UnitedHealth Group profits are down in Q2, but revenue gains thanks to Optum and UHC
While revenues are down year-over-year, they still surpassed Wall Street's expectations.
Photo courtesy of UnitedHealth Group
UnitedHealth Group is reporting a $4.3 billion dollar profit in the second quarter, almost $2.3 billion less than it recorded during Q2 2020, according to information released by the company this week.
Revenues of $71.3 billion were a 15% increase from the previous quarter, which UHG attributed to well-diversified growth at subsidiaries Optum and UnitedHealthcare. Zacks Investment Research reported that this is an increase from the $62.1 billion in revenues the company posted in the first quarter. While revenues are down year-over-year, they still surpassed Wall Street's expectations.
Revenues from Optum, meanwhile, improved 17.2% year over year to $38.3 billion, on the back of solid contributions from the sub-segments of OptumHealth (up 45.5%), OptumInsight (up 12.3%) and OptumRx (up 5.4%).
Earnings from operations hit $6 billion, while cash flows from operations reached $5.5 billion, about 1.3 times net income.
Net earnings were $4.46 per share and adjusted earnings were $4.70 per share.
The company's medical care ratio of 82.8% deteriorated 1260 basis points (bps) year-over-year, primarily due to the adverse effects of the pandemic, Zacks found.
The operating cost ratio of 14.5% improved 160 bps year over year in the second quarter, due to repeal of the health insurance tax, the pandemic-induced effects on revenues and persistent productivity advances. That metric has been partly offset by business mix and various investments.
Total operating costs for the second quarter escalated 23.5% year over year to $65.3 billion due to increased medical and operating costs, higher cost of products sold, and rise in depreciation and amortization.
WHAT'S THE IMPACT?
During the quarter, UnitedHealth Group's health benefits segment, UnitedHealthcare, generated revenues of $55.5 billion. The year-over-year revenue growth of 13% was driven by an increase in the number of people served through the segment's community and senior offerings.
Earnings from operations have reduced more than two-fold year over year to $3.1 billion. The decline was due to the pandemic-induced care deferral in 2020, partially mitigated by higher revenues.
The company served 49.63 million people in the quarter, up 1.2 million lives year over year.
THE LARGER TREND
Optum and Change Healthcare announced in January their intent to merge, uniting two of the nation's largest technology and service companies in a $13 billion acquisition, but the move received pushback in March from the American Hospital Association, which said the proposed deal raises antitrust concerns.
In a letter sent to Acting Assistant Attorney General Richard Powers of the U.S. Department of Justice's Antitrust Division, AHA General Counsel Melinda Reid Hatton said the deal threatens to reduce competition for the sale of healthcare information technology services to hospitals and other providers. That, in turn, would negatively impact patients and providers, she wrote.
She claimed the proposed action would result in a large-scale consolidation of "competitively sensitive" healthcare data, and shift the data from Change Healthcare, a neutral third party, to Optum.
The letter spurred an investigation by the U.S. Department of Justice later that month.
Twitter: @JELagasse
Email the writer: jeff.lagasse@himssmedia.com
