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Our Take: Optum’s expansion in value-based care contributes to UnitedHealth Group’s record $20.6 billion profit in 2022

Jan 23, 2023

UnitedHealth Group (UHG) added another $4.9 billion to its bottom line in the fourth quarter of 2022, bringing the company’s total profit for the year to $20.6 billion — up 16.4% from 2021. 

UHG’s revenue of $82.8 billion in the final quarter of last year — more than a 12% increase compared with the fourth quarter of 2021 — beat analysts’ forecasts, giving the company total revenue of $324.2 billion for 2022, according to the earnings report

While UnitedHealthcare, UHC’s insurance arm, brought in $63 billion in revenue for the quarter and $249.7 billion in revenue for the year (a 12% increase from 2021), it was Optum that saw the largest growth in revenue: $47.9 billion for the fourth quarter and $182.8 billion for the year, an increase of 17.5% compared with the previous year. 

UnitedHealthcare added more than 1.2 million to the number of people it served in 2022, with growth mostly in the company’s community-based and senior offerings. At year-end, UnitedHealthcare had 51.7 million members.

Optum Health, the care delivery arm of UHG, which includes primary, specialty, urgent, and surgical care, saw a 29% increase in revenue per consumer last year relative to 2021, with total revenue of $71.2 billion. UHG attributed the increased revenue to growth in patients served under value-based arrangements (by about 1 million) and an increase in the levels of care the company is able to offer.

Optum Rx, UHG’s pharmacy benefit manager (PBM), had revenue of $99.8 billion in 2022, an increase of 9% from the previous year.

While discussing UHG’s earnings on an investor call earlier this month, CEO Andrew Witty said the company expects that 4 million people will participate in fully accountable value-based care provided by Optum Health this year, which would be roughly 1.8 million more than at the start of 2022. 

On the same call, Wyatt Decker, CEO of Optum Health, indicated that home care and behavioral health would be two areas of focus in terms of accelerating the company’s growth in value-based care. 

When asked about UHG’s key priorities in the area of mergers and acquisitions for the year ahead, Witty said “a substantial number of transactions” are in process, and the “pipeline of opportunities … is probably bigger, deeper, more diverse than we’ve ever seen.”

Looking ahead, UHG expects to earn revenue of $357 billion to $360 billion in 2023.

Our Take: How much bigger can UnitedHealth Group get? The answer could be disconcerting, to say the least. 

UnitedHealthcare is the largest health insurer in the U.S. by total membership, serving more than 50 million members in 2022. 

With at least 60,000 employed or aligned physicians across 2,000 locations, Optum is the largest employer of physicians in the U.S. Optum also owns one of the country’s largest ambulatory surgery center chains, and it’s the nation’s largest operator of urgent care clinics.  

Optum Care serves more than 20 million people, and Andrew Witty said last June that UHG is still growing Optum Care’s geographic reach. 

“I think we’re in the very early innings of this whole agenda for us,” he said at the time.

Optum Rx serves more than 66 million members and is the third-largest PBM in the U.S.

Optum Insight — the health information technology and analytics services arm of UHG — is being integrated with Change Healthcare and, moving forward, will no doubt dominate that segment of the industry. 

Fortunately, UHG’s emphasis on value-based care is likely to hasten the transition away from the health care system’s outmoded fee-for-service structure. But what happens when UHG eventually owns the health care system?  

What else you need to know
Eli Lilly’s donanemab won’t receive accelerated approval as a treatment for early symptomatic Alzheimer’s disease — most likely because it worked too well in a mid-stage study. In a complete response letter, the only reason the FDA gave for not granting accelerated approval was an insufficient number of patients (the agency had requested a minimum of 100) with at least 12 months of drug exposure data provided in the company’s submission, Lilly said in a press release. Although enough participants were enrolled in the study used to support the submission (the Phase II TRAILBLAZER-ALZ trial), patients were permitted to end treatment upon reaching a predetermined level of amyloid plaque clearance. Lilly said 40% of the participants had reached that level of clearance as early as 6 months after initiating treatment, according to Reuters. As a result, fewer than 100 patients received 12 months of donanemab. Lilly anticipates reporting top-line data from an ongoing confirmatory Phase III trial, TRAILBLAZER-ALZ 2, in the second quarter and plans to use that data to apply for traditional approval. 

Jefferson Health will consolidate its operational divisions from five to three, according to multiple news outlets. The health system’s wholly owned hospitals will be grouped into a northern region (six hospitals), a central region (seven hospitals), and an eastern region (three hospitals in New Jersey). Each division will be led by a president who reports to the chief operating officer. Dr. Joseph Cacchione, who took over as Jefferson Health’s CEO in September, told The Philadelphia Inquirer the restructuring will better integrate the health system and its clinical programs, noting that many of the hospitals currently compete with one another. Through mergers and acquisitions, Jefferson Health grew from three hospitals in 2015 to 18 hospitals in 2021. (Two hospitals are controlled through a joint venture and are not included in the restructuring.) 

ACO REACH, the redesigned Direct Contracting model, kicked off its first performance year on Jan. 1 with 132 ACOs serving 2.1 million people, an uptick from the 99 ACOs participating in Direct Contracting last year. ACO REACH is designed to help close racial and ethnic disparities by increasing access to accountable care in underserved communities. Additionally, the Kidney Care Choices (KCC) model saw an 87% increase in the number of participating providers and organizations compared with last year, with more than 8,393 participating in KCC this year, according to a CMS press release.

Meanwhile, the Medicare Shared Savings Program (MSSP) experienced a drop in participation, falling from 483 ACOs serving 11 million people in 2022 to 456 ACOs serving 10.9 million people in 2023. Two-thirds of the ACOs in MSSP this year are in two-sided risk arrangements, in which they share savings but must repay Medicare if they miss financial or quality targets. CMS said it expects policy changes set to go into effect in 2024 will increase MSSP participation next year and beyond. In a separate news release, Clif Gaus, CEO of the National Association of ACOs, agreed: “We expect 2023 to be a turning point for ACOs and growth in participation to really accelerate in 2024 thanks to CMS leadership.”   

California’s attorney general is suing the top three insulin manufacturers and the country’s three largest pharmacy benefit managers (PBMs), accusing them of overcharging patients. The lawsuit claims Eli Lilly, Novo Nordisk, and Sanofi “aggressively raise the list price of insulin in lockstep with each other to artificial levels” that have “significantly exceeded inflation and are not justified by advances in the efficacy of the drugs or the cost of manufacturing.” It also claims that CVS Caremark, Express Scripts, and OptumRx give the drug companies’ products favorable placement on formularies in exchange for “secret rebates” based on list price, a practice that incentivizes the drugmakers to raise their list prices and results in the PBMs promoting higher-priced insulins over less expensive ones. These actions, the lawsuit contends, constitute unlawful, unfair, and deceptive acts and practices prohibited by the state’s Unfair Competition Law. In a press release, the AG’s office said the three drug companies produce more than 90% of the world’s insulin supply and the three PBMs administer pharmacy benefits for approximately 80% of prescription claims managed. 

Adam Kautzner, PharmD, is Express Scripts’ new president, according to a press release from Evernorth, Cigna’s health services business. Amy Bricker had served as president of the PBM since 2020; the announcement of Kautzner’s promotion did not mention Bricker or the reason for the change. 

What we’re reading
What The Inflation Reduction Act’s Reforms To Medicare Part D Mean For Prescription Drug Prices. Health Affairs Forefront, 1.20.23
Disparities According to Genetic Ancestry in the Use of Precision Oncology Assays. NEJM, 1.19.23
A New Approach to Cancer Bundled Payments in Medicare—The Enhancing Oncology Model. JAMA Health Forum, 1.20.23

What else we’re reading
Cold New World: Growing Up in a Harder Country, by William Finnegan. I never finished this amazing work the first time around, so I’m giving it another try. A prescient look at America’s social problems through four powerful narratives. 

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