UnitedHealth projects major revenue boost in 2020 on the back of continued Optum growth


The outside of Optum's headquarters

UnitedHealth Group projected it will generate $242 billion in revenue in 2019 and expects to report another 7% to 8% increase in top-line growth in 2020.

The insurance group presented updated figures during its investor conference that kicked off Tuesday with officials saying they expect to increase the company’s 2020 revenue to between $260 billion and $262 billion.

They project between $21 billion and $22 billion in operating earnings in 2020.

In comparison, UnitedHealth Group generated $17.3 billion in profits on $226 billion in revenue in 2018. The company is projecting to report $19 billion in profits in 2019.

The biggest driver of growth this year has been UnitedHealth’s Optum, the company’s pharmacy benefit management and care services group. Optum revenue is projected to have increased by 11% from 2018 to 2019, earning UnitedHealth $112 billion in revenue compared to $101 billion in 2018.Optum is expected to continue to be a major growth driver for the company in its 2020 earnings projection, with UnitedHealth pegging growth to increase again between 13% and 14%. UnitedHealth executives said that Optum is expected to make up 50.5% of the company’s total after tax operating earnings this year.. 

Optum could also be the key for UnitedHealth to improve its Medicare Advantage business.

“We don’t like being third, that’s fundamentally where we landed for the year,” said UnitedHealth Group CEO David Wichmann, “Over time I think we will continue to grow and outpace the market.”

Executives said that the key to growth is to keep its networks consistent as well as pharmacists and pharmacies consistent for seniors. 

“We believe we maintain in the Medicare market a strategic cost advantage because of the capacities we have as an organization,” Wichmann said.

UnitedHealth pointed to the success of OptumCare, the company’s primary and specialty care provider.  The highest performing Medicare Advantage plans were in markets that had an OptumCare presence. Wichmann said that growing the OptumCare platform is a majority priority for UnitedHealth over the next seven years.





Fitch says 2020 healthcare environment bumpy but negotiable


Dive Brief:

  • Demand for healthcare services will remain stable next year, but profitability will become more of a challenge, according to a new forecast from Fitch Ratings. The continued move from volume to value is encouraging the evolution of traditional business models, the analysis found.
  • The legal fate of the Affordable Care Act is one of several uncertainties, according to the report. Ongoing opioid litigation is another. And healthcare itself will be an important political issue during the election season.
  • Fitch said that credit downgrades in the sector are likely to outweigh upgrades, but that ongoing discord in Washington means that most companies will be insulated from significant change.

Dive Insight:

The healthcare sector seems to be entering a volatile period, although the chances for a major upheaval are far more remote, according to Fitch Ratings.

The biggest risk to healthcare is currently the uncertainty regarding the ACA, which as it nears its 10th anniversary remains embroiled in litigation, currently awaiting a decision from the U.S. Fifth Circuit Court of Appeals in New Orleans.

Fitch noted that if the law is struck down with no replacement waiting, “it may result in a disorderly wind down of the insurance expansion elements of the legislation, which could have negative ramifications for cash flow and profitability of segments most exposed to patient liabilities.”

While there are legal uncertainties surrounding the ACA, Fitch believes the gridlock in the nation’s capital remains a plus for the sector, noting that “progress on major pieces of healthcare legislation, due to political discord in Washington, will insulate issuers from the effects of any new policy measures on profitability during 2020.”

Meanwhile, those companies caught up in litigation over the opioid crisis will likely have to negotiate years of lawsuits, but Fitch believes it will be manageable over the long-term. “We expect investment-grade issuers to navigate the litigation with credit profiles intact, given the ability to redirect a portion of cash flow from operations from shareholder returns to litigation payments,” the rating firm noted. “Moreover, early indications are issuers will pay cash settlements over a period of years rather than in lump sums, which limits the effect on credit metrics.”

Healthcare ventures are also navigating the shift from volume to value. “A slow changing payment environment tying profits to high value, rather than high volume care, will continue to encourage gradual evolution of business models across the sector,” Fitch observed. “The convergence of business models via strategic M&A is viewed as constructive to credit profiles since it could help companies align value propositions with shifting consumer and payer preferences, despite its potential to reshape issuers’ balance sheets.”





Trinity Health sees net income plunge 60% as operating margin improves


Image result for trinity health headquarters

Trinity Health recorded higher revenue and operating income in the first quarter of fiscal year 2020 than in the same period a year earlier, but the Livonia, Mich.-based system ended the quarter with lower net income, according to unaudited financial documents.

During the first quarter of fiscal 2020, which ended Sept. 30, Trinity reported operating revenue of $4.8 billion, a 1.8 percent increase over the same period of the year prior. Operating expenses climbed 1.7 percent year over year to $4.7 billion.

Trinity ended the first quarter of fiscal 2020 with operating income of $94 million, up from $87 million in the first quarter of last year.

The system reported an operating margin of 2 percent in the first quarter of fiscal 2020, compared to an operating margin of 1.8 percent in the same period of the year prior. Margin growth was partially attributable to Trinity’s divestiture of Camden, N.J.-based Lourdes Health System in June. Growth in patient volumes and payment rates also supported margin growth.

After factoring in nonoperating items, including a decline in investment returns, Trinity reported net income of $166.4 million in the first quarter of fiscal 2020. That’s compared to the first quarter of fiscal 2019, when the system posted net income of $419.9 million.



Health insurers eat higher medical costs


Image result for 2. Health insurers eat higher medical costs

Almost all of the major health insurance companies are spending more on medical care this year than they have in the past, Axios’ Bob Herman reports.

The big picture: Rising prices and more services for some sicker patients are among the many reasons why this is happening. That uptick in spending has freaked out Wall Street, even though insurers are still quite profitable.

Driving the news: Almost all of the eight major publicly traded insurers have shown their medical loss ratio — the percentage of premium revenues they’re spending on medical claims — is rising this year.

  • UnitedHealth Group, the largest insurer in the country, said its loss ratio was 82.4% in the third quarter this year compared with 81% in the same period a year ago.
  • But these companies are handling billions of premium dollars, so any increase in medical claims equates to hundreds of millions of dollars in additional spending, which they don’t want.

Between the lines: Medical loss ratios are often higher for health plans that cover more older adults, the disabled and the poor, because those groups typically need more care or are in the hospital more frequently.

But costs have been climbing in some commercial markets, too.

  • Anthem executives admitted on their earnings call that the company is dumping some employers with workers who had medical needs and costs that were too high.
  • CVS Health, which now owns Aetna, previously said some middle-market clients had employees that it thought were getting too many services and drugs.
  • CVS “intensified our medical management in those geographies,” an executive said on the earnings call.

The bottom line: Health insurance companies closely track their medical loss ratios and aim to hit those targets most often by charging higher premiums, denying care, forcing people to use lower-priced providers or declining to cover people they deem to be too expensive.







Tenet posts 3rd consecutive quarter of volume growth


Dive Brief:

  • Shares of hospital chain Tenet Healthcare rose more than 3% Tuesday morning after reporting its third quarter results Monday evening showing broad-based volume growth.
  • Comparing hospital-to-hospital performance, Tenet reported a 3.6% increase in admissions and a slight uptick for inpatient surgeries (1.9%) and outpatient visits (1.6%).
  • The Dallas-based company reported a net loss of $232 million for the quarter attributable to the company’s common shareholders, compared to a loss of $9 million a year earlier.

Dive Insight:

Tenet CEO Ronald Rittenmeyer touted the results on Tuesday’s call with investors and said the company is raising its outlook for the year based on the numbers.

“We had a very positive third quarter with performance improvement in each of our operating segments,” Rittenmeyer said in a statement.

It’s the third consecutive quarter of volume growth, executives said Tuesday.

Rittenmeyer attributed positive trends over the past few years to a strong leadership team. “Tenet is in a much different place than it was two years ago,” he said.

Same-hospital patient revenue grew 5.8% and surgical revenue increased 6.9% on a same-facility basis.

Commercial volume trends were also very positive, executives said.

Still, they said the company faced more than $50 million in unanticipated headwinds including closures and costs related to Hurricane Dorian, lower California provider fee revenues and costs related to a nursing strike at 12 facilities.

The company is raising its outlook for adjusted earnings per share for the year. It expects adjusted diluted earnings per share from continuing operations of $2.25 to $2.91 for the year.

The company’s other segments also showed growth.

Conifer, the revenue cycle management unit, reported adjusted EBITDA of $90 million, an 11% increase from the previous year period. Tenet announced earlier this year it will spin off Conifer into an independent publicly traded company by the second quarter of 2021.

USPI, the outpatient surgical business, has a steady pipeline of health systems willing to send patients to the outpatient facilities, executives said during the call. During the third quarter, the company added three health systems and expects to reach a total of seven by end of year.