Q1 2022 UnitedHealth Group Inc Earnings Call

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Good morning, and welcome to the Unitedhealth group first quarter 2022 earnings conference call.

A question and answer session will follow Unitedhealth group's prepared remarks, and as a reminder, this call is being recorded here are some important introductory information. This call contains forward looking statements under U S Federal security laws.

These statements are subject to risks and uncertainties that could cause the actual results to differ materially from historical experience or present expectations a.

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 periodic SEC filings.

This all will also reference non G. A a P amounts.

Correlation of the non G. A a P to the G. A a P amount available on the financial on earnings reports section of the company's Investor Relations page at Www Dot Unitedhealth group Dotcom.

Information presented on this call is contained in the earnings release, we issued this morning, and our form 8-K dated April 14th 2022, which will be assessed.

First from the Investor Relations page of the company's website I will now turn the conference over to Chief Executive Officer of Unitedhealth Group Andrew Witty. Please go ahead.

Thank you good morning, and thank you all for joining us today.

We named to this quarter, we set clear objectives for the year to drive strong execution of our long term strategy and deliver high quality diversified growth.

Sue excellence in every consumer experience at every touch point.

And apply technology to help all stakeholders to improve access affordability outcomes and experiences.

As our results show, we are delivering on these objectives.

Like to start this morning's call by thanking my colleagues the 350000 people of Optum and Unitedhealthcare.

That dedicated work gives us the confidence today to increase our 2022 adjusted earnings per share outlook to a range of $21 20.

The $21 70 per share.

At our November Investor Conference. We described five key areas to drive our long term, 13% to 16% earnings per share growth rate and.

The first area value based care delivery Optum health continued its robust momentum into the first quarter characterized by its integrated approach and high clinical quality.

After a strong start to the year, we now expect to add 600000 patients under value based arrangements during 2022 compared to our initial estimate of <unk>.

500 sizes.

Our approach focuses on providing quality care in the setting that makes most sense for the patients we serve.

Our pending combination with LHC group will reinforce our ability to deliver care and support in the home as well as in other ambulatory locations.

Within the second growth area health benefits, we're rapidly advancing the quality innovation and consumer appeal of our plan offerings and bringing value based care to scale.

In Medicare advantage, our strategic balance of benefit stability and enhancements once again helped to deliver strong growth we remain well on track to serve an additional 800000 people in 2022 consistent with the expectations. We set we set last November .

And the commercial benefits market, our innovative offerings, such as physician led and virtual first plans have grown to serve 350000 more people over the past year.

This underscores the consumer appeal for these high quality primary care based coverage options.

Nearly 90% of newly enrolled people in our individual exchange offerings selected plans with significant virtual components in the most recent open enrollment period and.

Nearly 30% selected a virtual first offering youll.

Youll see us expand such offerings as we look forward to 2023.

And our third growth area health technology, we continue to execute on the major new health system partnerships initiated last year, including a broad relationship with SSM health and it's 11 side with some providers carrier for people throughout the Midwest.

We are helping our health system partners alleviate administrative burdens and creating operational capacity for these organizations to focus on delivering high quality patient care and experiences.

These partnerships move far beyond traditional revenue cycle management with both clinical and technology features becoming important.

Both are developing efforts in health and health financial services <unk>.

Streamlining and simplifying payments for providers payers and consumers, while reducing friction and increasing speed and convenience.

Consider our new integrated consumer card, which we introduced in January .

Many people typically have separate cards, so clinical care pharmacy benefits food assistance programs fitness rewards programs and more we've combined these benefits into a single card vastly simplifying the experience for consumers and providers and we plan to do even more in the future.

And finally pharmacy services the high cost of specialty drugs is one of the most pressing issues for our health plan partners drill.

Drawing upon all of Optum as advanced analytical capabilities, we're collaborating with health plans to provide clinicians access to real time medical and pharmacy analytics, which are coordinated with a patient specific benefit plan design.

Table and clinicians to determine the most effective and appropriate therapies at the point of care.

Our initial results are highly positive.

Helping to lower specialty costs by over 15%.

Overall, ophthalmology <unk> performance in the quarter healthy retention rates and strong sales pipeline provide provide a great foundation for growth.

These efforts from expanded in home and broad based broad value based care offerings to enhancements to Medicare advantage to simplify and how to finance care are designed to create greater value for consumers and more broadly have a profound impact on the lives of <unk>.

Families and individuals and communities with all levels of need across America, which is a powerful motivation for all of US at this company each and every day.

Doug Mcmahon, our president and Chief operating Officer will now share more about these efforts.

Andrew There is no more important aspect of the consumer experience in health care than convenient access to quality care.

Not theoretical access, but care, when and where people need it.

Testing for instance is an area, where we see significant opportunity to improve the consumer experience.

It can be a burden for people to test for conditions, such as colorectal cancer.

As a result, too often people just won't deal with the hassle early stage condition and as a result early stage conditions go undiagnosed.

People don't get the care they need until things get really serious which is bad for their health and resulted unnecessarily higher intensity treatments and costs in the future.

Like many of you we've observed more willingness by patients for trial and adoption of in home testing for many types of common conditions.

However, it can be challenging for people to first line test and then make sure the results get back into a doctor's workflow.

<unk> need to call providers for a prescription.

Disparate locations to pick up the test and then somehow get the piece of paper with a test result into an already busy clinic operation.

Unitedhealthcare, we've introduced an integrated solution that addresses all of the tasks that need to occur sequentially, where test results to get into a clinic system.

This digitally enabled solution is resulting in nearly 10% increase in people obtaining necessary screening versus a multi step process.

We are expanding this vital capability to more people and making additional types of tests available as well.

As many of you know the first quarter it tends to be the most impactful and setting us up for operational success for the remainder of the year.

The ease of that initial experience for people has a lasting impact on consumer and customer perceptions and buying decisions.

Not just for the next three months, but often for years to come.

So we thought it would be timely and helpful to provide a bit of a performance report card for the quarter.

The short version this is where we owe a great. Thank you to the people of Optum and Unitedhealthcare.

Perhaps nowhere was this more apparent than in the Onboarding of the many new people served under value based arrangements within Optum health.

Investing in the preparation of systems and training and physicians and staff was critical and laying the groundwork to provide high quality care for these new patients and expanding into new geographies.

For example, in Ohio, and New York, We are observing early improvements in post acute trends such as skilled nursing facility admits declining 25% in just the first quarter of operation.

It's a testament to the deep integration of our post acute capabilities for transitioning patients to the most appropriate setting for their needs as well as a patient centric orientation of our local care delivery organizations and their vigilance on care continuity.

United Healthcare, our digital investments are continuing to serve our care providers in helping advance our efforts to move to a paperless experience.

In the first quarter visits to our digital portal continued to increase while provider support calls declined about 12% from historical averages.

Shortly we have driven a 38% increase in providers using digital documents instead of paper and just this first quarter compared to last year.

We expect the efforts we have taken in this quarter, we will save 80 tons of paper over the next five years.

Before handing off to John Let me briefly let me turn briefly to our pending combination with change healthcare.

By now it should be clear, we are deeply committed to helping achieve a simpler more intelligent and adaptive health system for patients payers and providers the.

The combination of Optum and change healthcare will connect and simplify core clinical administrative and payment processes health care providers and payers depend on to serve patients.

Creasing efficiency and reducing friction will benefit the entire health system, resulting in lower costs and a better experience for all stakeholders.

Our extended agreement with change healthcare reflects our firm belief in the potential benefits of this combination to improve health care and in our ability to successfully overcome the challenge to this merger with that now I'll turn it over to Chief Financial Officer, John Rex.

Thank you Derek and good morning, everyone.

Our first quarter 2022 performance positions us well to deliver on our full year financial and growth objectives revenues grew by $10 billion or 14% to $80 billion over the year ago first quarter with double digit growth at both Optum and Unitedhealthcare. This.

This strong diversified growth was largely organic with balanced contributions from across both our services and benefits operating platforms.

Compared to a year ago, we are adding over 1 million more people to Optum health supporting 30% more patients in value based relationships, providing over 20 million more prescriptions and serving one 5 million more people across their health benefit offerings.

I'll start by providing a little color on care patterns over the course of the quarter and then turn to our individual businesses.

As you'd expect there was considerable variation in care patterns due to the Covid incidents peak early in the quarter.

For example in January we had about 40000 COVID-19 related hospitalizations.

The highest of any month since the onset of the pandemic.

By March these a decline to around 2000.

Overall care in the quarter was about at baseline levels, though we observe pockets that are modestly below historical baseline such as emergency department and pediatric visits.

However, we are not assuming this is a permanent shift in consumer behavior.

As it relates to potential longer term health impacts on people do to care, which was deferred during the height of the pandemic.

Thus far we are not seeing the increasing acuity that many expected for example, initial oncology related diagnosis levels are consistent with historical averages.

Of course, our core focus remains on getting people the care they need and we are encouraged that critical screens are occurring at normalized levels.

Moving now to business performance.

Optum health revenue grew 34% in the first quarter and earnings from operations rose over 40%.

Revenue per consumer grew 33%.

This was driven primarily by the increasing number of patients served under value based arrangements.

Continued augmentation of our value based care offerings, such as expanding digital care and our services into the home.

The opportunity to serve more people much more broadly and deeply.

We expect to grow strongly for years to come.

Optum insight revenue grew 13% year over year the.

The revenue backlog was $22 8 billion growth of $2 billion or 10% over the prior year.

Our expanding health system partnerships are contributing to this growth and.

And we expect the number and breadth of these partnerships to continue to grow.

<unk> revenues grew 11% to 24 billion, reflecting the strength of new business relationship secured over the course of last year.

We typically incur significant investments in the early months of these expansions to assure strong performance and value for our customers.

Turning to Unitedhealthcare revenue growth of 14% was driven across the businesses.

Our Medicare advantage offerings remain on track to add up to 800000 people.

About three quarters will be in individual and group Medicare advantage and the remainder in dual special needs plans.

New seniors aging into Medicare are increasingly selecting Medicare advantage based on the value. It offers.

And the five star quality plan performance, we achieved this year enables us to enroll people in our plan offerings through the year.

People served by our Medicaid offerings grew by over 150000 in the first quarter and is now approaching $8 million.

Our growth outlook for the remainder of the year continues to incorporate an expectation that states will resume eligibility redetermination when the public health emergency lapses, resulting in modest net attrition.

First quarter commercial enrollment was in line with our expectations. The decline in people served under fee based arrangements was driven by three previously known customer transitions, which were offset by core growth.

We see the number of people served overall, increasing as we progress through 'twenty two.

Driven by the strong market response to our more recently introduced innovative offerings as well as the continued recovery in the total number of people covered by employer health benefits, which typically lags reported job growth.

Our capital capacity remained strong.

First quarter cash flows from operations at $5 3 billion or one times net income were consistent with our expectations.

And we continue to expect full year cash flows of about 24 billion or one two times net income.

We returned nearly $4 billion to shareholders in the quarter through dividends and share repurchases and ended the quarter with a debt to capital ratio of 38%.

And as we look toward completing both the LHC and change combinations this year.

We will continue to have ample capacity to expand upon the ways. We can serve people and help them to live healthier lives.

As noted earlier based on this growth outlook today, we increased our adjusted earnings outlook to a range of 'twenty, one 'twenty two 'twenty $1 70 per share.

And we continue to expect the seasonal pattern to be more consistent with our historical experience with just under 50% of the full year earnings in the first half.

Now I'll turn it back to Andrew Thank.

Thank you John .

You will recognize the consistent themes that we laid out last year as a guidepost for sustainable growth.

I will focus on execution and continuous improvement across our businesses is a characteristic that we're going to sustain as we build upon this strong start to 2022.

And with that operator, let's open it up for questions one per caller. Please.

Secondly, the.

The floor is now open for questions. At this time, if you have a question or comment. Please press star one on your Touchtone phone you may remove yourself from the queue by pressing the pound key we ask you to limit yourself to one question. If you have most of my questions. We will only be answering the first question. So we can respond to everyone in the queue.

Good morning.

We will now take our first question from Lisa Gill from Jpmorgan. Please go ahead.

Alright, thanks, very much good morning, John .

I just wanted to go back to your comments around utilization trends you talked about hospitalization now down to 2000 inherent marks but baseline somewhat moderating back, but you talked about <unk> and peds, but can you maybe just talk about the difference of what youre seeing in commercial versus government and then secondly.

It sounds like you are not really anticipating that there is a still a lot of pent up demand.

I hearing that correctly and how do I think about the trend as we move here towards the back half of the year.

Lisa Thanks, so much for the question, let me ask John to respond to the first part and then Brian Thompson, maybe you could just speak to a little bit the demand piece and maybe Brian pick up within that.

Any sense of acuity shifts I think that'll be helpful for the folks who are listening John first good morning, We said John Yes. So in the first quarter still seeing similar trends in terms of utilization across the different categories, you talked about little bit higher in commercial a little bit lower in government programs, but everything kind of trending back more to those.

Baseline levels overall.

And pointing out is as you appropriately noted here, where we're still seeing some pockets here of differentiation such as impedes an emergency department Thats been a trend we've seen.

Not to the point, yet where we would expect to.

We would expect that to continue but our consumer difference that we've that we've noted.

Also on your comments and Brian will go into this much more deeply but as it relates to the potential for acuity. This is something we talked about very early on in the pandemic as people were missing treatments and how might they come back into the system. It's still something we're extremely watchful for across very a lot of categories I spoke specifically to oncology and what we're seeing.

It was areas so good to see people getting their screenings what.

What we haven't seen though is this expectation we had for the incidence rates might actually come up because of missed treatments over that earlier period and Brian could you offer a little more commentary sure. Thanks, John and thanks for the question Lisa I think John summed it up nicely as you expected the quarter was odd and that obviously, there was stronger levels of hospitalizations and.

<unk> in January and that clearly deteriorated down to a lower level in March so kind of a tale of two stories inside the quarter as John alluded to commercial a little more close to baseline with Medicaid.

Being the lowest in Medicare in between when you think about service type inpatient running slightly above baseline, but that was really a function of January in those higher hospitalizations that we saw and really encouraged as we look at physician visits because those accelerated through the quarter sort of offsetting and consistent with the reduction in infection levels on.

Strained dynamics, maybe another thing I'll point out clearly less severe in <unk> than what we saw in Delta we saw hospitalizations that about half the level that.

That we saw but again confirming what John said really no signs of deferred care and we've been watching this closely throughout the pandemic looking at screens diagnosis severity progression and it usually cycles through pretty quickly. After we've seen large infections within two to three months to get back to baseline and that's where we're at right now, leaving the quarter. So.

I feel good about where we're at as we pace forward into the next quarter right John Brian . Thanks, So much for that yes. It was a very it was definitely a quarter or two parts in terms of January and then have February March move forward with the shifting impacts of Alpha omicron during this quarter.

I think what you've heard from both John and Brian really reflects that kind of movement back toward kind of baseline activities won't with one or two exceptions.

Rest assured we are really watching like a hawk to see any evolving trends around acuity shifts of is a super important from a patient welfare perspective, but so far we haven't seen very many signals of that tool.

Maybe still early days at Lisa. Thanks, So very much for the question next question. Please.

We will now take our next question from a J Rice from Credit Suisse. Please go ahead. Your line is open.

Hi, everybody.

Just thought I might ask where obviously a lot of discussion in the broad market about.

Inflationary pressures.

My sense is you are pretty well matched particularly on the insurance side, but I wonder if.

If you might take a few minutes and just sort of think I know theres a lot of different things going on an opt in how do you feel as we enter.

Period, where there may be a little more inflationary pressure that you're batch.

Revenue versus cost.

Is there any pressure points is there any places where it's actually helpful to you maybe comment on that.

Hey, Jay Thanks, so much for the question I'll make a couple of comments then.

Maybe ask a dumb.

Look a little bit to reflect on the broader perspective, and then Bryan again, just to talk a little bit too within the UHC portfolio.

Generally speaking.

I want to make it Super clear I'll focus always is to try and get the very best value proposition for our clients members and patients and I think at the time of the inflation that responsibility, we carry really seriously.

So making sure that there are advocates really in the system to get the best deal possible for the folks who rely on us to continue to get good access to healthcare services and the care they need when they need it.

It's something we're very focused on so.

We're fortunate to have some very long term positions in place with a wide range of inputs that we rely on which is obviously important Brian may talk a little bit to that in a sector from UHC perspective, but whether you look at all of our.

Optimal Rx portfolio, where we're going to continue to focus on getting really the lowest possible price for pharmaceuticals, or whether you look at the way in which we run our business to seek out sources of productivity to offset inflationary pressures as an overall agenda. This is a time, where United Health group and all of its parts. He is going to be first and foremost do everything it can do.

To protect the people who rely on us from the forces of inflation with that backdrop, maybe Dirk you could pick up a little bit more broadly some of the things we're doing in the company and then pass to Brian .

So thanks, Andrew Yeah, Hi, a J. So first of all yes, we're always sensitive to the challenges that people face in healthcare specifically from a cost perspective.

That's a big reason why we have affordability agenda, that's really focused on total cost of care lowering total cost of care for people and also telling people in these inflationary times, how do they get more out of their benefits that they purchase from us.

We've also done things, we've talked before about getting really some good products in the marketplace like our virtual products, which are 15% lower than other prevailing products in those markets.

As Andrew said, we're working really hard on technology to improve productivity one of the things we're trying to do from a productivity standpoint is.

Do that.

To enable us to make targeted investments in our people and to or otherwise pass that through in the form of premiums to folks. So those are things from a productivity standpoint that Ron.

From a labor strategy standpoint more broadly.

The less fall as the sort of the great resignation progressed.

We made some investments targeted investments in our people in the first quarter, we had our normal Merit review cycle with raises so we're trying to make from it from an internal perspective, the right thing to do but as we look forward in for the remainder of the year, we're going to have to make continue to make targeted investments in areas like clinicians and customer service folks.

Where we see higher levels of attrition. So that's a broad brush as to what we're doing Brian .

Brian go ahead, yes, thanks, Derik as you might expect.

There are good disciplines and management inside United Health care that I'm pleased with where we're at pricing to our forward view of costs being one including inflation.

Obviously, we have some provider agreements that do offer multiyear predictability, but this is less about being insulated from the overall inflation environment and more about our responsibility to drive down that total cost as Dirk alluded to and I'm more encouraged than ever on things like value based care consumer transparency to navigate the system to get to the appropriate site of service.

Having the tools digitally to ensure we can enable that virtual engagement and post acute and home innovation to really avoid those expensive hospital stay. So those are the elements that we can really drive to try to offset the overall cost yeah, Brian very well said I think that our response to inflation is innovation simple is that the way in which we're going.

To get the best the best outcome for folks who rely on us to continue to innovate how we work inside the company to deliver greater productivity, how we deliver.

Efficient access to the system for members and patients how we take advantage of things like.

<unk> platforms, and how do we truly bring to life the value of value based care and all of the work that's going on between Unitedhealthcare and Optum that that is going to be a tremendous aid to us in ensuring that we can manage through this on behalf of the people who rely on us. So AJ. Thanks. So much for the question next question. Please operator.

We will now take our next question from Scott Fidel from Stephens. Please go ahead.

Hi, Thanks, and good morning.

A question just on the <unk> acquisition.

I guess, a two parter.

Just as you've conducted a portfolio review of <unk> assets just interested at.

You've made a decision yet on whether you plan to retain all of the key assets separate from home health, particularly thinking about hospice and personal care.

And then just also be interested just on some of the key synergies that youre seeing as you look out to integrate our hcg and to Optum broader clinical platform, particularly when thinking about some of the more adjacent assets such as landmark and Navi health that you already have enough to home based care umbrella.

Great.

Yes, Scott. Thanks, so much for the question I'm going to go wide decade in a second to give you a little more response on this.

We're incredibly proud of coming to an agreement with the La Z boy to bring together the two organizations, obviously, it's a transaction, which hasnt closed yet so I'm not going to go into too much detail about it but let me say a few things and I had the great pleasure, even though Monday actually to spend some good time with the founders and the leadership team of the.

Of LHC unbelievable.

Positive culture inside the organization has been built up by Keith and Jane just since they first founded it.

Really a company with a true hall and really puts patients first in their families first extraordinary impact in all of their lines of operations and have they can.

Have a.

A significant impact on the lives of people, who very often they're excluded from care. This is really about opening up access to a lot of people who would not otherwise find easy access to the system is really important.

And I like very much all of the aspects I've seen of that organization look forward very much to successfully bringing it into the United Health group portfolio.

I would also say and I guess as.

Well I'm going to ask Doctor decades, it takes a little bit more deeper dive, we're really moving at speed to bring together all home and community capabilities and if you look at what's really driving alongside our value based strategy for the clinics the rapid growth of our home and community offering which has brought together the <unk> and landmark.

We will over time align with LHC when it joins into the organization built on our original optimum home product.

An extraordinary set of capabilities and is positioning us very well to for example, the decent population in a way, which historically would not have been possible in that as you've heard from John I know there was a big piece of our growth in the first quarter and maybe with that backdrop I'll pass to adult indexed to give you a little more detail. Thank.

Thank you Andrew and Scott. Thank you for the question. We are very excited with the combination of LHC group I think Andrew said it well.

Have a longstanding culture since their founding in a small community in Louisiana 1994 of commitment to serve others and help people live their healthiest lives in homecare setting.

They've developed multiple capabilities, which actually really nicely complement our growing home and community platform that Andrew touched on so very excited about that the quality of care that they provide is remarkable it's a full 33% higher than the stars quality ratings than the national average for home health.

Care, just as an example, and we share this commitment to quality and service. So we felt really good alignment.

Then building on your question in Andrew's comments.

As we leave home healthcare together with the more.

Kind of complex offerings of post acute care and complex care in the home that we've already brought into our home community platform, we see.

Remarkable synergies and this will continue to grow and it also begins to address the question of why has it been so hard to have home care being delivered in a value based construct and our vision is with these comprehensive set of offerings stitching. It together in a way that is differentiated and helps people get better healthcare.

Our outcomes initially will help deploy them in the post acute care setting right out of the gate. Thanks for the question.

Thanks, Doug to Deca and AJ. Thanks, so much for the question and maybe leave you with one thought on LHC actually and just for your awareness.

85% of LHC providers are four star or better ratings from a quality perspective, I mean that just tells you everything you need to know about the organization of why we wanted to be part of our family. We think it's going to bring great access great quality.

Two.

But to members and families across the country a J. Thanks, so much for the question next question operator please.

We will now take our next question from Justin Lake Wolfe Research. Please go ahead.

Thanks, Good morning wanted to ask a question about value based care first kind of with the <unk>.

Improvement in the outlook for penetration there I'm curious if you were to step back and look at the entire kind of value based care operation you have and think about the penetration in terms of capitation.

Could share that number with us meeting the total Tam there.

Your physicians and their patients how many of them are already in value based care.

They'll still to come and then just given all the competition in the space I thought it's interesting there's been some.

Industry chatter that you made a large acquisition or it might be making a large acquisition in Houston.

Can you talk about the M&A pipeline, there and given the competition do you still see it.

Being as robust as it was let's say three to five years ago. Thanks.

Justin Thanks, so much for the question I'm going to ask in a second I'll ask Brian just to reflect a little bit on the kind of direction of travel for value based care I think is super interesting to hear the perspective from a payer perspective, because obviously, what Brian and his team are looking for is how do they deliver the very best outcome and value for the folks who rely on him but before.

Before I go to the couple of things we probably.

I'm not sure we need to kind of go into a ton of speculation on what the potential would be where I would focus on is look at the rate of growth that's going on right now so.

That movement in terms of growth of Medicare advantage that Brian is leading that growth 600000 folks coming into the optum care value based hepatitis it environment on the Doctor Deckers organization.

We're focused on knowing that we are able to sustain that level of transfer and grows over many years to come so what the ultimate ceiling is on I think actually is a product of our ability to continue to deliver a fantastically innovative and high quality capability in the marketplace and thats going to continue to attract very long.

Those numbers of folks who want to be part of and benefit from it. So I'm a little less thoughtful about what could the ceiling be on much more motivated by and excited by the way in which we are at least 500 600000 rates.

Moving across.

Our ability to both move and grow and win external business as part of our agenda is going to be the thing that we're focused on so.

Maybe with that Brian I'd ask you to go a little further from your perspective, Yes, I think similar to what you said for me, it's less about a number I will say there is a lot of runway left.

Been about geographic expansion historically now it's much more than that we've moved into duals. It's about complex care. It's about home. So the breadth and scale is really at the core of it and United Healthcare is deeply incentive to continue this journey with Optum. When you think about our best retention levels. When you think about satisfaction. When you think about where we have the lowest <unk>.

And that drives the best benefits, the best quality and the best growth all of those outcomes com when we partner with Optum. So were strong we have strong incentives to continue this and I am encouraged because theres still a lot of runway left Brian . Thanks, So much and Justin just to come back to your second question around pipeline as you would expect we don't we don't comment on transactions.

No speculation, but let me just make a few general points you saw during Q1 we.

We successfully closed and announced the bringing of refresh health into the organization great business built by Steve Gold and his team, helping us build out all behavioral delivery capabilities within Optum health complements Super nicely.

Largest behavioral health network that we already have across the country from the benefits side of the business. So continue to operate that I'd say overall, our pipeline of opportunities I actually think is probably probably as diverse as it's ever been and probably deeper than it's ever been so so I think from.

Potential capital deployment capability, I think we feel pretty pretty optimistic about that we continue as you see we continue to be extremely disciplined about <unk>.

Sure.

Overall, the very many opportunities that we see that we focus on the ones, which first and foremost nestle centrally within our core strategies those five growth areas I touched on earlier refresh mental health is great example of that sits right into that value based proposition in terms of how we we believe we need to bring behavioral health management alongside medical management.

So first off we need to essentially within our strategic framework, we need to believe in the culture and the capability of the leadership teams that will well comedians Unitedhealth group and of course, the economics have to.

Fit with our demand and expectations to support our long term growth ambitions of 13% to 16% and also the returns to our shareholders rightly expect so that that drives us forward.

Comfort in our by our ability to continue to deploy capital, which has always been a key element of helping us deliver long term growth. So I hope that gives you a little sense of where we stand Justin and maybe with that and the next question.

Thank you we will now take our next question from Gary Taylor from Crown. Please go ahead.

Yes.

Hi, good morning.

I just had a question now that we're thinking about.

Optum health.

Type of growth Andrew that you were just talking about.

Really tens of billions of dollars of capital.

Risk how do we think about.

The reserving Optum health was a Standalone company, how do we think about the reserving.

It's that risk taking I presume capitation from UHC is an elimination.

As all of the other payer medical expense accrual is that just rolling through your total medical accrual John or is there somewhere else on the balance sheet, where there is payable.

The numbers, we should be paying attention to.

Okay, Gary Thanks, So much and let me go straight to <unk> respond to that.

Morning, Gary John .

Yes, it would be rolling through in the <unk> in the same place that you would be seeing everything else in terms of how those occur youre right in terms of how you're thinking about eliminations with.

United Healthcare business versus external business.

Not the eliminated of course, but all in the same place in terms of how we would be appropriately reserving for the for those for those arrangements.

Much John Gerry. Thank you very much next question. Please.

Thank you we will now take our next question from Kevin Fischbeck from Bank of America. Please go ahead.

Okay, great. Thanks, I wanted to go back to the growth and help them out for a minute.

Can you talk a bit about what drove that 100000 higher number is that an organic number does that driven by deals isn't it.

Direct contracting internally, United as an external or is there some way to kind of think about that growth.

And what drove it and then I guess just generally speaking when you think about deals in that space. How are you thinking about multiples either on earnings or on where you think the long term earnings can eventually be when you move that practice to capitation.

Kevin could you just repeat the second part of the cloud just last year in the middle of about this could you just repeat that sorry, yes, just the second part was just about deal multiples in tradition. So I don't know how you think about it whether it's on the actual earnings or whether it's on kind of a normalized earnings in five years. Once you move that practice entirely to capitation.

I'm just kind of think about how we should think about the returns on the capital Youre spending in this area.

Yeah, Okay, great listen Kevin Thanks, so much.

I'll hand to adopt a decade to respond to you on the first part of where that extra 100000 taken as up to 600000 is coming from.

It'd be good for you to hear that from him I think in terms of how we think about.

How we invest in this space.

I would say each one is pretty much a unique situation.

Uhm every every dot to clinic, they're all different they've all got tremendously different histories situations dynamics.

And obviously, we take a view within a broad piece of not just what <unk> achieved to date higher alongside the rest of all capabilities can we build opportunities in value for patients and utilizes of those environments environments and thats, what really drives all kinds of economic assessment, though I think what you can see is the way in which we understand.

And seek to continue to learn how to work back from better within within the value based envelope and how we can utilize the skills of these organizations allows us to be confident in being able to set very fairly reward people, who choose to join our organization and that's what's driving our ability to be.

Successful integrators of some phenomenal people and their teams across the country and I am so pleased.

They stay inside the organization.

<unk>.

It is.

Super nice to be able to see Optum health continued to strengthen itself as a physician to physician led organization that I think is really contrast into many others out. There. This is an organization led by physicians at every level of the organization and it makes a huge difference in terms of the way the heart and soul of this place is starting to be.

And I think Thats, what underpins a lot of our contribution and competitiveness with that Doctor Decker as the physician leader of the organization, maybe you could just reflect a little bit on how youll successfully driving up that growth rate sure Andrew happy to do it and Kevin Thanks for the question.

What youre really seeing is the result of almost 10 years of building a flywheel that Dow has significant momentum we've invested in people and technology and data and building out networks and deepening in our established geographies as well as going into new geographies all of that continues to yield.

<unk> benefits and frankly growth.

Your question is right is it organic growth that added that additional 100000 and the answer is yes. We saw strong results in open enrollment member retention and we of course have not only four star plans, but five star plans that are able to enroll patients year round. That's also true of duals and one final point that I'll know.

<unk> is that we are now a third of this growth. This year is in the dual special needs population and these are individuals that have difficulty accessing care and we're able to provide care with home and community.

Meaning wraparound solutions in their homes. So it's another model that helps us grow thank you.

Thank you so much Kevin thanks, so much for the question much appreciated next question. Please.

We will now take our next question from Stephen Baxter from Wells Fargo. Please go ahead.

Yes, hi, Thank you just a follow up on a previous question I wanted to ask a little bit more directly about significantly higher interest rate environment. We're currently experiencing.

Hoping you could talk about how you expect this will impact your investment portfolio over the next couple of years as our investments mature and are reinvested at higher rates.

Also how should we think about this is <unk>.

Packaging EPS growth rate target.

Potential upside or tailwind can be used to offset inflationary pressures elsewhere, maybe a softer economic backdrop or is this something you think could actually be a net tailwind to your earnings growth over the next few years. Thanks.

Steve Thanks, so much for the question Joe.

Good morning, Steven Yeah, certainly anything more than zero percent interest rate is going to be helpful to us.

Overall as you move in that environment, but it does take some time as I think as you accurately pointing out here. So maybe a few perspective that could offer on that.

Roughly 40% of our $70 billion in cash and investments is tied to floating rates. So that would be the first cut you would want to take that 60%.

Percent, it would be and in the fixed rate environment.

Environment so.

As you are alluding to those will mature and being reinvested.

<unk> invested at higher rates over time, but not much of that piece would have any year, one impact call. It in terms of how when we think about that so maybe just to give you a hypothetical here say you had a 100 basis point increase in interest rates.

So that would impact that 40% or call it roughly $28 billion of cash and investments that are tied to floating rates. So that'd be the first place you would see that.

So put that in the zone of it is really about 28 billion and that is in that component so $280 million impact on investment income important to note on that we also have about 10 billion of floating rate liabilities. So think about that swapped floating aggressive commercial paper so.

So that would also have about $100 million offset to that 280, so that'd be the zone I'd put you. When you think about getting 12 months out from from first 100 basis point increase that would be the zone. The rest of that portfolio. The other 60% will roll off over a period of years call. It think of that probably <unk> 5 billion.

A year rolling off as those things mature and that would be the pacing that you should expect thank you John and thank you very much Steve and thanks. So much for the question next question. Please.

We will now take our next question from Josh Raskin from Nissan. Please go ahead.

Thanks. Good morning, I was wondering if you could speak to the local market strategy more on the Optum side in markets like New York or Houston, or maybe Houston soon.

I'm, specifically curious about how much of that delivery system, you feel you'd need to employ control on and how we should be thinking about sort of long term success and growth is that on.

On the delivery side does that manifest on the benefit side as well thanks.

Josh. Thanks, so much that's a great question actually and I would say that again I'm going to ask why it to go.

Much deeper for you on this.

I'd say that over the decade or so that this has been developing optum I think our views are probably it's fair to say evolved quite a bit in terms of what the right way to operate not only in terms of what might be the right blend of relationships with.

Ourselves and the physicians.

So the role of physicians versus advanced practice clinicians on others.

And also the role of what happens in our clinic based environment versus a home based environment.

Say, particularly over the last I don't know maybe it's the last 24 months I think that has moved on quite a lot in terms of how we're thinking about this so I'll just frame it I'm going to hand, right now to buy but I would just frame. It may be just in those three dimensions right location kind of relationship between and then type of clinician.

Evolving dynamics around which we're becoming more and more opinionated maybe on that why you could go a little deeper.

Thanks, Andrew and thanks, Josh for the question.

Andrew framed it up very accurately and so our thinking and frankly, the practice and value based medicine is evolving as we are able to go into the hall provide virtual care and behavioral care and comprehensive services, even that overcome things like social determinants. So.

In markets like New York State that have primarily been fee for service, we do see an opportunity to move to value based care and it's a blend of employed physicians and affiliated and contracted physicians, but increasingly it is bringing all of the solutions that we offer within optum, including Optima.

And other places in the enterprise and Optum health to bear on helping people get the best health care outcomes possible lower the total cost of care and actually make care very convenient for healthcare consumers since that's a differentiator in the marketplace.

Thanks, So much Josh Thanks for the question next question. Please.

We will now take our next question Ricky Goldwasser from Morgan Stanley . Please go ahead.

Yeah, Hi, good morning so.

Optum Rx grew.

Mid single digits.

Should we think about this as sort of a steady state based on growth and if we think about it.

You May you may have a clearer than coming to market sometime middle of next year.

Is high single digit.

EBIT growth.

Reasonable place for us to model on top of what we've seen sort of this quarter.

Just one follow up I think Derek you talked about in home testing in your prepared remarks.

Is this something that you're focusing on the Medicare and dual book or is this also an offering to the commercial book.

Or is that and are you working with the national labs on that strategy.

Yeah.

Ricky Thanks, so much for the questions before I go to Heather let's tackle. Your first question. Your second question first and maybe I'll go to Tim No.

Comment a little bit from a perspective of the Medicare.

Looking at in terms of the home testing opportunity and dynamic.

Yes, Ricky I Timna all here. Thank you very much for the question.

In home testing is certainly a huge area of focus for us. There's obviously a component of it that relates to some of the work that we do on an annual basis with respect to Starz and closing some of those gaps related to the star measurement methodology, but more recently, we've really been folk.

Based on reaching out to people that we know to be under diagnosed for contingent conditions like Hep C and diabetes.

In doing this we have reached out over the last year to about 1 million members.

Who we suspect the underdiagnosed and offering in home testing solutions.

<unk> bye.

The house calls partners over at Optum and these completion rates have been really promising 35% on last year and we will continue to evaluate expanding this program on that we will do a really nice job of helping us understand where conditions are under diagnosed and can be better treated Tim. Thanks, so much into that.

No Tim did a great job, explaining Ricky and direct answer to your question. We have started with Medicare and we will move to commercial as we sort of receipt of lung, but this is a Medicare start was what I was talking about specifically excellent. Thanks. So much just before I hand over to Heather to go deeper on the optimal expertise.

Ricky as you allude to as we roll into next year in particular, we're coming into a kind of a bit of a new cycle for pharma or in a way in terms of the biosimilar opportunities and obviously you referred to one very significant one really an important one.

So, it's clearly going to be a super dynamic environment, which we had this team is absolutely engaged in and getting ready for.

I would just say as I look very pleased to see that acceleration of growth rate during the first quarter and that's down to a tremendous amount of hard work in terms of developing the right products and services.

Driving our retention and of course win rate in one of the things I keep an eye on is the number of bid opportunities that we have.

In front of US right in terms of what's coming and it's been super interesting to see that ratchet up over the last 12 months or so so the market the market is activating.

I don't think you'd be super surprised to hear that given the last couple of years, but it is activating so we're seeing more and more business come to market.

Super reassured by our sustained very very high retention rates have been then maybe you can reflect a little bit on how she sees that will play out over the next year or two.

Thank you. Thank you maybe I'll just build on what Andrew said, just first maybe Ricky to your question you can see our relentless focus on not just growth in the pharmacy benefit business, but also the pharmacy services and the direct to consumer so that will continue to support our top line growth that will support that retention.

And continued growth membership growth and the Pbms, but in addition, there's pharmacy services become increasingly important as we look at the future in these coming years Youre right.

We've long anticipated introduction of multiple opportunities and Biosimilar and other specialty services for our members.

The services, we offer through our pharmacy services programs are really I think going to drive not just the growth in our top line of our business that continued pushing our earnings which as.

Coming to our guidance for this year, which you see it as a mid to high actually single digits, and then longer term kind of moderating in the mid single digits and that's really that relentless focus on pushing the value from the from the pharmacy services into our clients and into our patients and our clients consumers.

And making sure that we continue to drive the tools and services that our clients will pay for those our clients. Our external book of clients are United Healthcare client and Thats also our pharmacy services clients like our community pharmacy clients, which really need services and offerings like our behavioral health services that really integrate a fragmented.

Our system. So I look at the whole thing and as we move forward it feels like our clinical analytics or pbms.

Our specialty program management services that were referenced by Andrew earlier.

Our script this morning, as well as our continued push to transform using our pharmacies as the way, we're really going to grow our business.

Thanks, so much.

Ricky Thank you very much for the question. We just have time for one last question. So and then maybe go to the last question.

Certainly we will now take our final question from Steven Valiquette from Barclays. Please go ahead.

Great Thanks, and good morning.

So just to tie a lot of things together that have been talked about on the call with the 90% increase in EPS guidance for 'twenty two.

Wanted to ask for a little bit more color on how much of this better outlook is driven by the Optum segment in particular versus the UHC segment versus any other factors at the corporate level.

I'm guessing, it's maybe mostly driven by Optum and maybe Optum health within that but also what else ex optimism, maybe performing better that's worth calling out as well. Thanks.

Steven Thanks, So much I think maybe you misspoke its a we increased our guidance range. This year by 10, both of the top or the bottom of the guidance range just to just to.

Just to reconfirm that but listen that that raises essentially based on the strong performance of Q1, good start to the year, we feel good about that.

While as always there's a lot of moving parts in our world and you have heard from people like Brian in some detail about some of the dynamic of the first quarter actually as it all comes together the year's kind of shaping up pretty pretty pretty much in line with the expectations. We laid out to you all in November last year strong performance is supported by.

Execution across all of our businesses I would say.

All of the core businesses often of United healthcare.

Started the year well, we continue to be very focused on the execution of those.

Those businesses of course.

And I think what youre, continuing to see and I hope you've heard some of that in the conversation today and it's certainly reflecting through the result is.

The synergy opportunities, which are coming to life between the two organizations you heard a lot about value based care and our whole value based care model, which we believe is truly capable of transforming experiences not just for patients, but for physicians and payers. That's that's a product of the two organizations working together the development.

In home care same.

Same thing very much being led by the two organizations working together and increasingly what we're seeing as we strengthen our capabilities in areas like that with our deployment of capital and some of the acquisitions, we'd be making so for example organizations like Navi Health landmark and others, that's been driving strong external growth as well.

Well, so really really demonstrating how building these kind of fundamental innovations in the way in which care can be thought about can then not just be attractive to United healthcare of course, but also to many other payers and completely reinforces our deep commitment to be a multi payer organization building <unk>.

<unk> and services and Optum, which work not just for UAC both of payers across the spectrum and Thats, what you see in supporting the business and it supports our confidence in raising the outlook for the rest of this year. So I hope that gives you a clear sense of that and very much appreciate that final question, Steven and thank you to everybody else for joining the call. This morning, we truly appreciate.

Your interest and your attention.

I hope what you heard in the call today is a strong sense of the confidence in our long term strategy and as I, just said again and intensely disciplined focus in its execution.

Aiming to create value for consumers advancing our mission and delivering high quality diversified growth in this quarter and for many years to come.

We look forward to sharing that progress with you again when we next talk in July . Thank you so much and I appreciate your attention today.

Ladies and gentlemen that will conclude today's conference you may now all disconnect.

Yes.

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