UnitedHealth Group's fourth-quarter profit beat expectations, led by its Optum health services that saw sizable growth from its business running clinics and outpatient medical centers.
Minnesota's largest company by revenue, UnitedHealth saw a profit of $3.54 billion during fourth the quarter, up more than 16% from the year-ago period. After adjusting for one-time factors, income of $3.90 on a per-share basis beat by 12 cents the expectations of analysts surveyed by Refinitiv.
In morning trading Wednesday, UnitedHealth Group shares were up more than 2%.
"Our businesses remain strong and well-positioned for continued balanced growth by delivering even higher levels of societal value," David Wichmann, its chief executive, said during a conference call with investors.
Minnetonka-based UnitedHealth Group runs UnitedHealthcare, which is the nation's largest health insurer, as well as Optum, a health services business that includes direct patient care, IT and health care consulting and management of pharmaceutical benefits.
Health insurance remains the bigger of the two business in terms of sales. During the fourth quarter, UnitedHealthcare generated operating revenue of $48.2 billion compared with $29.8 billion at Optum.
UnitedHealthcare and Optum hire one another for services. Total revenue after eliminating intercompany sales came in at $60.9 billion -- about 4% better than the year-ago period.
But Optum during the fourth quarter accounted for a larger amount of operating income than did the health insurance business, and posted a higher profit margin, as well.
Optum's clinic business grew significantly during 2019 with UnitedHealth Group's acquisition of DaVita Medical Group. During the fourth quarter, the OptumHealth division that includes clinics posted operating earnings of $901 million on $8.3 billion of revenue.
A tough start to the flu season during the fourth quarter didn't hurt financial results, said Dr. Wyatt Decker, the physician who runs OptumHealth.
Optum's clinics often are paid by health insurers to take risk for patient outcomes, which means an unexpectedly bad flu season or any other surge in illness could hurt financial performance. But Decker noted the division also includes the MedExpress chain of urgent care centers, which are paid on a fee-for-service basis and would therefore see better financial performance with more flu.
What's more, the strain of flu virus circulating is generating more outpatient health care needs, Decker said, versus costly hospitalizations.
Company officials said fourth quarter earnings from operations at the pharmaceutical benefits management (PBM) business called OptumRx were unusually high due to one-time factors.
Membership in health insurance products in the U.S. stood at 43.4 million people at the end of December, down slightly from the end of the third quarter but up from last year. UnitedHealthcare in recent months launched a new "site of service" initiative designed to control costs by steering patients to receive certain services at lower-cost surgery centers rather than the outpatient departments in hospitals.
Such policies from health insurers have proved controversial among hospital operators.
"We are committed to driving significantly lower rates of health care spending growth than the industry," said Dirk McMahon, the chief executive of UnitedHealthcare, during the conference call on Wednesday.
UnitedHealth Group employs 320,000 people worldwide, including about 18,000 in Minnesota.
Christopher Snowbeck • 612-673-4744 Twitter: @chrissnowbeck
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