Breaking up is hard to do. But should be done if UHG wants to survive and thrive.

Our proposition: UnitedHealth Group has become a victim of its own giantism, conflicts, and focus on financials–and its failure will drag down healthcare.

How big? By far, it is the largest US health insurance company based on 2023 enrollments with a 15% market share, 29 million members, and $371.6 billion in revenue. It leads by far Elevance Health (formerly Anthem, 12%), CVS Health/Aetna (12%), Cigna (11%) and Health Care Service Corporation (7%). A more realistic picture of its size is that it is now is the US’ fourth-largest firm by revenues, just behind Walmart, Amazon, and Apple. (Visual Capitalist 17 Dec 2024, based on American Medical Association data). Their growth has been led by acquisition into Optum, their health services division. It houses their owned physician practices as the largest owner of practices in the US with 90,000 physicians, their ACO relationships, data analytics, Change Healthcare, the largest billing and claims management company, home care/hospice, the third largest PBM Optum Rx, a venture investment arm, and much more. Optum is the massive symbol of the integration envisioned by former and current CEO Stephen (Steve) Hemsley. Other health plan companies have health services units, for instance PBMs–CVS has Caremark and Cigna Express Scripts, both larger than OptumRx, and analytics–but not to the vertical and horizontal integration depth and extent of UHG’s continuing search for revenue and profit.

The road this vision took under Mr. Hemsley and later Sir Andrew Witty took diversions along the way that have escalated into a cadence of legal troubles, a near-perfect storm of corporate misery, that have damaged them among customers, shareholders, and regulators. A list of the recent highlights (bold type links are new information; standard type links refer to earlier TTA articles):

• The contentious two-year-long purchase for an eye-blinking $7.8 billion or $13 billion of Change Healthcare that finally closed in 2022. While opposed by the Department of Justice (DOJ), the District Court disagreed and said it wasn’t anti-competitive or prevented competitive entry. 
• Change Healthcare was a House That Jack Built that collapsed spectacularly in February 2024 with the ALPH-V/BlackCat ransomware attack. It was evident that Optum didn’t conduct basic due diligence on Change Healthcare’s multiple systems, built up over multiple acquisitions, nor set to work fixing them after the closing, leaving the largest claims/payment system vulnerable. UHG’s response managed to anger patients, providers, and HHS. It took Optum most of 2024 to fix it at a loss of at least $2.3 billion. 
• DOJ has been investigating certain relationships between the company’s UnitedHealthcare insurance unit and its Optum services unit, specifically around Optum’s ownership of physician groups. This started in March 2024.
• The $3.3 billion acquisition of Amedisys home health has taken over two years (since June 2023) and has taken multiple rounds of divestitures–and still DOJ is grinding its Paul Bunyan-sized ax against it, filing their suit in Maryland along with four state attorneys general in November 2024.
• DOJ’s insider trading investigations may have started as early as October 2023. The $300 million Hollywood (Florida) Firefighters Pension Fund filed a class action lawsuit in mid-December 2024 alleging that the sales were made while the Department of Justice (DOJ) was considering an anti-trust action against UHG that would revisit the so-called ‘firewall’ between it and Change Healthcare. Named in the lawsuit were Brian Thompson, head of UnitedHealthcare, Andrew Witty, and Steve Hemsley. (Sir Andrew resigned from UHG’s board effective 20 May, Becker’s and SEC Form 8-K)
• DOJ is reportedly investigating UHG for criminal Medicare Advantage fraud, according to the WSJ earlier this month, reported in HealthcareFinance.
• The latest accusation: kickbacks to nursing homes to reduce patient transfers to hospitals and thus costs, based on an investigative report from the UK Guardian reported in FierceHealthcare last week.

The Brian Thompson assassination earlier in December uncapped a boiling volcano of resentment against the health care system that crossed political lines, then focused on UHG itself and its claims treatment. Next it revealed something that UHG undoubtedly didn’t want known–that UHG’s AI-powered claims review system had a 33% rate of claims denial on marketplace plans across 20 states, the second highest in the US (first was BCBS Alabama, a single-state plan) (KFF). This eruption unleashed a tsunami of heartrending social media stories of denied care and approved then denied care by UnitedHealthcare, including one for a patient delivered to a surgeon post-operation.

• Instead of examining their methods, UH doubled down on featuring ever-so-trendy AI. Revealed recently to the WSJ, half of their 1,000 + AI-powered apps use generative AI and the remainder a more “traditional” form, without explanation of “traditional” according to chief digital and technology officer Sandeep Dadlani, Their software, not necessarily AI-powered but usually rules-based or using algorithms, ‘auto adjudicate’ 90% of UHG claims. And this wasn’t new. UHG was sued in Federal Court as far back as 2023 in using an AI-powered application to evaluate and deny claims.

This is above and beyond the business conditions that have affected every insurer: high utilization costs resulting from accelerated care activity, more (and more expensive) benefit offerings, and higher costs associated with Medicare Advantage beneficiaries, along with a minor reduction in MA benchmark rates.

One healthcare observer’s–and marketer’s–opinion, drawn from her experience not only in healthcare but also outside it.

UHG has pursued profit and growth to justify an immense share price and return to its shareholders. It has become unmoored from its business customers, instead trapped in an ever-widening gyre of increasing its revenue, profit, share price, and dividend every quarter, every year, to satisfy investors. It remains profitable, yet its share price has collapsed from over $600 on 3 December 2024–the day before the Thompson murder–to $378 on 12 May, the day prior to Witty’s resignation, to today’s close of $295. This is despite massive share purchases by Mr. Hemsley and other UHG executives, presumably to demonstrate confidence. Last week, three major investment banks downgraded their recommendations on UHG.

It’s time to sell off businesses and refocus on either being an insurer or being a healthcare services company. Not both. 

• If UHG chooses to be an insurer, refocus on a service mission, not the shareholders. Respect their members (and commercial businesses) who pay the premiums. Focus on member health, first preventative, then managing chronic care. Stop treating patients and providers as always trying to game the system or grift them. People depend on insurance at the time of need, when they are sick, and treatment is complicated. Make it easier for both members and their providers.
  • Bring back humans evaluating prior authorizations and claim approvals–and get better tools with a final review by humans. Treat providers in and out of network better.
  • Get back to being the insurer of choice for individuals and groups. Contract for the services you need, not own them and try to manage them too. UHG would not be the first insurer who has faced this–both Molina and Centene have divested all or many of their service businesses.
• If UHG chooses to be Optum, it needs to focus on their services and how well they integrate. Divorcing Optum from UnitedHealthcare resolves a lot of conflicts around interest but there are still others.
  • Owning and controlling practices creates multiple conflicts and a closed system. The feedback from doctors in Optum-owned practices that this Editor has seen is that they are micro-managed down to the penny, escalating administrative costs and taking focus from patient care. Optum practice locations that this Editor has seen have a ‘bad look’–underused, often repurposed locations.
  • Abandon the Amedisys acquisition and rethink (or spin off) the entire home care business for the same reason as owning practices.
  • Refocus their ACOs from ‘captives’ to management services provisioning that more naturally integrates with Optum services–or get out of the business.
  • Expand analytics into providing the best and most convenient tools for hospital and practice management, which likely will require some acquisitions.
  • Optum Rx is facing its own challenges from new competitors and eroding market share–and simplification can help management focus on it. If Change Healthcare is kept, rework and reform how they process and pay claims across healthcare; harden it against the cyberattack/ransomware that cost the economy and healthcare billions. Optum Ventures and its role should also be examined for conflicts with the main business.

UHG is a company now demonstrating the end stage of integration: too many complex parts, too much administration needed to keep the juggernaut going, too many inherent conflicts, no central theme, too little focus, culminating in failure to customers and shareholders. It has become toxic in reputation to its own members, providers, and to businesses who sign commercial contracts. It’s become a falling knife, a rolling failure such as GE before its breakup or (returning to my airline days) Texas Air Corporation, once the world’s largest airline holding company. Unlike GE or TAC, UHG’s business size and outsized vertical integration choking off alternatives have created multiple situations, such as Change Healthcare’s failure, which can damage the entire healthcare system. It’s time that their new CEO and their C-levels sit down and have a long think about what their future, and the future of their role in being a healthcare leader, should be. Think…smaller.

Update 28 May: The American Hospital Association (AHA) has also provided comments to the Trump Administration, DOJ, and FTC, as part of the administration’s 10:1 deregulation initiative*, addressing payer vertical integration and its effects on providers. Payer control, concentrated among four payers that control half the market (UnitedHealth, Elevance, Aetna, Cigna) , far outstrip those of health systems, and have led to higher premiums and constraints on care. The AHA is demanding review of regulations within the Affordable Care Act (ACA) that permit insurers to circumvent medical loss ratio (MLR) requirements through high-priced practice acquisitions yet enjoy exclusions in the Stark Law (physician self-referral) that health systems cannot. Their comments also included simplification of prior authorization processes and other utilization management practices, and swiped at the increased Premarket Notification process for M&A, something that the new administration is already reviewing. FierceHealthcare published 27 May.

*For every new regulation passed, canning 10 rules, regulations or guidance documents