By Anna Wilde Mathews and Dave Sebastian
UnitedHealth Group Inc. said its insurance arm gained from
widespread cancellations of medical procedures but its surgery
centers were hurt by falling volumes, results that showed the
pandemic's emerging impact on the U.S. health-care system.
The company on Wednesday played down the effects of the new
coronavirus on its first-quarter performance, however, saying they
were minimal and emerged toward the end of March. The results beat
analysts' expectations. The company also said it wasn't adjusting
its guidance for the rest of 2020 and warned of significant
uncertainty.
The pandemic has had a mixed impact on the U.S. health-care
industry so far. Across the nation, surgeries have been canceled as
hospitals and other health-care providers brace for expected surges
of coronavirus patients. Americans are also avoiding clinics and
emergency rooms amid infection fears and stay-at-home orders. But
in parts of the country, such as New York, hospitals are
overwhelmed by patients sick with Covid-19, the illness caused by
the novel virus.
"The elective deferrals to date are offsetting Covid-19 costs,"
UnitedHealth Chief Executive David Wichmann said in a conference
call with analysts and investors.
UnitedHealth is the parent of the biggest U.S. health insurer as
well as, through its Optum arm, the owner of a large network of
surgery centers, urgent-care clinics and doctor practices.
Investors consider its results a bellwether for important segments
of the health-care industry.
Earlier this week another industry bellwether, Johnson &
Johnson, lowered its forecast for its performance this year, citing
the slowdown in patient visits to doctor's offices and in spinal
surgeries, knee replacements and other elective medical
procedures.
Gary Taylor, an analyst with JPMorgan Chase & Co., said
UnitedHealth's first-quarter results likely foreshadow far more
dramatic financial impacts across the health-care industry that
will become clearer later this year.
Hospitals have reported revenue drop-offs of around half, due
largely to the deferred surgeries, he said. So far, their
reimbursement for Covid-19 treatment, with the surge in cases
spread unevenly around the country, doesn't appear enough to make
up that deficit.
"This is a dramatic, unprecedented change in the last month," he
said. In the second quarter, he suggested, insurers might report
some of the strongest results in history if those fall-offs in care
continue. UnitedHealth's comments are "directionally supportive" of
those trends, he said.
UnitedHealth said medical expenses could be significantly lower
in the second quarter but might rebound later in the year as people
pursue care they had deferred.
Overall, UnitedHealth's first-quarter earnings were $3.38
billion, or $3.52 a share, compared with $3.47 billion, or $3.56 a
share, in the same period last year. Adjusted earnings were $3.72 a
share. Analysts polled by FactSet were looking for earnings of
$3.44 a share, or $3.63 a share on an adjusted basis.
First-quarter revenue was $64.4 billion, up 6.8% from $60.3
billion in the same period a year earlier.
The medical-loss ratio of UnitedHealthcare, the company's
insurance arm, which measures the share of premiums paid out in
claims, was 81%, when a consensus of analysts polled by FactSet had
expected 82%.
Yet OptumHealth, the unit that owns surgery centers, physician
practices and urgent-care clinics, fell short of some analysts'
projections.
Like the rest of the health-care system, UnitedHealth has seen a
drop-off in elective care, Mr. Wichmann said. The falloff helped
insurance results, as UnitedHealthcare didn't have to pay for the
forgone surgeries and other care. UnitedHealthcare reported
first-quarter earnings from operations of $2.9 billion, on revenue
of $51.1 billion.
The drop hit UnitedHealth's Optum health-care operations,
however. "Most traditional procedural work has been postponed" at
Optum's surgery centers, Mr. Wichmann said.
Nonetheless, UnitedHealth said OptumHealth had met its financial
expectations overall, as the unit is often paid in ways that aren't
tied to the amount of health-care provided. OptumHealth reported
earnings from operations of $712 million, on revenue of $9.2
billion.
UnitedHealth Chief Financial Officer John Rex said uncertainty
about how the pandemic would unfold makes it hard to make
projections. "The situation is just so different than anything
we've seen before," he said.
The insurer will also face expenses tied to hospitalizations and
other care received by Covid-19 patients. UnitedHealth pointed to a
range of actions it had taken to bolster coverage and care during
the crisis, including accelerating payments to doctors and
hospitals, starting with about $2 billion, and offering more
telemedicine.
UnitedHealth said it expects a drop-off in its membership in
employer plans due to layoffs and closed businesses as large parts
of the U.S. economy shut down, but that could partly be offset by
increases in Medicaid and individual-coverage enrollment.
Also on Wednesday, the company said Andrew Witty, UnitedHealth's
president and the chief executive of Optum, will take a leave of
absence to assist with the World Health Organization's efforts in
pursuit of a Covid-19 vaccine.
Write to Anna Wilde Mathews at anna.mathews@wsj.com and Dave
Sebastian at dave.sebastian@wsj.com
(END) Dow Jones Newswires
April 15, 2020 12:27 ET (16:27 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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