Kicking off the spring season of managed care earnings statements, UnitedHealth Group shows that business is bustling for modernizing American healthcare and expanding insurance.
The Minnesota-based insurer of 41 million Americans and owner of a large technology and services portfolio brought in a $1.4 billion profit on revenues of $36 billion for the first quarter of this year.
Both of those financial metrics are up year over year: the $1.4 billion or $1.46 a share, increased 27 percent from first quarter 2014, while revenue grew 13 percent. That and other signals are enough for UHG to increase its guidance for full-year earnings by $0.25 a share; the company is now forecasting $6.15 to $6.30 per share and revenue of at $143 billion.
"We are working to create more effective and more modern approaches to accessing and delivering healthcare," said Stephen Hemsley, UHG CEO. "We are gratified with the market response to our efforts, providing us opportunities to serve more people, in more ways."
UnitedHealthcare, UHG's insurance business, added added 680,000 members to individual and employer plans in the first quarter, including enrollment from public exchanges in 25 states. UnitedHealthcare's Medicaid managed care plans also grew by nearly 750,000, to more than 5 million, over the last year, with first quarter growth of 160,000. The company's Medicare business, alreading having the largest market share, grew by an another 380,000 seniors, half of them in Medicare Advantage and half in supplemental plans.
UnitedHealthcare's revenue grew 11 percent, from $29 billion to $32.6 billion, with operating income of $1.9 billion, up 35 percent. UNH saw a consolidated medical cost ratio of 81.1 percent in the first quarter, and medical claims payable per risk member that increased 5.9 percent. (The insurer has stopped providing a commercial MCR metric, "so it becomes more challenging other than to have broad generalized read-thrus," as Sterne Agee managed care analyst Brian Wright noted.)
UHG's Optum technology and services subsidiary saw first quarter revenues grow 15 percent, to $12.8 billion, with earnings from operations of $742 million, up 14 percent. Optum, covering businesses from hospital revenue cycle management and ICD-10 to home medicine and retail clinics, had an operating margin of 5.8 percent, flat year-over-year due to the $12.8 billion acquisition of the drug benefits manager Catamaran--one of several potentially market moving ventures.
The Catamaran deal, combining the PBM with OptumRx, will create the third largest pharmacy benefits manager in the country, amid rising drug prices and waves of new speciality medicines. Optum is also acquiring MedExpress, a national retail clinic chain with 140 locations across 11 states, as part of a major foray into retail health clinics.
"Game on," as consultant Ron Hammerle, CEO of Health Resources, in Tampa, Florida, said of Optum's MedExpress deal. "Fifteen years after pioneers set up a small clinic in a retail supermarket in Minnesota, nine years after a leading national pharmacy chain bought the pioneer and took it national in the U.S., and sensing that two, big international players are now planning to take the business global, the largest American health insurer must have decided it's time to play."
HCA suggests growth for hospital chains
In other for-profit healthcare news, Hospital Corporation of America also is eying a booming 2015. The country's largest investor-owned hospital system raised its outlook in a preview of first quarter earnings, with revenue for the full year now expected at $39 to $40 billion and earnings per share at $4.90 to $5.30.
For the first quarter of 2015, Nashville-based HCA anticipates revenue of $9.6 billion, up from $8.8 billion in first quarter 2014, and earnings before income taxes of 1.07 billion, compared to $680 million year-over-year.
"We are very pleased with the results of the first quarter," said HCA CEO R. Milton Johnson. "The majority of the first quarter performance was driven by continued favorable volume and payer trends in our core operations."
Compared to last year, Same-facility admissions at HCA's 165 hospitals increased 5.1 percent in the first quarter, same-facility equivalent admissions grew 6.8 percent, and same-facility ER visits increased 11.5 percent, while revenue per equivalent admission increased 1.6 percent.