UnitedHealth beats expectations as Optum revenue hits $100B

Jan. 15--Shares of UnitedHealth Group were up about 2 percent in trading Tuesday morning after the Minnetonka-based health care giant beat analyst expectations for fourth quarter profit on continued growth at its Optum division for health care services

For the first time, annual sales at Optum sales hit the $100 billion mark, company officials said Tuesday, as the division's operating earnings for the year grew more than $1.5 billion, or 23 percent, to $8.2 billion.

Optum provides medical care through medical practices, surgery centers and urgent care clinics, and sells data and IT consulting to doctors and hospitals. Optum also is one of the nation's largest pharmaceutical benefit manages (PBMs), which handle the pharmacy portion of insurance benefits for health plans.

Full-year 2018 revenue at Optum, which is based in Eden Prairie, grew 11 percent to $101.3 billion.

"Looking ahead, the 150,000 people of Optum are incredibly enthusiastic about 2019 and our opportunities for longer term growth and performance," said Andrew Witty, the Optum chief executive, during a Tuesday call with investors.

UnitedHealth Group, which also operates the nation's largest health insurer, posted $3 billion in earnings on $58.4 billion of total revenue during the fourth quarter, with profit slipping from $3.6 billion in the year-ago quarter. The results from the comparable period in 2017 were boosted by a favorable noncash revaluation of deferred tax liability with the federal government's tax overhaul. Excluding the tax impact, the net adjusted margin grew to 5.2 percent, UnitedHealth says.

Adjusted earnings per share, which removes one-time factors, came in at $3.28 per share, seven cents better than expected among analysts surveyed by Thomson Reuters.

The company's UnitedHealthcare health insurance business saw U.S. membership decline slightly in the fourth quarter to just under 42.9 million people, offset by growth in health plan membership in South America.

Medical costs during the fourth quarter came in higher than expected, with UnitedHealthcare officials attributing the increase to the company's business serving as a managed care organization in state Medicaid programs. David Wichmann, the UnitedHealth Group chief executive, said the company has taken steps so the Medicaid business in future years hits the target profit margin of 3 percent to 5 percent.

"We continued to address performance pressures in a handful of Medicaid markets in the fourth quarter as we aggressively executed actions on both structural costs and rate recovery to ensure 2019 will see a return to stronger margin levels," Wichmann said.

For 2018, UnitedHealth Group overall generated $226.2 billion in revenue. UnitedHealth is Minnesota's largest publicly traded company employs about 18,000 people in the state.

UnitedHealth Group shares were trading up 2.5 percent in midmorning trading, at $254.28.

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