After this Editor’s call for breaking up UnitedHealth Group–two more views, for your consideration (as Rod Serling used to say before we entered ‘The Twilight Zone’).
MedCityNews examines The No Good, Very Bad Year for UnitedHealth. It’s a more, shall we say, measured view, than mine, though we plow many of the same furrows in UHG’s fertile ground.
Additional points are made by the astute Ari Gottlieb (A2 Strategy, who had the best takes on both Cano and NeueHealth), the critical Robert Pearl, MD (formerly CEO of the Permanente Medical Group and presently a professor at Stanford University School of Medicine and Stanford Graduate School of Business), and Dr. Adam Brown (emergency physician and founder of healthcare advisory firm ABIG Health).
- Mr. Gottleib focuses on UHG attributing its challenges to Medicare Advantage issues such as increased utilization. Yet other major insurers are stating they anticipated this and it’s trending about how they expected. He believes that UHG will manage their way out of this, much as (smaller, less complex) CVS Health apparently has, which was looking at a breakup in October 2024. But it will take time.
- Dr. Pearl hits upon a point that I had not thought of, which is that UHG’s strategy was out of an old playbook that doesn’t work today: “(to) become successful is you increase the medical loss ratio (MLR), by which I mean you lower the value, meaning that you invest less in actual care delivery. He (Witty) does that by a lot of prior authorization {denial}, a tremendous amount of claims denial.” In his view, UHG hasn’t moved beyond that nor is anticipating the future. In this Editor’s view, CFO John Rex’s 13 May statement of UHG’s challenges reinforces this ostrich-head-in-sand approach.
- Finally, Dr. Brown’s fine point is taken (Editor’s emphasis): “I do believe it’s a bit of a reckoning where United, over the past several years, has been building an empire on Medicare Advantage and on vertical integration. And remember, Medicare Advantage is taxpayer dollars. … I think regulators, politicians — we see it even in a bipartisan manner — and of course patients are asking similar questions: Have we gone too far in vertical integration, and have we handed over too much of healthcare to one single entity?” He also sees them at risk due to scrutiny from the DOJ, FTC, HHS, and Congress, as well as public perception.
Takeaways: other insurers are challenged but UHG, for 40 years the best managed of the lot, is stumbling and falling into a hole of its own shoveling; it hasn’t moved beyond ‘squeezing the rock’ of MLR and reducing care delivery; vertical integration has gone too far; and it’s too much for one company.
A Substacker provides more quantification of the deep hole UHG has dug for itself in its endgame. And it’s damning. Published on 28 April before the Sir Andrew Witty resignation, and not read by this Editor before today, healthcare analyst Jeff Goldsmith on Substack analyzed the sudden end of, as he put it, UHG’s 40-year growth saga, from a primarily financial perspective. The bloom is not only off the rose, but it’s wilting. Some highlights from this Must-Read:
- “The company is a $400 billion black box. The main United businesses-health insurance, care delivery, pharmacy benefits management and business intelligence/services–are so intertwined with one another that only United CFO John Rex and a few other senior managers actually know from whence United’s earnings actually flow.”
- Two decades of growth were fueled by United buying other companies out of its astonishing cash flow ($3 billion per month!)
- They have literally run out of profitable or near-profitable companies, “accretive transactions”, to buy and add to Optum. They cannot buy other health plans without running into the antitrust buzzsaw. They can’t buy up many more physician groups as over one-third are owned by hospitals–and they are money losers (e.g. they wisely passed on Steward Health’s practices).
- They sit on a swelling mountain of cash, which is starting to attract the Wrong Kind of Attention.
- OptumHealth’s margin is shrinking. At seven years ago, a quarter of its present size, its margins were 10%. They are now 25% less. It also bought high-quality practice groups like Kelsey Seybold that had profitable contracts with competitors like state Blues’ Medicare Advantage or their own plans (Kelsey)–which aren’t so profitable anymore.
- OptumInsight was decimated by hasty acquisitions–Equian, Change Healthcare, and naviHealth. It went from a 28% margin business to 16.5%. (Change Healthcare alone was responsible for a $2.9 billion loss.)
- Then Change’s ransomwaring and hacking proved that UHG was negligent in running that type of business. As stated before in writing about Change, UHG did not do its due diligence on the only partly digested meal-via-acquisition that Change really was, nor spent the two years before the cyberattack reviewing and hardening Change’s systems. His conclusion–United can’t run that type of business competently. (Too true of ‘black boxes’)
He also returns to the brutality of UHG’s ‘denial machine’ of AI-driven claims and prior authorizations, killing them not only politically but also in a research metric commonly used to rate plans. United has a minus 12 ‘net promoter’ score, which is as bad as it sounds.
It confirms that no one except perhaps (!) at the C-level really had their arms around all of UHG’s businesses. The facts are far more than inconvenient, more like damning. While the tide was lifting all the boats, it was keen and peachy. But when the end hits the fan…will one of the strategy’s architects, Stephen Hemsley, try to save it whole or dismantle it? Hat tip to Matthew Holt via LinkedIn.
Leave a Reply