it foregone utilization management protocols, and those are really in two categories. The first is we suspended our inpatient level of care reviews where we assess for appropriateness of inpatient versus outpatient, and that was the lion's share of our adjustment. We've got a long history of understanding those elements. It's just a unit cost adjustment, so pretty simple and easy to estimate and adjust for. The second element inside those practices was some outpatient prior authorizations that we also suspended. Those were a smaller element inside this quarter. Those will play out a little bit more in next quarter as you think about that lag between notice and actual and curled date. But again, pretty easy for us to estimate. These are practices we've had in place for a very long time and feel comfortable about the adjustment that we made.
spk17: Brian, thanks so much. And just again to confirm, as you heard from John, we've brought those processes back into play in the last few days. Next question.
spk23: We'll go next to A.J. Rice with UBS.
spk20: Thanks. Hi, everybody. Congratulations on working through all this. Maybe just to make sure I understand a little more, the $800 million – reserve that you're holding out and you did comment that you didn't take any prior period development to the bottom line. I guess it sounds like you've used the word prudent several times in describing that. How much, yeah, just maybe to follow up on the last question, how much of that is things that either from what you get insight from OptumHealth or from your own ability to look at prior year claims versus what you've seen so far is what you really think is going to happen and how much of that is sort of add-on just because of the moving parts out there. And then it sounds like you're basically saying that the care dynamics are similar. Is there anything you call out, outpatient, inpatient, that suggests any variance relative to your MLR assumptions for the year when you started out?
spk17: So I'm going to ask John just to comment on the 800 million more specifically. I mean, I think as we said a couple of times, AJ, really not seeing anything stand out in terms of care pattern differentiation from what we really expected. I mean, as we mentioned earlier, that kind of pressure we saw at the end of Q4 and, you know, rolling into the very beginning of the year around some kind of winter, you know, winter syndrome vaccination dynamics we talked about a lot last time. As expected, that did subside. Beyond that, I would, you know, which was what we were anticipating. Beyond that, I wouldn't say there's anything really to call out within all of that. John, could you maybe go a little deeper on the 800? Yeah, good morning, AJ.
spk09: So picking up on a comment Andrew had made earlier, so what you're really doing there is estimating what you didn't see. So claims receipts that you may have not received in the quarter and trying to make an accommodation for that, as you said, a prudent accommodation for that, just to acknowledge that there clearly had to be some disruption in the quarter in claims patterns. And so you're trying to make some estimation in that zone to anticipate that. So you put it somewhere in the zone, it's not zero and it's not 800, somewhere in between, probably as you think about those elements and where you might land. And so as we look out, and you should expect that we'll probably continue with a judicious view over this over the next several quarters, actually, also. We'll want to make sure that We've got full visibility into this, that claims are flowing. And as we sit here on April 16th, we see at UHC, we see fairly normal claims, receipts, and payments flows going on at this point. But we'll really want to be careful on that because we know there are certain care providers out there that maybe have been left out a bit. And so we'll continue to be very judicious next quarter also in terms of assessing that. Thanks, John.
spk17: Thank you, AJ.
spk09: Next question.
spk23: We'll go next to Justin Lake with Wolf Research.
spk16: Thanks. First, I just wanted to quickly follow up on AJ's question here around the $800 million. Can you just be specific around, is that conservatism related to 2023, meaning you would have had up to $800 million of development that would have benefited the quarter? Or are you saying that you just took extra reserves that actually impacted Q1? Because we're looking at an MLR that's 50 basis points above where you kind of expected it, and yet you're saying trend is in line. So we're trying to figure out, was there a 50 basis point miss, or are you saying that really that's just the conservatism here? And then my question was really around the relative visibility on cost trend, right? Last year, it was somewhat opaque. You kind of told us that there was some uncertainty there. And then if that uncertainty turns to certainty around, you know, hey, trend is higher in Q2, how do you feel about your visibility this year? Do we have to wait until 2Q to kind of, you know, be able to declare that, hey, we're kind of through this and you're not seeing what the rest of the industry is seeing? Or do you think we probably have to get that update again in second quarter? And lastly, any commentary on Q2 MLR and where you think you end up in the full year range for MLR? would certainly be helpful if you could provide. Thanks.
spk17: Okay, Justin, thanks for those questions. Let me – I'm going to ask John in a second just to go back and, again, just give you a little bit more definition around the $800 million, as you asked. Just in terms of cost trend, and let me make a couple of comments. I'm going to ask Brian maybe to go a little deeper as well and then come back to John. You know, as I look at the cost trend – this year versus last year, some big differences. So last year, really, I think the core of the story of what led to that sort of step shift, if I can put it that way, in early Q2, Q2 of last year, I think that was really, and hindsight tells us, that was really around a kind of post-COVID or end of COVID story playing out in terms of capacity coming on stream, most importantly, and to some degree, a pent-up demand. I actually think the capacity coming on stream was as much an issue, a driver of that as anything else. So I think to some degree a one-off. We don't see anything like that. We've seen much more stabilization. We haven't seen a step down from that trend. We'd be super clear about that. We haven't seen it kind of go back down again, but we've certainly seen that kind of sustained activity without aggressive acceleration. And then the other thing I would say to you is, as you would expect, given that shift we saw last year in the intervening year, we've put in a lot of sensing mechanisms across our organization, both in UAC and Optum, to look for early warning signals of changes, quite a low granularity in terms of trying to figure out how this pattern plays out. Now, as all our actuaries and any actuary will tell you, the gold standard of knowledge on trend is a paid claim. But nonetheless, we've tried to put in place a lot more prospective sensing capability. And again, that's kind of consistent with what we're sharing with you. So we're not really anticipating a big change there. I mean, obviously, you know, the future is the future. But as we sit today, everything looks pretty much as expected. Brian, you may want to give a bit more from a UHC perspective.
spk10: Yeah, thanks, Andrew. And I think you summarized it well. I'll reiterate what you heard from John, which is what we're seeing in these underlying service types, inpatient, outpatient, et cetera, are in line with what we had planned for. So I'll reiterate that and Just to add to that level of improved visibility this year over last, certainly COVID being the biggest driver, but also redeterminations. Last year, we were at the beginning of that. This year, we're nearing the end of that. So two key unknowns a year ago, I think, that contributed to perhaps a little less visibility, both of which I think we've really got a better view to this year. And the last thing I'll just point out is, as we've paced through 1-1, I also feel good about our business mix. Again, early in the stages of evaluation of that, but how our growth has changed and what we've seen in those profiles from The growth that you're seeing in our commercial business to the growth of our Medicare business as well really feel good about all those elements. So, yes, optimistic about the rest of the year and how it's playing out against what we had planned for.
spk09: Great. Thanks, Brian. Joel? Yeah, Justin, good morning. So I think the way you look at it, so overall, the net view being so we didn't let any earnings or medical care ratio impacting development flow through into the quarter. And when you look at it, so you can come at it, if the normative course of assessments would have indicated some potential for favorable development in the quarter, we took a position also that there was likelihood that there were claims we didn't receive. And so in terms of the claims completion factors and such, and so how that may have impacted. And so you're really netting that all off in the course of the quarter to try to just normalize that out, not having any impact from those elements. taking a pretty prudent view of where you might be in terms of the claims you received. In terms of your question here on Q2 MCR, at this distance, I put in a similar zip code to 1Q, including similar impact from the cyber effects that we had also. And as I noted in response to AJ's question, we'll continue to be very judicious as we look at those patterns also on claims receipts. So we'll continue with a judicious view of how we think about how we think about development and those impacts as we step out here the next couple of quarters and make sure we're getting our claims receipt timings fully incurred here. Right. John, thanks so much. Next question.
spk23: We'll go next to Stephen Baxter with Wells Fargo.
spk14: Yeah. Hi. Thanks. The business disruption costs you projected beyond the first quarter are, I think, smaller maybe than most had expected, despite the fact we've heard commentary from the stakeholders reducing costs. their dependence on change healthcare during the quarter. I guess, what are you seeing from customers on that front? I guess, how much of that recovery do you have on a revenue line? Do you have line of sight too? Versus you have to drive throughout the balance of the year to get to that no impact to 2025 that you seem to expect. Thank you.
spk17: Yes, Stephen, thanks so much. So I'm going to ask Roger Connor, who runs OptumInsight, to give you a little detail on this. First off, So I just want to take a moment to pay credit to the teams for the speed in which they brought back the overwhelming majority, the functionality of Change Healthcare after the attack. It's been an extraordinary example of really the resources of UHG and, frankly, the support of many of the biggest companies across America in the tech environment coming in to help recover from this particular attack, which was, you know, straight out an attack on the U.S. health system and designed to create maximum damage, I think. We've got through that very well in terms of the remediation and the build-back to functionality. And, Roger, maybe you could share a little bit of what you're seeing and expect in terms of customer dynamics over the next few months.
spk04: Yeah, I will do. Stephen, thanks very much for the questions. I suppose the way that we're thinking about the whole cyber attack response is two key areas of focus. First of all, as Andrew mentioned, good progress on system restoration. If you look at the biggest areas where we have the largest number of customers, that's pharmacy claim and payment, we're up to 80% functionality, and that's continuing to improve day by day. Now we've still got work to do. We've got another set of products coming in line in the number in the coming weeks, but pleased with that progress. I think your question is really about our next focus, which is recovering the business. And this is about bringing those products back, but actually bringing them back stronger where we can. We're adding functionality where we can too. But then also bringing back customers who, because of the outage, had to go elsewhere to get things like their clearance house support. Now we're confident in our ability To do that, why? Well, first of all, the portfolio and the differentiation we have, which is good. But also, as you can imagine, we're talking to those customers all the time and they want their functionality back. You know, they like what they've got or they had with change and they want to get that back. So we're working with them to ensure that we can actually do that. Also, we provided financial support to a number of our clients. And they appreciate that. They have said to us that they appreciate it. It's a signal that we're committed both to them, but then also to this marketplace as well. So when you add those elements up, Stephen, that's where we're confident. We've got more work to do. This has been a heavy lift, and we're going to continue that work. But that's why we're confident in getting back to that baseline performance in 2025.
spk17: Roger, thanks so much. And I think, Stephen, what you heard in Roger's response there is a couple of really important features of the character of UnitedHealth Group. super high resilience, and we will always stand by our customers and clients. And when an attack like this happens, which puts our customers and clients at risk, we will do whatever it takes to make sure they get through that, whether it's technical fixes or financial support. We are going to stand by our clients, who in this case are the providers and the systems across America who look after American patients and We will do that, and I think that means a lot to a lot of people, and it's an important capability to have running through the backbone of American healthcare. With that, Stephen, thanks for the question. Next question.
spk23: We'll go next to Kevin Fishbeck with Bank of America.
spk11: Great, thanks. I just want to go a little more into the visibility that you guys think that you have into claims today. It sounds like you feel like you're largely back, but I guess where would you say... today that you are from a percent visibility into claims versus the same time last year. And I know that there's forecasted improvement, but there's a lot of focus on the ability to price 2025 correctly. So by the time you're submitting your MA bids, you know, how much back to normal, what percentage back to normal do you think you'll be from a claims perspective at that point? And finally, I'm used to hearing you guys reiterate 13 to 16% long-term EPS, but I didn't hear that in the prepared remarks. I just wasn't sure. that was due to time or whether there was anything that you were trying to say there. Thanks.
spk17: All right. So I'm going to ask John to comment on your substantive question, Kevin, and I'm going to ask you just to stay on the line for my last paragraph of closing comments for the second part of your question. John?
spk09: Good morning, Kevin. So as we sit here today on April 16th, UHC is pretty much back to normal levels in terms of claims submission activity. We view it as normalized now. We're seeing claims flowing like they we'd expect them to be flowing and moving along. So that's all progressing quite well, which assists a lot with the piece that you were just describing here in terms of where we think that is. And as we move forward, look over the next month plus to finalize our bid submissions and such. So feel good about that in terms of our visibility and insights. Yeah.
spk17: Thanks so much, John. And thanks so much, Kevin. Next question.
spk23: We'll go next to Nathan Rich with Goldman Sachs.
spk19: Hi, good morning. Thanks for the question. I wanted to ask on the reported DOJ investigation, I'd be curious, as the company had kind of dialogue with the DOJ, do you have a sense of timeline for what the next steps might be as we look for what the possible outcome of this process could be?
spk17: Hey, Nathan, thanks so much for the question. Listen, you know, I think you'd probably expect we don't comment on these sorts of matters, and, you know, I don't think it would be appropriate to do so today, and certainly we never have done in the past. So it's not something we're going to get into in the call, but appreciate the interest. Thanks. Next question.
spk23: Well, next to Andrew Mock with Barclays.
spk05: Hi, good morning. Commercial risk and ASO membership both came in above the high end of your initial guidance. Can you help us understand what drove the better membership results for each segment? Thanks.
spk17: Thanks so much for the question. That's Dan Keeter, who runs our E&I business from UHC, to respond to that. Dan?
spk08: Yeah, hi, Andrew, and thanks for the question. Certainly encouraged with the broad-based growth, share-gaining growth, I would say, in our individual segment, our local market segment, and our national accounts business. Some of the key drivers underlying that, about a third of our group growth gains were attached to our most innovative products and the expansion of those into 37 states now on a fully insured basis and also fully available nationally on an ASO fee-based business. Specifically inside the risk business, our individual and family exchange-based plans were a significant driver of the growth. We've seen some latency from membership we expected that would have come in from redeterminations into the final portions of 2023 now begin to emerge into 2024. That's been a significant contributor to that risk based growth in the first quarter. As a punch line, I like our growth. I like the pricing. It's very much like the profile of both the groups and the consumers that we're attracting. And finally, I'm really pleased with the consumer experience that our teams are delivering to those that we serve. Great. Thanks for the question.
spk17: Thanks so much. And as you saw, Dan's organization delivered an extraordinary $2 million member growth in the first quarter, one of the highest growth rates we've seen for many, many years. And I think that really comes down to, you know, relentless focus on modernization of service offer and then delivery of that service offer. And I'm very proud of the whole team in the UHC commercial businesses domestically for what they've done. Next question.
spk23: We'll go next to Lance Wilkes with Bernstein.
spk15: Thanks. A question on Optim Health. As we're looking at outlook there, we've been really focused on capacity growth in the systems. Do you guys have any insights for your capacity growth in OptumHealth? Obviously, you've been taking some cost actions there. So interested in hiring trends. And then second, have you been renegotiating risk deals? I know that there was likely some of that for 24. What's the outlook for that and the impact of that in 24 and the outlook of that for 25? Thanks a lot.
spk17: Yeah, Lance, thanks so much. And I'm glad you've asked about OptumHealth. I'm going to ask Dr. Desai to respond to that. Arma runs our OptumHealth business, been doing a great job of continuing to mature that business for us, which for me, I think is one of the great headlines of OptumHealth. It's continuous maturation as a sophisticated value-based care delivery organization. Arma, maybe you could respond to Lance's question.
spk07: Thanks for the question, Lance. I'll take the first one in terms of hiring trends. We continue to work with more providers in a deeper way, continue to grow across a range of arrangements. As you know, physicians across the country work with us in contracted affiliated arrangements as well as employed arrangements, and we continue to have strong partnership and growth both organically and also through some organic M&A activity. We don't see a capacity constraint there. In fact, we continue to see incredible growth with our payer partners. To the second part of your question, the risk partner growth continues to increase across multiple payers. It's being driven by some of the funding and benefit dynamics that are out there. Folks are looking for a real stable partner to be able to grow with. We have worked with them continuously in terms of our contracts, both looking at the benefit and funding changes and ensuring that the funding level is appropriate for the risk that we're taking on and to be able to provide very high-quality care across our membership. So we're very proud of the growth we've had, and we'll continue to do so. Thanks. Thanks so much. Next question.
spk23: We'll go next to Sarah James with Cancer Fitzgerald.
spk02: Thank you. We wanted to understand a little bit better the $3 billion in IBNR. So just our back of the envelope math suggests if 15% to 20% of claims from UHC run through change post-event, that would be like assuming a third of the change-related claims are delayed. Is that in the ballpark of where your change completion factor assumptions were? And keeping that conservative assumption of a claims like throughout the year, what does that imply for the seasonality of the remaining 41 to 61 cents gap impact from change?
spk17: Sarah-Jane, thanks so much. John?
spk09: Yeah, sir, I don't know if I'd kind of go right with some of those stats that you pulled out in terms of where those fell, but here's some insights I can offer on that. So one of the elements we wanted to break out on the IBNR component is, so as you know, what we report on the balance sheet you received this morning, medical costs payable, is a combination of IBNR and medical claims payable. And so we're hoping to provide some more transparency for you as you looked at the quarter and such, and A $3 billion increase in IBNR is significant, and then offsetting that on that line item would have been really the funding advances, the component where we just made sure that as soon as the claim was in-house processed, we were speeding it out the door to get it to providers. That was one of the components, in addition to the interest-free loans we made, that we were helping the provider community with. As you discussed kind of where we were, let's say today we feel that UnitedHealthcare is essentially at normalized levels in terms of claims receipts. We're going to be super prudent how we look at that because we know there are providers out there that could still be having trouble submitting claims and still having troubles with payment flows and such, and so we're going to be very appropriately constrained in how we think about that dynamic playing out here over the next couple of quarters. But really, those are the kind of mechanics of what's going on between the IBNR component that you spotlighted and the full line of medical cost payable. Right. Thanks, John. Next question.
spk23: We'll go next to Gary Taylor with Cowan.
spk06: Hi, good morning. Just want to follow up on that point, John. My understanding is on the IBNR that you report in your Qs and Ks includes unprocessed claims inventories. So the $3 billion, is that just going to tie to the number we see when the Q comes out? Are you saying the $3 billion really is true unreported claims at this point?
spk17: Thanks so much, Gary.
spk09: John? $3 billion is IBNR directly. That is to your point. That is the IBNR component of it, Gary. Okay.
spk17: Thanks, John. Next question.
spk23: We'll go next to Erin Wright with Morgan Stanley.
spk21: Okay. Thanks. On capital deployment, you didn't change your expectations for share repurchases, but How should we think about the priorities more broadly, whether it's M&A or otherwise, and your ability to be opportunistic on that front? Thanks.
spk17: Aaron, thanks so much. I'll ask John to comment on it.
spk09: Yeah, Aaron. Yeah, we didn't update any of those components here. We continue to take a very balanced view in terms of how we think about our opportunities. You saw certainly that we had activity in the quarter in terms of both share repurchase and dividends. We continue with robust opportunities in the marketplace in terms of other capabilities that we are looking at. So that all continues strong. So you'll see us continue to balance those out nicely in terms of the opportunities that are out there and with capacities really to approach all those elements strongly. Okay.
spk17: Yeah, and I continue to see a very interesting, diverse pipeline of M&A opportunity across the marketplace in terms of business areas that we have interest in. As I think you see some of the funding changes play out across the next few years, I suspect that may also create new opportunities for us as different companies assess their positions. I think I think how we look at this situation is we have a good, strong strategy for how we navigate through this dynamic. You're seeing that play out super well in the first quarter performance of Optum Health and UHC. And I think it gives us a sense of real confidence as we look, not just in terms of our performance, but potentially how we might think about M&A opportunity. And as you rightly said, be somewhat opportunistic if those moments arrive. Next question.
spk23: We'll go next to Whit Mayo with Learing Partners.
spk13: Thanks. Good morning. Just back on the 2025 rate notice, I think you're, if I'm hearing you correctly, it sounds like you're framing this as modestly disappointing but perhaps manageable. Just any more color on growth expectations for next year and then if you could elaborate on the broker-agent changes, what this could potentially mean for your strategy. Seems like a meaningful change. Don't know if you think about investing more into Captive broker strategies, just any color would be helpful. Thanks.
spk17: Thanks so much for the question. I mean, obviously, we're not going to get in to give kind of 25 numbers or expectation just yet. But Tim Knoll, who runs our M&R business, certainly give you some good perspective on the rest of your question, Tim.
spk18: Yeah, good morning, Whit. Thanks for the question. So on the final notice and some of the distribution elements of that, We continue to believe that there's opportunities to improve the distribution environment in Medicare Advantage and have been in a dialogue with CMS for several years on how to do that. Some of the elements of the final notice that were published recently are directly in line with some of our recommendations and some of them are, you know, relatively consistent, but not totally as we had conceived them. I would also say right now it's a little bit early to comment on how this might rebalance some of the channel mix as still some questions on how some of the key elements of that will be rolled out. So we're still waiting for a little bit more detail before we can get more specific on how it impacts go-to-market in 25. Great.
spk17: Thanks so much, Tim. Next question.
spk23: We'll go next to Ann Hines with Mizuho Securities.
spk22: Hi. Good morning. So I would say your commentary on care patterns is definitely more positive than what investors feared. And you referenced several times that trend came in line with your expectations. Can you actually tell us what growth rates you're assuming, like the major trend categories and guidance, whether that's inpatient and outpatient, maybe some year-over-year growth versus historical averages? And within that, can you specifically talk about what you're assuming for MA? That would be great. Thank you.
spk09: John, would you like to start that? Anne, good morning. So the components that I would call outliers are the similar components that we've talked about for a while here in terms of trend outlooks. So in particular, still go back to outpatient care for senior, what we've seen in orthopedic, cardiac, those kind of categories primarily have been the big factors. I think you brought up a really important point, though. So the percentage growth in those was much bigger last year. You're coming off an environment where both the supply side had been constrained and the willingness of seniors, in particular consumers, to access that environment had been constrained for a couple of years. So those percentage factors were quite significant. You heard us talk about very significant levels on those double-digit levels last year as we looked at those. The way we look at those really, though, is because you would expect that to start in normalizing in terms of the percentage change. So you really look at that in terms of the number of units consumed per patient served. And so you look at those levels. That's what we're talking about. We're seeing those kind of continuing at those levels. They're continuing at those levels in terms of the number of units consumed, delivered. But those percentage levels, of course, would start normalizing out a little bit in terms of what you'd seen. So that continues to be the area. It's outpatient care for seniors. It's those categories that we'd call real outlier areas versus our historical levels of trend factors. The other historical levels of trend factors remain much closer to kind of our traditional views that we've always had as a company. You know, in the corridor, other things you look at just to get indications and By the way, they've kind of vastly expanded all those areas. First fills, you've heard us talk about that a lot. Also, first fills in the quarter, an indication of outpatient care, physician visit activity, kind of normalized in there also in terms of stabilizing for us and the many other factors that the company has historically looked at. Thank you.
spk17: Thanks, John. And maybe ask Brian maybe to give you a little bit more from a UHC perspective, and then maybe Heather also from a Optum perspective in a second, just maybe reflect a little bit on the work you're doing in terms of how we, obviously medical trend is one thing. Then there's a question of how well we're able to engage with folks to actually help them manage their cost. And maybe come to you in a second, Heather, on some of the work that you're leading at Optum. So Brian first.
spk10: Sure. I think John said it well. The first headline is what we're seeing is what we plan for. But as he alluded to, some of those elements, we plan for them to be elevated year over year. I don't want to lose sight of unit costs. We've talked for some time that multi-year provider group and hospital contracts renew a little later than perhaps the inflation we've seen, and that is up year over year. The biggest driver was the outpatient. We're really pleased to see that in line with, as John explained, but also we've been able to see increases in specialty RX. We've planned for those. Those are in our pricing appropriately, etc., and We've certainly worked hard to create more access in the behavioral space. So all of those elements are modestly up, but up as we had planned for. And they'll hopefully sound familiar to you because we spoke to all of these at our investor conference as we ended the year. So I think that's what I would summarize or add to John's commentary. Heather?
spk00: So I would say incredibly consistent on the awesome side. So maybe just focusing on the medical first. So, I mean, I think you've heard us say this. When you look, when we came out of last year looking into this year, our focus was on the behavioral health, those outpatient sides consistent with UnitedHealthcare. And what was very important for OptumHealth was using that capacity that Amar explained in our physicians, as well as those wraparound services and our investments to ensure that we were looking at those care patterns. So we feel really good about coming into this year. That work we've done, John referenced engagement with particularly those most complex numbers, 75%. already engaged, and that PCP engagement, that member engagement is incredibly important, whether it's with our PCP directly or it's with some of our own care management wraparound services, because it identifies affordability opportunities incredibly quickly. It also identifies chronic disease that needs to be managed, and it gets them connected to primary care quickly. So that's our focus for the year, and that's why we feel good about our ability to control utilization on the medical side, particularly, and again, what we'll remind you, is a reduced funding environment as we go into this year. So that's what brings that value-based care proposition incredible value to all of our payers. On the pharmacy side, I call it the same things. For our clients, that specialty trend is a focus, and we bring those products and solutions. And that's why we've seen growth on the PBM side and our pharmacies around our clinical model and the continued innovative products that we're bringing to bear. So you're seeing that. pull through in the diversified growth and strength of the performance in the OptumRx side as well.
spk17: Thanks so much, Heather. Just one number Heather just shared with you there, which I'm very pleased of, and it's a significant improvement year over year, is that 75% engagement of the most complex members in OptumHealth. And just for that, that means three out of every four most complex, most disadvantaged folks in the country have had a direct engagement with us in the first three months of the year. That's a great rate of touch. opens the door then for us really getting to know those folks, helping the system, helping bring the system to support the many of these people, particularly those who are trapped in their homes, have just not had access to that kind of care opportunity. That engagement is the first step of doing that. We really believe that is a key to how we not only deliver an effective care delivery from a cost point of view, but also make sure they get the very best quality that they deserve. Really pleased to see that step up year over year. I think we have time for one last question. If we could take that question, please, Jennifer.
spk23: Yes, we'll go to our last question from Jessica Tassin with Piper Sandler. A few more details maybe on the launch.
spk17: Sorry, we missed the beginning of your question.
spk24: Sorry about that. I'm interested in a few more details maybe around the launch of Change 2.0 If you could talk a little about what payer receptivity to reconnection has been, whether change retains its legacy data rights post-breach, and then just any change or updated thoughts on kind of the long-term thesis on change for something like a real-time transparent, you know, payments and decision support network. Thanks so much.
spk17: Thanks very much for the question.
spk04: Let me ask Roger to kick that one off. Yeah, Jessica, thanks very much for the question. First of all, on your first part, that change 2.0, again, we're just confident in terms of our ability to reconnect. I mentioned the level of functional restoration that we have. You can imagine now the next stage of this is working with payer and provider to reconnect them in a safe way and an appropriate way. And all of the conversations that we're having with them are positive as we work through it. As I mentioned, there's still work to do, and that's going to take us a little bit of time, but we're continuing to work through that functionality. I think it's important also to recognize where change sits in the overall OptumInsight portfolio. Change Healthcare was about 15% of our projected revenue for this year, and when you look at, that means I've got thousands of people who are continuing to work on other products outside of change, not impacted by this, and Their underlying performance this quarter has been strong. If you adjust for the change outage, that business's earnings actually grew by around 10%. But what we haven't slowed either, as you mentioned, is our innovation agenda. The excitement of the change portfolio plus the Optum Insight portfolio is what we can bring to this market to transform it from an innovation point of view. And the real-time settlement work that we're doing, plus work that we've been doing with Optum Health on value-based care and provider risk enablement, that's all still going ahead. innovation agenda and the performance of the underlying business within Optum Insight, we're very positive.
spk17: Roger, thanks so much. And yeah, absolutely, you know, Change Healthcare, important acquisition for the group, you know, and I think important for the country that we own Change Healthcare. Without UnitedHealth Group owning Change Healthcare, this attack would likely still have happened and it would have left Change Healthcare, I think, extremely challenged to come back because it was a part of UnitedHealth Group We've been able to bring it back. We're going to bring it back much stronger than it was before. And secondarily, all of the reasons that we were interested in bringing the change healthcare capabilities and customer connectivity closer to United Health Group still absolutely holds fast in terms of the potential innovation around things like real-time settlement, clinical decision support capabilities, all of those products of the future, services of the future, which ought to be characteristics of a modern healthcare environment. Those are all the reasons why we believe change and health and UHG were better together. This cyber attack has unfortunately created another true validation of why that was the right thing to do, because it meant the UHG was in position to resolve this much more quickly than I think would ever have been imaginable in a standalone situation. Thanks everybody for all of your questions this morning. It's been a bit more of a complex quarter for sure this time around, but one that's also showed the depth and breadth of our company's capabilities. We're recovering quickly from the change healthcare attack and are a stronger, more capable company as a result. We're continuing to build our business based on the five strategic growth pillars that we're relentlessly focused on. And we're steadfastly confident in our ability to achieve our 13% to 16% long-term growth objective as we look to the years ahead. We very much appreciate all of your time and attention this morning. Thank you.
spk23: This does conclude today's conference. We thank you for your participation.
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