Q3 2020 UnitedHealth Group Inc Earnings Call
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Good morning, and welcome to the United Health Group third quarter 2020 earnings Conference call. A question and answer session will follow Unitedhealth group's prepared remarks as ray.
As reminder, this call is being recorded.
Here is some important introductory information.
This call could contain forward looking statements are to us federal securities laws. These.
These statements are subject to risks and uncertainties that could cause actual results could differ materially from historical experience or present expectations.
A description of some of the risks and uncertainties can be found in the reports that we file with the Securities and Exchange Commission, including the cautionary statements included in our current and periodic filings.
This call will also reference non-GAAP amounts a record.
A reconciliation of the non-GAAP to GAAP amounts is available on the financial earnings reports section of the company's Investor Relations page at Www Dot United Health Group Dotcom.
Information presented on this call is contained in the earnings release, we issued this morning and in our form 8-K dated October 14th 2020, which may be accessed from the Investor Relations page of the company's web site.
I will now turn the conference over to the Chief Executive Officer of United Health Group Mr., David Whitman. Please go ahead Sir.
Good morning, and thank you for joining us today.
The past nine months and hopefully provided you a window into both the values and capabilities of this organization and how they enable us to serve our customers patients care providers team members and their families and you our investors in a period of unprecedented challenge.
Im fortunate to witness up close the exceptional work of our team every day and.
And innovative growing and highly adaptable enterprise driven by the compassion expertise and breadth to spirit of our 325000 people.
Over 120000 of them, providing care on the front lines.
Our collective experiences over this year have made us an even more deeply committed and energized organization about our potential to help advance the next generation health system.
One, which is fair affordable simpler and effective.
Our team combined division with sharp focus on day to day execution, delivering strong well balanced results across the enterprise.
Third quarter adjusted earnings were $3.51 per share with the.
With the decline from the year ago quarter, reflecting the swift customer and consumer support actions, we committed to from the very beginning of the COVID-19 pandemic.
Based upon this performance and forward estimate of pandemic impacts we are updating our full year 2020, adjusted earnings outlook to a range of $16.50 to $60.75 per share.
In this we remain committed to ensuring any financial imbalances arising from the pandemic, our address proactively and fairly for those we serve.
We have done that consistently over this period, even as the ultimate outcomes remain unclear as the timeline timeliness of relief to our stakeholders is critical.
Service fairness and performance with a long term view. This is what you can continue to expect from us.
You should also expect this enterprise will apply its innovative spirit to contribute to a new and different ways as our capabilities expand and circumstances require.
We have partnered on and lead clinical trials, helping resolve the nation's critical PE and PCR supply chain issues and enabling more rapid testing a considerable scale, while keeping the health workforce safe.
We are supporting state testing operations in California, New Jersey, North Carolina, and Indiana and contact tracing in New York City.
We are supporting the male clinic development of convalescent plasma and some of the most promising vaccine and antibody trials.
We have helped enabled workforce safety through the development of protect well a protocol processing technology to enable the safety of the health workforce as well as the states opening of businesses schools and nursing homes.
We're working to assist with employees health coverage transitions through our get covered campaign now being offered by employers to assist people who have lost their jobs.
We provided $2 billion in liquidity belief for the health system, and our customers and consumers will realize over $3 billion in premium and cost sharing relief, including $1 billion in estimated rebates.
We have contributed more than $100 million of financial support and 6 million pounds of meals for community suffering from food insecurity homelessness and health disparities.
These efforts are possible because we operate a capable set of businesses and capacities that are leading the development of the next generation health system and expanding our opportunities to serve.
Today I'd like to give you a brief sense of this work.
Early in the pandemic, we quickly enabled optum positions and the physicians of United Healthcare is most vulnerable patients to adapt and expand rapidly to meet the needs of millions of patients for for care of chronic and emerging conditions.
This included advancing tele health by creating direct connections between patients and their own physicians.
A critical element to highly effective digital health, ensuring adoption will extend well beyond this crisis.
So far this year Optum care physicians have facilitated 1 million digital clinical visits directly with their patients.
And we are rapidly developing a proprietary set of distinctive tools and aligning our clinical practices to further develop and amplify this capability.
I'm sure you can see how advancing modern tele health fits into our overall strategy to build high performing systems of care.
Our growing therapeutics capacities are positively impacting the management of chronic diseases.
With the introduction of level to a digital therapy developed to improve the lives of the 30 million people with type two diabetes, we are helping patients move toward remission of the disease.
Level to uniquely measures signals and applies artificial intelligence engaging people and producing better health outcomes UK.
You can expect more digital therapeutics from us in the coming months and years.
Our growing capacities are especially apparent within our optumcare platform, where 53000 physicians across 1500 local patient centered facilities served nearly 20 million patients own.
Over $3.5 million of these in some form of risk arrangements.
With 1.3 million Medicare advantage or duly eligible members under global capitation.
Optumcare create substantial value by building, a deeper clinician patient relationship and by leveraging data and artificial intelligence to enable our clinical model to intercept and treat disease early and proactively leading to better health outcomes value and industry, leading patient experiences.
Our patients are experienced safer healthier more fulfilling lifestyles spending one third fewer days per year on average in a hospital bed.
And 40% fewer days in the skilled nursing facility, then patient supported by traditional Medicare fee for service.
Moreover, our most advanced care delivery practices delivered this high quality care and upwards of 40% lower costs than the equivalent traditional Medicare benefit.
With the value fully reflected in improved benefits and lower costs for seniors all at World class NPS scores in the mid seventies.
The proven clinical success of opt in senior care offerings supports our considerable growth goals for Optum care and also demonstrates the longer term potential to greatly benefit consumers and commercial offerings.
We have been building this platform for over a decade now and expected to continue to grow at strong double digit rate for years to come.
Another aspect of modern next generation health system is managing the specialized and costly medications of the future in a way, which works for patients clinicians employers and payers.
Our optumrx integrated specialty solution brings a total approach to managing complex conditions across both the medical and pharmacy benefit.
So we are able to generate up to 37000 in annual savings per patient by employing clinically appropriate care at more convenient lower cost sites.
This approach has enabled by Optums growing footprint of the integrated community pharmacies, which will grow by over 60 centers in 2020.
And the number of patients served with our infusion services will grow at double digit rates.
We expect this to be another durable growth trend given the much safer and clinically equivalent patient experience.
We see optumrx as continuing to transform to be a leader and pharmacy care services.
So differently, we believe the value for people and the system from pharmacy care services resides in managing personal engagement in health not just supply chain management. This.
This plays to our strengths and will increasingly contribute to the growth of optumrx in the years ahead.
United Healthcare continues to focus on the varied needs of healthcare consumers.
And the next generation health system, we expect consumer benefits to become increasingly customized to meet these needs as people search for solutions, which are simple affordable and help enable quality outcomes.
United Healthcare seen strong reception to our expanding suite of highly tailored and affordable individual coverages.
This year alone the number of people, we serve with individual health coverage has grown by 15%.
Likewise in employer sponsored coverage are growing set of consumer centered innovative and flexible offerings, such as bind all savers and physician aligned plans such as harmony in southern California are gaining traction with membership and these offerings, having grown over 50% this year.
We know many of you are interested in the annual Medicare advantage enrollment period, which opens tomorrow.
The 2021 benefit year, we'll be Unitedhealthcares largest Medicare advantage footprint expansion in five years, reaching an additional 3.2 million people and nearly 300 additional counties.
We are emphasizing what we know seniors are looking for this year, even more than ever.
Ability and value.
Premiums for most people, we serve will be flat or reduced and nearly two and a half million people will have no premium at all.
We continue to innovate our product offerings with all Medicare advantage plans featuring zero co pay primary care digital health visits and.
And the expansion of our personal support services, such as an annual clinical health assessment delivered in a seniors home and for many the assignment of a dedicated United healthcare navigator.
We expect strong growth in individual I may and when combined with our group Medicare gains 2021 is shaping up to be another year of market leading growth.
We also expect continued growth in Medicaid due to transitions in coverage and net new market gains and are looking forward to a record RFP season as.
As we seek to serve more people in more geographies.
What I've described for you. This morning is a sampling of the initiatives. We are pursuing today to help lead in the development of the next generation health system, a health system that works better for everyone, those who experienced care, those who provide care and those who pay for care.
Now I'll turn it over to Chief Financial Officer, John Rex.
Thank you Dave.
Broadly speaking third quarter results continued to be impacted by disruptive tear pattern, albeit to a much lesser extent than in the second quarter as many regions of the country stabilize near to more normalized levels.
Within the quarter care deferral impacts were more than offset by being proactive consumer and customer assistance measures. We voluntarily undertook earlier this year.
Well, COVID-19 care and testing costs and broader economic effects.
These factors resulted in a 10% year over year decline in adjusted earnings per share.
As we discussed last quarter, the deepest period of care deferral, which occurred in the second quarter and the timing of DAP recognition of our assistant factions built entirely lineup, which makes for a more pronounced adverse impact to earnings in the second half of Twentytwenty.
The measures, we voluntarily undertook mostly impact our benefits businesses and contribute to Unitedhealthcares third quarter operating earnings declined from a year ago.
In the quarter, we thought total care activity now exceeding 95% of seasonal baseline with certain categories, even more closely approaching normal.
This compares to an overall measure of about two thirds at the lowest point in the second quarter.
Each of the three Optum businesses continued to perform well less active in different ways by still recovering care patterns and economic effect.
Optumhealth third quarter earnings increased 12% year over year as fee for service practices and ambulatory surgery activity began to recover while risk bearing practices still experienced some modest continuing effect from deferral of care.
Our SDK ambulatory surgery centers operated at about 95% of seasonal baseline in the third quarter compared to 55% in the second quarter.
Year to date over 1000, new surgeons that perform procedures with FDA as they seek a safe convenient and efficient clinical partner.
New surgeon affiliations for the nine month period rose nearly 25% over last year and we continue to expand the complexity of procedures performed in the setting having added over 40, new service lines nearly double last year.
Patients increasingly prefer the three Sammy centers with NPS measured at 92.
These durable long term trends will benefit our growth even more strongly in the future as elective care activity fully normalized.
Optuminsight third quarter earnings increased 24% year over year, while the revenue backlog grew by half a billion dollars in the quarter to nearly 20 billion.
Hair services and state government businesses performed strongly while we continue to see lower activity in the provider facing businesses due to procedural volume.
While still not fully normalized business development activity has increased from the second quarter much lower pacing.
Optum Rx earnings declined 2% year over year in the third quarter at script volumes were impacted by lower care activity and economic factors.
First fill scripts, which are correlated to physician visit activity greatly improved from the second quarter, which was down about 25%.
While not yet fully back to prior year levels right.
Revenues in our expanding pharmacy services businesses have grown nearly 30% year to date.
Turning to United Healthcare third quarter operating results reflect a considerable moderation of the care deferral impact experienced in the second quarter, while still not at baseline levels.
This was more than offset by our assistance measures direct COVID-19 care costs and economic factors.
The number of people served in commercial products declined primarily due to employer actions.
Within that or asked about 40% of the fee base decline came from very large employers primarily in the hospitality transportation and energy sectors.
During the third quarter growth in Medicaid membership accelerated benefiting from the continued easing of state Redetermination requirement we.
We have not yet seeing material Medicaid enrollment activity due to job well.
Shortly these transitions lag loss of health care coverage by about six months.
Our Medicaid business has seen strong year to date organic growth of over 500000 people.
Sales activity in Medicare advantage has continued to move towards more normalized patterns after seeing some slowing in the second quarter due to the pandemic.
Within this we have been considerably less planned switching than typical for existing Medicare advantage enrollees well selection of M&A over fee for service for people new to Medicare is tracking well.
We continue to deepen our engagement with those seniors most in need.
Increasing the distribution of remote digital sensor kit to collect and monitor vital health data and address gaps in care generated by the pandemic.
Seniors continue to highly value our house call program with the number of home visits in the third quarter growing by nearly 30% over last year.
Our liquidity and financial position remains strong.
Third quarter cash flows of 3.1 billion or one times net income reflects the extra federal tax payment in the quarter due to the deferral of payments typically paid in the second quarter.
Year to date cash flows from operations, our 16.1 billion or 1.2 times net earnings and.
And our debt to total capital ratio of 39.1% comparison, 43.7% in the year ago quarter.
As noted earlier, we have updated our full year adjusted earnings outlook to a range of $16.50 to $60.75 per share.
This reflects third quarter performance, while anticipating the fourth quarter will reflect continued customer assistance measures normalization and care patterns and rising acuity as a result of mist and deferred treatment.
We will continue to work proactively to help people obtain the care they need.
Now I'll turn it back to Dave.
Thank you John with the.
With the third quarter earnings report, we have at times provided some early soundings on our growth outlook even.
Even as the current environment is anything but routine I'll still try to offer some useful perspective.
We approach a future with continued conviction on our long term, 13% to 16% earnings growth objective.
Some of the factors, giving us confidence include our rapidly expanding care delivery services now benefiting from over a decade, one building and investing in local value based care systems and extension into market, leading post acute home and modern behavioral health intervention services.
Our ability to support seniors across multiple channels and markets with increasingly innovative high value offerings.
The way, we meet the growing needs of people with highly complex conditions with comprehensive personalized care, including people across commercial federal and state based programs.
The innovative and consumer responsive products now being offered through the employer and individual market channels are.
Our unmatched ability to support a more interoperable and intelligent health system as a result of significant investments over many years to improve performance integrating data analytics and clinical information to provide essential insights to evidenced based next best care actions and.
And our restless drive to allocate capital and aligned with other innovative companies as we lead in the development of the next generation health system and a socially conscious way.
These are just a few of the accelerating capabilities, which will enable our enterprise to serve more people much more deeply as we look to the years ahead.
As the early thoughts on 2021, we expect our underlying business performance to be strong and well supportive of our long term growth objectives, including the Tailwinds, we have highlighted throughout this morning.
The pandemic and related economic impacts of course remain difficult to predict and at this distance likely represent a significant potential headwind.
As a result, we envision stepping out initially with a more conservative all in 2021, starting point to accommodate these still developing an unknown covered related impacts in particular, the pacing of a return to more normal levels of care services and the condition of the economy.
As the environment continues to evolve we will also continue to evolve our thinking in perspective and.
And as is our custom we look forward to providing you further perspective on all aspects of our business at our Investor Conference on Tuesday December Onest, which will be held virtually this year.
Thank you for your time today, operator can you. Please open the line for questions.
Our GAAP EPS target for you have a question or comment. Please press star one on your Touchtone phone.
May remove yourself from the queue by pressing the pound cake.
We go ask that you limit yourself to one question.
If you ask multiple questions, we will only be answering the first question. So we can respond to everyone that mchugh. This morning. Thank you will.
We'll take our first question from AJ Rice with credit Suisse. Please go ahead.
Hi, everybody.
Maybe just two.
We're seeing a little bit further into the.
Dave just made about.
Thinking about next year, I guess predicting a medical cost trends, you've got a lot of moving parts.
There.
Potential and further deferrals potential pent up demand that could come back costs.
Cost of vaccines and therapies that could be there a number of things taking about the cost trend for next year capital.
How are you approaching that how.
Do you see.
Competitive environment is changing as a result of that just maybe flush that whole comment about how uncertain the ability to predict the medical cost trend is for next year.
Thank you AJ, a very thoughtful questions hopefully.
Hopefully you took away from the.
For the.
Prepared remarks that were optimistic about the performance of our business.
And that's pretty much universal across Optum and Unitedhealthcare, we didn't get into some of the smaller size businesses, but Rob.
We're optimistic in particular about our relative competitive position and the growth prospects for 2021.
But as I also indicated we remain deeply respectful of the environment, both the pandemic and really economic consequences and.
And one thing I underscore ages, which you had very well there are a number of moving parts, which are very difficult to predict.
And you should also know that we are extending our efforts to ensure that our chronic members in patients are getting the care that they need during this unprecedented time and we also still have a strong commitment towards correcting any imbalances that could occur.
So at this distance.
We do see our business.
Underlying business performing strongly and aligned to our long term growth objectives, which are 13% to 16% appear per year offset offset in part by these pandemic pandemic related EPS effects.
So the starting point as we indicated in December will likely represent a wider range.
Given the.
Possible outcomes.
And the more conservative all in expectations than normal that you.
That you would normally see from us given the all the elements that you just described.
So we're taking that into consideration as we develop our.
Our point of view about where our MSR might land.
How what the what the variability of that might be.
We see it generally speaking that whole pandemic related impacts is being.
An area a headwind for the organization, but.
But don't don't misread. It we are very bullish on the strong underlying growth performance of our business.
Thank you next question please okay.
Amex questionnaires from Josh Raskin with net for our research. Please go ahead.
Hi, Thanks, Good morning, I, just a question on Optum.
Hey, or I guess and you are seeing big growth in the PMPM and is there.
On the consumer Sir can I, just want to better understand.
The relative performance sort of three to year over year versus Twoq, what's driving that increase in revenue per member.
And then if you could also talk about sort of this physician recruiting in it and how thats going on over the last six months.
Sure.
Yes, great question, and I think you're hitting on one.
Hitting on one of the strengths of the enterprise one of the reasons why we're bullish on its growth for next year are simply said it will be more market.
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More deeply penetrated into those markets and a higher percentage of them, having a risk bearing arrangements.
But why if you want to talk more fully yep sure. Thanks, Josh and thank you Dave.
Thank you Dave you captured it well what we're seeing is as we grow.
We not only have increased the number of members researchers to 98 million, but weve increased by 25% the revenue per member and that's being driven in part by the March sense of services that we would offer somebody through a risk based arrangements in Austin there versus.
The lighter so you might see through some of the other businesses within office no we.
We expect that trend to continue.
Frankly are very excited about double digit growth in our M&A risk lives and related fully capitated lives that we serve.
Your piece I'd say gosh around your question about physician recruitment is.
We have seen continued robust interest in both.
All tuck in acquisitions as well as medium and large physician groups, who are attracted to both stability to physician leadership and the evidence based approach that we've embraced in optumcare. Thank you.
Good question Josh. Thank you next question please.
We'll go next to Justin Lake with Wolfe Research. Please go ahead.
Thanks, Good morning, I wanted to circle back when tolerance on slide 21.
First from a consensus around the world.
7% range growth year over year.
I know you said that you have to labors any water average this year wondering if you can focus all within that range at any point negative performance to be in the breadth of the business. It does nothing specific segments.
Dusted were having a hard time hearing you are if you're on a headset can you pick up the handset.
Sure It was Doug.
No.
No.
Almost 30, okay.
Okay.
However.
It is thank you.
Sorry about that.
So what I wanted to circle back to the comments you made on twice what it was first consensus earnings growth I think Geos will look like.
Targeting around 11% year over year. So below the 14 16 wondering if you think that might do to your wider than typical guidance still might close that concept assessments within the range and they can you point us to the specific businesses, where do you where you're seeing given our permanent fee.
Central impact.
Oh total.
Did it in a recession concerns maybe beyond just as difficult commercial membership.
Yes.
Sure John.
Good morning, Jeff and John Rex here.
As Dave pointed out I think we are quite confident in terms of the underlying growth the organization as we look towards.
2021 and kind of.
In a normal year I would think kind of things like even kind of where that consensus range. That's at this point would be kind of in a normal zone that one could expect of that an error.
An area that we would think about stepping outlet.
We are very respectable the fact heller as anything but a normal year end. We've learned so much every month I had to tell you. During this period over the last six months and in terms of how we operate our businesses perform how we need to respond for the people we serve.
And so we.
We continue to be in a respectful mode in terms of learning more understanding the situation better.
And realizing there could be significant impact.
In certain businesses as we think about it.
Think about performance. So we look at it in a world of excluding debt, excluding kind of vis vis vis world. We operate in today with kind of coated related impacts.
Good zone.
But where that but you should expect that we think that there are potential headwinds within that whether those are economic headwinds whether those are whether those factors in terms of what we need to do from a customer assistance perspective and really.
I'm really kind of that really the pacing of direct co bid care and treatment costs. So.
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That's a long winded way of getting at we are in a mode still.
Really trying to be responsive to what we're seeing in the environment and evolve our thinking as that environment evolve.
And just I don't think I heard it up your second question.
If you could repeat that line it was just hard here.
Yes, what I was asking is.
Specifically around this segment that could be impacted and.
But most of all I know appropriators potential uncertainty referred in the market is a lot of properties with from a price for that adding a little bit the trend that's all.
Is that something that you felt like you did for last year, and you're just still being conservative, but we feel like that's something that's tough to do in this environment. Thanks.
I mean, just in this is Dirk Mcmahon 82 and what.
What I would say is we're of course going to price to our best estimates with lower trend. That's going to include Covance you asked about the economic impact.
So as we sat back and we looked at the at the third quarter actually our membership.
It was a little less impacted than we thought it was going to be because of things like the payroll protection program as well as some furloughs that large employers did so yes, there will be a little bit of a run in problem, but less than what we expected. So when the membership standpoint, we're actually.
Fairly optimistic about how we priced we continue to look at how our block of price.
For one one and as we look at that we were more than competitive and we monitor that every day.
Thank you Justin Great questions next question. Please.
Were next to Frank Morgan with RBC capital markets.
Okay.
Good morning, John.
John You mentioned, a good expectation for a decline in Dan.
Plan switching this year and the market just curious you make any color on why you expect that to be the case. Thanks.
Im just follow up I think what we.
One of the things I commented on was actually you're seeing less planned twitching the normal actually and what we're seeing is strong adoption of people new to Medicare coming into Medicare advantage.
Yes.
Anything to note that Frank Thanks.
Thanks, that's in all Im good morning, Yes, John alluded to is that what we've seen in the market place is a decline in people that are switching from one m- carrier to the Max.
Oliver a lot of strength in what we call that shoes, our market, which are of that are newly out full for Medicare or people that are on choosing Medicare advantage plan on compared to other other covered sites throughout the course of the year. So seeing really good strong demand in those categories, but the plan switching activity was.
Lighter and particular in March and April it come back a little bolt on throughout the course of the year on and actually we've seen some better activity on recently.
The dynamic in the marketplace as we head into annual enrollment period is one where we're trending back to an environment, that's more normal on compared to.
Selling season in the past.
Great. Okay. Thank you. Thank you.
Thank you Frank next question please.
Our next to Ricky Goldwasser with Morgan Stanley. Please go ahead.
Yes, hi, good morning question.
Question on the Medicaid side.
The enrollment impact from higher unemployment is coming in lower than you expected on when.
When do you expect the intact.
Peak.
How do you think about the balance that's going to Medicaid versus exchanges.
And then on the Medicaid side is the pandemic change how states think about transitioning to higher acuity populations to managed care and fee for service.
Fee for service and and what type of visibility do you have more Medicaid rates for next year at this point of time.
Pretty much cover the entire landscape really well done [laughter], we'll try to be as responsive as possible on all of that.
Since focus our chief executive for you Tim.
Hey, Thanks for the question.
You are definitely hitting on a lot of the factors that we've been tracking the first at this in terms of enrollment.
And Dirk mentioned there.
I mentioned this over to John in his opening comments. So far we've seen just in terms of enrollment gains is really the result of the suspension redeterminations as a result of the cures Act, we really have not yet seen unemployment pull through and I think that's reflective of some of the dynamics that we're seeing in the commercial market.
And that's been supported I think by a lot of external studies as well. So we continue to watch. This I think we would expect that unemployment would pull through at some point, especially.
Especially as the timeframe between lots of coverage.
Increases.
As for your second question just around complex population Yeah, we are.
Actively monitoring states as they explore transitions to managed care. We believe there is a very strong value proposition, especially for complex populations, including those that receive long term care services and it should be our services.
We know based on our experience that managed care can deliver significant value not just in terms of cost savings, but also in terms of helping individuals remain in their homes, helping people access social services and support.
And so we've been working with.
Jason monitoring space activities as they transition.
I think we are seeing.
You know a very robust RFP pipeline as Dave mentioned and were hopeful that many states include long term care services in complex populations in those and then five.
And then finally I think your last question was on funding and.
And.
And rich, yes, and.
And so just I'll now and yes. This is something that we've also been working closely with our state customers on.
Really to ensure that funding is sustainable both now and into 2021, especially considering all the dynamics in play.
States are really taking a rational approach to funding, they're leveraging the appropriate risk management mechanisms depending on their experience that could include risk corridors and large structures. There are also benefiting from some of the additional federal funding through the cares Act.
And then of course, just as a reminder, Medicaid funding must be Actuarially sound, which are states really do continue to use as a guiding principle.
This is certainly an area of focus for us we have strong relationships with our customers and and we feel.
And we feel good about those conversations thus far and then maybe just the last thing I'd say is.
Sustainable funding and all of this work is really critical as it enables us to invest in programs that really do drive substantial social and health outcomes for our customers as well as for the people that we serve.
Turkey, I hope that was responses at least responsive enough. Thank you for the thorough question next question. Please.
Our next question is from Gary Taylor with JP Morgan. Please go ahead.
Hi, good morning.
Two part.
Question, just in case I strike out on the first one was wondering if you could quantify the.
Consumer and customer assistance, how that impacted the MLL R. This this quarter. The second part of the question just thinking about.
Cost trend heading into 2021, I think I think by the time. This year is all said and done you might end up being on your on your core commercial group costs trend down a couple of hundred.
At this point at least so when you're thinking about your guidance for 21.
Are you thinking it could be a normal cost trend on top of that are you thinking it could you know deferrals would would accelerate it could be 200 basis points or more higher than normal can I just I'm just interested in your thought process on how you are going to cause.
Comp.
What was the was it easier than expected all in trend for 2020.
Well I'll give you the strike on the first one because I don't think we're going to quantify customer and consumer assistance in the quarter are the one thing I will tell you is this extensive.
In particular this is.
One of the primary quarters, where the men.
The Medicare.
Business was offering a full co pay waivers on both primary care.
And specialist visits and the reason for that Gary is that we are deeply concerned and remain deeply concerned that met.
Medicare consumers.
Access their their physicians.
Just as quickly as possible because there were obviously managing chronic disease and we saw a very nice response.
To that to that program. So much so that we're extending elements of it into the fourth quarter, So thats, where a customer system will continue and it is.
In addition to that we extended some other programs you probably saw that our billion five.
Initial estimate with the $2 billion and in part that was because of additional premium.
Waivers and adjustments that we had made that will extend through the balance of this year.
And modestly into next as well.
So that gives you a color for the kind of the volume and the quantity of things that were going on during that during that timeframe and with respect to cost trends in 2021 31. So yeah I would say you know Gary This goes back to what Dave said originally we do consider all those factors you described we consider what we expect coal what to do with.
Aspect of testing with respect to treatment all things.
That are associated with abatement as well, we make an estimate that we try to make forecast when the vaccines we.
We come available. So all those things are considered as we price our business for next year.
I'm not going to get into the exact number of basis points associated with each one of those that competitive but I mentioned earlier, we do monitor what's going on in the market, what we see with ongoing trends at all three of those buckets as well as all the underlying cost and we make our best assessment as to where we were we should lead to be competitive from membership broke standpoint as well as.
Earning standpoint, that's what we do and we have actuaries and yet our management teams that are pretty experienced with that.
So thanks for your question Gary next question. Please.
We'll go next to Scott Fidel with Stephens. Please go ahead.
Hi, Thanks, good morning.
Just wanted to follow up on Medicare advantage for 2021, and the comments that David made around industry, leading growth expectations and I guess really just a two part question to this just just one so we do.
So we do have CMS projecting the at least 10% enrollment growth for individual I may for 2021 show. So just interested in in terms of your your commentary and industry leading growth how are you.
I'll take that into context, and whether that would support double digit enrollment growth in individual M&A for.
For 2021, and then just secondly, it sounded like the comments around group group that may it sounded pretty bullish in terms of sales just interested if you can maybe quantify for us the expected.
The group group that May lie of set that so far you think you've added for 2021. Thanks.
Just to clarify Scott from from at least my.
My standpoint really look at is the number of people served and what our performance will be.
Relative to the market overall and as has been pretty consistent over time.
Unitedhealthcare Medicare and retirement has outperformed on.
On that that metric in particular, what I like about this year in particular is whether or not.
Not only the group may.
Component.
Really coming off of what would be a disappointing year in 2020.
Meaning the 2021.
Actual policy year, but also the kind of the setup for individual and May.
And continuation with our newly eligible.
Members and their growth.
So that's the essence of the backdrop of the comment that I made Tim do you want to anything further yes.
Yes that fall selling obviously start to model for individual Medicare advantage within marketing our product.
Turning it back over.
And really positive feedback from the broker community about how our position and once again as you know our top priority, providing stability and benefits for the numbers that they're on and as we go to market. We are happy to have heated provide.
Providing that for our members asked about 75% of our members wallets.
Improving including benefits in 2021, okay.
The 2020, and we also made some additional investments in capability.
For 18 years, so given that backdrop, we do feel really good about our business.
Yeah.
Individuals may on if I may as well as the dual special needs plan market.
No we're not going to comment specifically on any point estimate for industry growth.
Well, we really like.
Guided the growth whatever that might mean on than we have today.
Then from where.
Really excited about our.
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Great. Thank you Scott next question please.
And next we'll go to Robert Jones with Goldman Sachs. Please go ahead.
Great. Thanks for the question I guess, maybe just wanted to get your latest thinking on participating in direct contracting next year.
Obviously to Optum care was wondering if is stored contribute at all to your projections around global capitalized growth or would that be incremental and then maybe just related Lee how are you thinking about direct contracting relative to the opportunity obviously around M&A on the agency side. Thanks.
Let's start with you Assi.
Sure Brian Thompson here as it relates to Medicare advantage.
No one from us for a long time, we've had the enterprise perspective, and modernizing fee for service that we're certainly encouraged by any activities like this week.
We participate in things like bundled payment programs et cetera, and I see direct contracting.
The positive to try to modernize the overall fee for service fee for service system.
Total and why it obviously you are looking at direct contracting for the warm welcome here.
Yes, Thanks, BT and Robert Thanks for the question.
We are very incur.
Very encouraged by every effort to move from fee for service to value based contracting so view this as a positive trend.
Direct contracting propose.
Proposals are primarily geared towards smaller groups that are in fee for service and we have been in risk based arrangements for over 10 years and so while we will.
Embraced this where it's appropriate we have relationships with over 80 payers and we'll expect to see continued double digit growth of our M&A and dual risk lives that we care for and I don't anticipate that the direct contracting will be a major factor for us, but again I don't mean to say.
And any kind of a negative way its been program, but it's.
We will embrace all vehicles to grow thank you.
Thanks for the question. Robert next question. Please well go next to Sarah James with Piper. Please go ahead. Your line is open.
Thank you.
I was hoping you can give us some context around corporate tax reform.
Going back to 2018.
Thanks to benefit around cheap study I'm wondering where that sits now and if there's a difference between product lines and how we should think about.
Which line benefited on the margin side session was passed in ferrous scrap pricing changes or other items.
Sarah Good morning, as John Rex here, So I think if you go back to the.
The former.
Former period that you're discussing in corporate tax run I think.
There were a number of things that we commented on during that period and in terms of impact and if you recall during that period. We also commented about investments that we're making as a result to build bill.
Build for future growth and how we were.
How we work.
That being in the businesses for the longer term.
That was an element there.
Clearly since that period, a number of years ago now the company is much much larger.
So you would expect that kind of that impacting those.
Kind of much smaller from a effective tax rate impact than we would have had that met back in that in that time.
You know among the other elements that you are talking to a corporate tax reform and impacts.
I think at some tough really to mannkind to get out ahead of anything in terms of potential impact and.
Even how those impact down on specific businesses, because there isn't done and we don't really don't want to get ahead of any kind of policies that that might be that might be out there. So probably would just leave it at that thank you.
Thank you Sir next question please.
Thanks, David Windley with Jefferies. Please go ahead hi.
Hi, Thanks. Good morning, Thanks for taking my question I'm I'm interested in I appreciate the comments several.
On a percentage of baseline utilization numbers offered in the prepared remarks, I'm I'm curious how that has progressed, perhaps through the quarter or for example by by the end of the quarter what were some of those at or above 100% are you expecting that to get to above baseline in the fourth quarter.
And based on your assessments of kind of pent up under utilization and system capacity, how long might you expect that.
Last.
And then just to tag on the DCP for the first couple of quarters of the year had been pretty consistent year over year, but at the third quarter is down a couple of days two or two to three days I'm wondering how that folds into that view of where utilization is going thank you.
Hi, David.
Congrats let me answer it trying to get at those so first of all let me give you a little more color in terms of what we saw in utilization over the course of the quarter and how is that what we are seeing last quarter is that so I spoke to.
Flying exceeding 95%.
Across our businesses as the as we look at the utilization at this point here, maybe a little color kind of context within that and different categories and how those would trend.
No point.
Point out if I look at physician services that would be below that baseline.
I'd put out.
Outpatient surgery that kind of the right kind of in that zone at baseline and I put inpatient above that baseline zone as we look down to kind of various populations and that's maybe a little color commentary in terms of how that trend.
Commercial certainly kind of higher in terms of where we're seeing our utilization and where we're seeing against the baseline and.
And government program services lower.
Within that I would say kind of a new government program that they the community state business being the lower elements of both.
And the way its trend trending.
Trending one important element here, you're so what what you referred to some of the commentary had for our expectations for the fourth quarter and then.
Among those were that care that had been deferred that way.
But we are able to help facilitate that Curt Karen curves and you know that's the kind of where we're making investments and what we want to see happen here on the other element that we anticipate as we look towards the end of the year is.
We have been anticipating see rising acuity because of deferred and treatment that leads the higher acuity population I would tell you we really haven't seen that yet where we see rising acuity on the overall book, it's because of the the public 19 cases that come in at a higher acuity level and so you see a higher.
Our acuity on that component, but if you take that component out we don't really see it across the full scope of the book of our business at this point.
As you are to your comment over terms over the course of the quarter, what we thought it was an issue.
It was an interesting quarter from that perspective, because you saw a different incidence rate in different parts of the country.
Over the course of the quarter. So we really monitor that quite closely and you would see as as a particular part of the country. As you saw infection rates begin to rise you would see deferral come into that mix.
Given our given our our platform across the entire country.
We have a a viewpoint into that but you should you see deferral and then you come back in I think.
I think the last thing I took place I would just point out is within kind of that baseline that were talking about the thought that exceeding 95% I put kind of in the zone of five points or so or probably COVID-19, driven and terms of within that mix and that's inclusive in the baseline we're talking about.
And then DCP.
DCP think reminders, so DCP that declining year over year, David So that is due to the really could be acceleration in.
Provider payment that we took on earlier in the year. So as we really were trying to get liquidity injected into the healthcare system. We celebrated our payment cycles very very significantly and that continues and the reason you wouldn't have seen that in the second quarter is because of the very.
Significant driver deferral of medical care in the second quarter, so that kind of getting into the math is that right.
You get a denominator airway medical cost per day was declining very very significantly in the second quarter. So.
So that more than offset the impact of payment as we saw care being restored much closer to normal levels this quarter.
And that comes up and so now you're seeing the impact of that accelerated payment cycle show up in our DCP, but that was the impact that.
To give you a sense of that as we indicated in the prepared remarks as well as around the $2 billion advance.
The market or acceleration in payment.
Thank you David next question please.
As extras Charles re with Cowen. Please go ahead.
Yes, hey, thanks for taking the question.
Maybe just to follow up on that about utilization and then tie back to sort of.
Comments around the outlook for 21 is yes, it sounds like inpatient volume is a little bit above normal others. Other areas are a little bit below an overall, let's say, we're kind of getting back to a normal based on utilization given.
Given that that kind of pace that we're on this year.
And then we think about next year what is it in your thinking that.
Makes you think that we're going to see a real big uptick in utilization because it sounds like when we go back to the earlier part of the Q and when Youre.
And your comments, David and John at the end was.
Next year, you are thinking about a more conservative starting point.
Think about the 21 outlook and I understand that we'd want to back out some of the onetime items.
Several positive for this year, but maybe maybe help us understand a little bit.
What what is your underlying assumptions for utilization has the same seems to me and the pace that we're going at it doesn't so certainly that we're going to really have really overutilization for say next year, maybe help us understand what but maybe youre seeing here as we're now into part of the fourth quarter that kind of gives you give you that sense.
Yeah. So so my comments are really grounded in the unprecedented uncertainty as we look forward and the deep respect for the pandemic and its impact on on the economic climate.
And that's that's why as you as you think about.
You know it being at this distance stepping out recognizing that as youre.
The.
As the kind of the future expectation.
Your you'd normally widen your range and you would probably take a more conservative posture and that's essentially what we were trying to communicate.
Do you have anything further to add.
For the one thing I get your comment and I think you said that if we've seen in patients that have above normal I wouldn't say that where we are as I said.
On that exceeding 95% baseline that was orienting those categories around how they how they orient around that exceeding 95% that inpatient ride a little about that position below that and outpatient surgeries kind of right in that zone.
So that's more of that commentary that I was frightened, they're not that inpatient is running above baseline yet.
But we certainly categories are progressing to that and I think those.
In terms of your broader commentary in the commentary to what to expect for utilization. So.
We want to make sure people get the care they need.
But that's why we're here ultimately and so we're going to do and everything in our power to make sure that that care occurs but you heard some of the commentary offered earlier in the year event.
Terms of what was going on different categories in terms of cancer diagnoses different areas that were off significantly.
Thats not kind of good for people that are good for the system. We want to make sure that were made that that care is getting delivered.
And there are areas of care that we were going to be very proactive in making sure that people are able to access that.
In our business, we have both direct access than the Optum care businesses.
United Healthcare is being very proactive its outreach to to vulnerable populations and making sure that they're getting the treatments that they need so.
Ambition is to make sure that that care is delivered as theres much Knesset there's lot an affair care that that not happening also but not come back to Dave's commentary as we look out to 2021 and the early opinions up we've been learning stuff all along the way over the past many months and we continue to evolve.
All that being continued to feel like we are.
We get better perspective, and wide deeply respectful in terms of.
We don't really know how this how this moves how this moves over the next several months also so I think thats what you hear in terms of our commentary in terms of how we think of why we think of how we think about stepping out and why that.
But we want to be a respectful of environment frankly that I am now.
No one has navigated before and.
And.
I think Thats, just what you would expect us to the way you'd expect just approach it. Thank you.
Thank you and we'll take this next 30 45 days or so to accumulate more facts understand even better and then lay all this out for you and.
In more detail to the best of our ability to get together on December Onest. We have time for one more question with a quick question and answer and.
And then I'll close.
And we'll take that question from Lance Wilkes with Bernstein. Please go ahead.
Yes, just wanted to ask him for each quarter enrollment.
Because of progressing in October and what's your outlook for Fourq, two and beyond that if you can give any clarification and optumrx on kind of the real sharp increase in revenue per script.
Some of the compression in margins there would be helpful too. Thanks.
And then sounds like we'll be able to give you insights into October in the quarter, specifically, but where we can give you insights into as you know what's the progress we're making across the board in the commercial market going forward.
To give you some sense of that.
Quantifying it I would say that.
As as you think about the fourth quarter is essentially be is there is that there's a good amount of stickiness with respect to the end of this year in terms of persistency that we're seeing with our groups and further I think as we look at next year I think we talked about in the script. We will have a lot of good products coming off the assembly line that we're very enthused about all savers are level funded product.
Bye.
A good product, which basically is a.
No scenario, where you have a have a base level of coverage in your buyer for care as needed in certain categories. Then we have what I would say a bunch of provider centric products, where we're looking at really efficient high quality networks, and having locums consumer out of pocket is associated with those so what I would say is we are optimistic about our product port.
Folio for next year as you look at the third quarter or the fourth quarter, specifically, we've had good good stickiness in terms of our persistency.
Yes, I think the commercial business is doing a nice job obviously we are.
Very dissatisfied with the start of this year, but I think they've come on stronger as the years progress with a wider array of product choices and offerings, but also getting there.
Given their cost structures and line them in being able to reflect that.
More competitive price positions in the market overall.
Then it probably index and forward view of cost plus margin, which reflects.
Variability.
The future marketplace.
John you want to touch on.
Lance John fronts talking about a revenue growth, we've had really strong growth in our specialty business as well as infusion.
Community pharmacies and businesses.
Which has done alone.
That is that a big driver as well as our external client wins, we had on the beginning of the year.
Look at our services businesses, which is both services as I mentioned, they are growing almost 30% inside that so really strong growth than that in terms of our margin and why its decline.
Year over year, it's really two factors one on.
The earnings side as impact to co. The 19 as you know with the pandemic. We've had less first fills in Q2 that continued in Q3 as well as you've seen in Q3 less.
Less.
Utilization per member as well as some loss in unemployment. So that's impacted our earnings and on the denominator side the retail co payment, which was added to revenue in 2020.
With added the denominator, which actually impacted the margin in Q3 overall.
Overall, we're quite pleased with our margin performance as you see between Q2 and Q3 earnings grew sequentially by 16%.
Both and commitment to improve our margins. So overall overseen we're executing very well.
Thank you John Thank you Lance thanks.
Thanks. Thank all of you for your interest and very thoughtful and type of questions that you offered today as.
As you know this is an unprecedented time in our company's history and as you've come to expect we will continue to respond and lead with full strength.
Passion.
And fortitude restlessness for serving the unique needs of every one of the 140 million people we serve around the world.
Despite the challenging time to 325000 people United Health group are deeply committed and they're.
And they are energized about our work to advance next generation health system in the socially conscious way.
Health system that will be universal affordable simple and effective and we look forward to engaging you and several weeks at our upcoming annual Investor Conference on Tuesday December one.
We see the virtual format as an opportunity to provide you an even deeper view of our company its strategic plans its people and our future. Thank you very much.
And this will conclude today's program. Thanks for your participation you may now disconnect have a great day.
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