UnitedHealth Group is taking its growing network of walk-in health care clinics in a new direction with the opening in Las Vegas earlier this year of the company's first cancer center.
UnitedHealth sees big potential for OptumCare health provider business
April 17, 2019 at 5:12PM
Executives at the Minnetonka-based health insurer discussed the growth potential for a business called OptumCare during a first-quarter earnings call on Tuesday, which included the company's first public comments about the new cancer center.
UnitedHealth Group recently hired Dr. Wyatt Decker, the former chief executive at Mayo Clinic's hospital in Arizona, to be CEO of OptumHealth, UnitedHealth's health management business. That business includes, OptumCare, which primarily consists of large medical groups, urgent-care clinics and surgery centers.
"Quarter by quarter, I think we see more and more potential for the ambulatory network that we're building," Optum CEO Andrew Witty said during a conference call with investors. "The opening of our first cancer-care center in Las Vegas this quarter, I think, is just signaling the direction that we want to follow."
UnitedHealth Group runs UnitedHealthcare, which is the nation's largest private health insurer, as well as Optum, which has divisions for direct patient care, IT consulting and management of pharmacy benefits within health plans.
In the first three months of the year, UnitedHealth said on Tuesday that it earned $3.47 billion, up 22 % from the year-ago quarter, on $60.3 billion in revenue. Adjusted earnings per share of $3.73 beat by 14 cents the per-share profit forecast by analysts surveyed at Thomson Reuters.
With the results, the company increased its financial guidance for the year.
"The beat was across the board," wrote A.J. Rice, an analyst with Credit Suisse, in a note to investors.
OptumHealth, includes the clinic business and health care services for active military and veterans. OptumHealth also runs a financial-services business that administers health-savings accounts and manages proprietary networks of health care specialists in behavioral health, organ transplant, chiropractic and physical therapy.
During the first quarter, OptumHealth was one of the company's faster-growing segments.
The new cancer center includes 55,000 square feet of space for medical and surgical oncology as well as chemotherapy, imaging and lab services, according to background material from Las Vegas Medical District, an economic development effort that includes the city of Las Vegas. For years, Optum has owned a large medical group in the city by virtue of its purchase more than 10 years ago of a large health insurer in the region.
Beyond cancer care, the website for OptumCare also lists offerings in Las Vegas for lung and allergy care as well as a group focused on orthopedics and spine procedures.
Witty told investors that the company's strategy of growing the network of walk-in health care centers will expand significantly once Optum is able to close on its pending purchase of DaVita Medical Group, which was first announced in late 2017. The deal is still going through regulatory approvals, and UnitedHealth Group Chief Executive David Wichmann said he had no update on the timeline for closing the acquisition.
OptumCare will grow within the dozens of cities where it currently operates, Witty said, as well as through acquisitions that bring Optum to new communities.
"OptumCare's vision for care is to create the leading, value-based, patient-centric, physician-led health care system in the United States and we will do this through local markets," Decker said during the conference call. "I am confident that there is no organization that is better positioned to create the future of health care than this one."
UnitedHealth Group is Minnesota's largest company by revenue and employs about 18,000 people in the state. Global employment has grown to about 300,000 people, in part because of a 2018 acquisition of a network of hospitals and clinics in South America.
During the first quarter, overall revenue at UnitedHealth Group rose 9 % to $60.3 billion. Earnings from operations grew compared with the year-ago quarter by 23 % at UnitedHealthcare and 14 % at Optum — a bit of a reversal since, over the last several quarters, Optum typically has grown earnings at a faster rate than the legacy health insurance business.
For the full year, UnitedHealth raised its per-share adjusted earnings outlook to a range of $14.50 to $14.75 per share, up from previous guidance of $14.40 to $14.70 per share.
On Tuesday, shares of UnitedHealth Group closed at $220.96, down about 4 % for the day.
Ana Gupte, an analyst with SVB Leerink, wrote in a note to investors that the financial results were "solid" and confirmed "continued steady fundamentals." Even so, Gupte noted how the stock has been dogged over the past week by political questions related to drug costs, Democratic calls for single-payer health care and ongoing litigation out of Texas over the future of the federal Affordable Care Act.
"Investors see policy imperatives that span drug pricing reform, Medicare-for-All, and the [Texas] lawsuit decision, all ahead of the Democratic primary, and the 2020 elections, as top of mind," Gupte wrote.
Christopher Snowbeck • 612-673-4744
Twitter: @chrissnowbeck
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