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Radar On Market Access: UnitedHealth Reports 'Good Start to the Year,' But Expects COVID Earnings Hit Later

Posted by Leslie Small on Apr 22, 2021


UnitedHealth Group began the first quarter of 2021 on a high note, reporting earnings per share (EPS) and a medical loss ratio (MLR) that both beat the Wall Street consensus estimate and saying it expects to achieve greater full-year earnings than it previously estimated, AIS Health reported. However, executives warned that the majority of the unfavorable COVID-19-related impact they're expecting will transpire in the second half of the year.

UnitedHealth expects roughly 70% of the predicted COVID-related $1.80 EPS hit to occur in the back half of the year, Chief Financial Officer John Rex said during an April 15 conference call to discuss the company’s financial results. He said that projection is based on UnitedHealth's prediction that as the year wears on and vaccination rates rise, people will increasingly be able to access higher-acuity, previously deferred care.

UnitedHealth's adjusted first-quarter EPS of $5.31 handily beat the Wall Street consensus estimate of $4.39, and its MLR of 80.9% topped the Street's prediction of 82.8%. The MLR result "likely speaks to lower core utilization patterns, particularly early in the quarter as COVID spiked," Citi analyst Ralph Giacobbe observed in an April 15 note to investors. The company also raised its 2021 EPS guidance to a range of $18.10 to $18.60, compared with prior guidance of $17.75 to $18.25.

"We view the results as a good start to the year, and the guidance raise as prudent all things considered, which should allow the stock to grind higher," Giacobbe wrote.

The business strategy surrounding various Optum divisions took center stage during the company's earnings call — especially OptumCare’s move toward value-based care models.

"Of the 4 million patients who OptumCare serves in some form of accountable arrangement today, 2 million are being served under fully capitated arrangements, and this demonstrates strong growth and progress — but OptumCare serves 20 million patients in total, which is one reason why we view the potential of OptumCare as only beginning to be harnessed," new UnitedHealth Group CEO Andrew Witty said.

Witty also expressed excitement about the analytics division OptumInsight, which saw a slowdown in new business prospects amid the pandemic but now has a "very exciting" pipeline of new business.

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Topics: Industry Trends, Data & Analytics, Payer