Q4 2023 UnitedHealth Group Inc Earnings Call
Good morning, and welcome to the Unitedhealth group fourth quarter and full year 2023 earnings Conference call. A question and answer session will follow Unitedhealth group's prepared remarks as a reminder, this call is being recorded.
Here is some important introductory information. This call contains forward looking statements under U S. Federal Securities laws. These statements are subject to risks and uncertainties that could cause actual results to 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 reconciliation of non-GAAP to GAAP amounts is available on the financial and earnings reports section of the company's Investor Relations page at Www Dot Unitedhealth group Dotcom.
Information presented on this call contained in the future in the earnings release will be issued the what we issued this morning and our form K 8-K dated January 12, 'twenty 'twenty, four which may be accessed from the Investor Relations page of the company's website I will now turn the conference over to the Chief Executive Officer of United Health Care.
Andrew Philip Witty: Andrew witty.
Andrew Philip Witty: Thank you and good morning, and thank you all for joining us today as we can.
Andrew Philip Witty: Conclude 2023 and embark on a new year I'd like to express my gratitude to our more than 400000 talented colleagues, who really all Unitedhealth group.
Andrew Philip Witty: It's directly due to their tireless efforts over the past year that we expanded our opportunities to serve more people more comprehensively.
As I reflect on our 2023 performance certainly the shifting care activity among seniors with an important element for us to manage effectively.
Andrew Philip Witty: And the reduced Medicare advantage funding outlook was a significant influence on how we prepared for 2024 and all the way through to 2026.
Andrew Philip Witty: Despite the shifting care patents and the commensurate pressure felt jewelry in 2003, we've been able to both deliver on our growth commitments and invest and prepare for reduced M. A funding cycle over the next three years.
Andrew Philip Witty: Even considering these factors.
Andrew Philip Witty: Twenty-three marked a year of balanced sustainable growth Unitedhealth group.
Importantly, we also strengthened the foundations from which we will continue to grow in 2024 and beyond.
Andrew Philip Witty: It looks great briefly during 2023, Optum health approach growth of 900000 more patients under value based care.
Andrew Philip Witty: United Healthcare added over one 7 million, new consumers and if Medicare and commercial offerings.
Andrew Philip Witty: Tomorrow Rex managed an additional 100 million prescriptions with people opt.
Andrew Philip Witty: <unk> financial handled more than $500 billion in consumer payer and care provider payments and optum insight facilitated more than 23 billion electronic transactions.
Andrew Philip Witty: The increasingly impactful ways, we can engage with patients consumers care providers and customers resulted in revenue growth of over $47 billion and adjusted earnings per share growth of over 13% in 2023.
Andrew Philip Witty: Looking to 'twenty four 'twenty five and beyond we will continue to drive quality simplicity affordability and accessibility to help improve health care system wide.
Andrew Philip Witty: And we remain confident in and committed to our long term, 13% to 16% adjusted earnings per share growth rate.
Andrew Philip Witty: Having held our Investor Conference just six weeks ago I'll take only a few minutes. This morning to recap what you should expect from US this year.
Andrew Philip Witty: Starting with our work in value based care.
Andrew Philip Witty: Value based care for US is a proven way of overcoming many of the widely recognized shortcomings of a fee for service based health system, such as fragmented consumer experiences and incentives that can emphasize volume over quality.
Andrew Philip Witty: Our value based offerings empower physicians to provide more connected coordinated on comprehensive care.
Andrew Philip Witty: Align incentives among consumers care providers and health plans deliver.
Andrew Philip Witty: To deliver better health outcomes and improve costs.
Andrew Philip Witty: At the end of 2023, Optum health served more than 4 million patients in fully accountable value based arrangements in partnership with many dozens of health plans.
Andrew Philip Witty: By the end of this year Optum health will grow to serve at least another 750000 patients under such arrangements.
Andrew Philip Witty: Total of more than twice the number of people we serve just two years ago.
Andrew Philip Witty: Yet even with the strong growth and significant investments we've made our market presence is still quite modest and the opportunity expensive.
Andrew Philip Witty: 4 million patients served just a small fraction of the many more people, whose health ultimately will benefit from the models of care.
Andrew Philip Witty: And a total Optum health revenue base, which today represents only 2% of the five trillion dollar U S health care system spend.
Andrew Philip Witty: We have a considerable distance to go to achieve the broad positive system wide impact for People's Health. We believe we can help drive.
Andrew Philip Witty: Turning to our consumer focus.
Andrew Philip Witty: Working hard to help consumers more easily find experience and pay for health care and that includes using their health benefits.
Andrew Philip Witty: An example of our progress can be seen in the results of United Healthcare commercial benefits business.
Andrew Philip Witty: Most recently completed selling season was among our strongest in recent years.
Andrew Philip Witty: The majority of this growth will come from our relationships with large employers among the most sophisticated buyers of health benefits.
Andrew Philip Witty: Our customers tell us we are focused on what their employees value most.
Andrew Philip Witty: Cost simpler experiences and adaptable benefits that meet their unique needs and circumstances.
Andrew Philip Witty: And the consumer NPS for these new innovative products is some 20 plus points higher than traditional health plans.
So we have more to do our goal is to become the trusted source for healthcare information and advice our go to marketplace for health services payments and benefits all through a few simple taps on our consumers' phone.
Andrew Philip Witty: One of our larger consumer offerings is Medicare advantage, which.
Andrew Philip Witty: I'd like to touch on briefly.
Andrew Philip Witty: We're proud of our long track record of growth and are delivering for the people who choose our offerings.
Andrew Philip Witty: During the recently completed annual enrollment period, we added about 100000 more consumers and we remain committed to our full year goal of 450 to 550000.
Andrew Philip Witty: We believe our assumptions of ongoing care activity and approach to supplemental benefit management are entirely appropriate for the environment. We are planning for <unk>.
Andrew Philip Witty: And feel positive about our positioning for growth entering this three year period.
Andrew Philip Witty: One additional item as we close out the year.
Andrew Philip Witty: To achieve our enterprise wide long term goals, we must consistently ensure best use of our resources, both time and capital to enable us to serve people more effectively and deliver value for our shareholders.
Andrew Philip Witty: As you likely saw we recently agreed to the sale of our Brazil operations, where our dedicated colleagues serve people with care and compassion.
Andrew Philip Witty: We highly value the relationships, we have developed over more than a decade in Brazil.
Andrew Philip Witty: After carefully evaluating our best course, we ultimately determined a sale was the right step for the people, we serve and for us to best focus our energies on the many compelling growth opportunities that we consistently discussed with you.
Speaker Change: And with that I'll turn it over to Dirk Mcmahon Unitedhealth group's president and Chief operating Officer Doug.
Dirk Mcmahon: Thanks, Andrew our growth is rooted in innovation and our intense desire always to do better.
Dirk Mcmahon: We're investing heavily in ways to accomplish that.
Dirk Mcmahon: Greasing digital engagement and using AI to be more efficient and then measuring our performance through net promoter scores to be sure we are hitting the mark.
Dirk Mcmahon: The impact of our digital engagement efforts was evident in our one on one performance metrics as Andrew noted we brought on one of our biggest cohorts of new people served via our commercial offerings and our technology played an important role in making the process worked well.
Dirk Mcmahon: Last month, the UHC mobile App consistently ranked number one or number two in the Apple App store medical category and on Google play.
Dirk Mcmahon: Through the first week of the year mobile App installs were up over more than a 100% year over year.
Dirk Mcmahon: And our chat volume was more than twice our historical average.
Dirk Mcmahon: And after more ex digital investments enabled us to bring on a record number of new clients, who brought with them more than 3 million new consumers on boarded with improved customer service scores and at an overall cost 8% lower than last year.
Dirk Mcmahon: We're consumer served higher satisfaction and lower costs.
Dirk Mcmahon: Our investments in AI and other advanced technology play an important role in improving customer service and productivity throughout the enterprise.
Dirk Mcmahon: For example, we are removing repetitive tasks from our workflows by using AI to help with tasks such as responses to consumer inquiries.
Dirk Mcmahon: Updating provider directories, and summarizing interactions with customers and patients.
Dirk Mcmahon: This frees up our service staff and clinicians to focus on solving more complicated tasks for the people we serve.
Dirk Mcmahon: And recently.
Dirk Mcmahon: We launched a new capability, where we use real time admission and discharge data to engage high risk members immediately after an emergency department visits and.
Dirk Mcmahon: Connecting them to follow up care to ensure higher quality posted net outcomes and avoid readmissions.
Dirk Mcmahon: This rapid response, driven by timely clinical data has improved member engagement rates by over 300% and has an NPS of 83.
Dirk Mcmahon: NPS remains a vital way to measure how were performing for our customers and consumers and how our digital initiatives and other efforts are impacting those measures.
Dirk Mcmahon: And leading to improved retention.
Dirk Mcmahon: Couple of examples.
Dirk Mcmahon: Ru digital optimization, we're providing consumers with on demand access to care highly personalized benefits information real time support and integrated pharmacy capabilities. This is translating into significant NPS improvements in many of our businesses.
Dirk Mcmahon: And we've removed friction from the system through expanded access to 24 by seven virtual visits and United Healthcare's efforts to eliminate nearly 20% of prior authorizations.
Dirk Mcmahon: Throughout 'twenty four you should expect to see an even greater investment in our digital capabilities as we continue to identify opportunities to.
Dirk Mcmahon: Leverage technology to reduce administrative costs.
Dirk Mcmahon: Improved productivity.
Dirk Mcmahon: Further enhance the consumer experience at both Optum and Unitedhealthcare and now I will turn it over to John Rex Unitedhealth group's Chief Financial Officer, John Thank you Derrick.
John F. Rex: Our colleagues ongoing focus on further expanding and strengthening the foundations, which underpinned our growth pillars is paving the way for consistent growth in 2024 and beyond.
John F. Rex: Revenue in 23 of 372 billion grew by over 14% with double digit growth at both Optum and Unitedhealthcare.
John F. Rex: Fourth quarter adjusted earnings per share of $6 16 grew 15% and brought full year adjusted earnings per share to $25 12.
John F. Rex: Growth of 13%.
John F. Rex: As Andrew noted earlier at the end of December we entered into an agreement to sell our Brazil operations and expect to close in the first half of this year.
John F. Rex: Upon closing, we expect to record a charge of approximately $7 billion. The majority of which is noncash and largely due to foreign currency translation losses accumulated over several years.
John F. Rex: The impact of this onetime charge will be excluded from our 24 adjusted earnings per share measure.
John F. Rex: For your modeling purposes, the full year 'twenty four outlet incorporated about $6 billion of revenue for Brazil, or about one 5% of consolidated revenue.
John F. Rex: Before reviewing our business results I'll offer some brief comments on care activity.
John F. Rex: Care patterns remain consistent with those we shared with you in the first half of 'twenty three.
John F. Rex: Activity levels continue to be led by outpatient care for seniors with orthopedic and cardiac procedure categories. Among the more prominent.
John F. Rex: As we've noted our benefit design approach assumed these activity levels persist throughout 'twenty four.
John F. Rex: And the care patterns, we observed exiting 'twenty three reconfirm that decision.
On the margin we saw some modest late year seasonal activity.
John F. Rex: Such as strong and welcome response from seniors to scheduled physicians at this to receive RSV vaccination.
John F. Rex: In some cases these were accompanied by additional necessary care being obtained especially for people that had not senior physician and some time a positive outcome for People's health.
John F. Rex: And some though as we reflect on full year 'twenty three results overall overall care activity was broadly in line with the views we've shared earlier.
John F. Rex: And as we enter 'twenty four we're confident in the responsive pricing and benefit design actions, we undertook with.
John F. Rex: With care patterns, continuing to be supportive of our care ratio outlook of 84% plus or minus 50 basis points.
John F. Rex: Turning to the performance of our businesses in 'twenty three.
John F. Rex: Optum health revenues grew by 34% to over 95 billion as we increased the number of patients served under value based care arrangements by about 900000 to more than $4 1 million.
John F. Rex: Expanded services in the home and broadened and deepened the levels and types of care we offer.
John F. Rex: Optum insights revenues grew 30% to $18 9 billion.
We concluded the year with a revenue backlog of $32 1 billion, an increase of $2 1 billion over last year.
John F. Rex: This growth was driven by our diverse and expanding product portfolio, which connects many of the key stakeholders across health care.
John F. Rex: Whether it's launching new decision support solution for providers.
John F. Rex: Claims editing software for payers.
John F. Rex: Or simplifying the payment process for all.
John F. Rex: Our continued investments are fostering the next phase of Optum insight growth.
John F. Rex: <unk> revenues grew 16% to over 116 billion.
John F. Rex: Driven by the continued addition of new clients expansion with an existing relationship and organic growth of our pharmacy services businesses.
John F. Rex: In 2023, both customer retention and new wins were among the best optimal Rex has delivered.
John F. Rex: At United Health care full year revenues of over 281 billion grew nearly 13%.
John F. Rex: Adding to Andrew's earlier comments within Medicare advantage, we expect a majority of our full year growth outlook to be realized outside the annual enrollment period with the growth patterns consistent with those we have experienced over more recent years.
John F. Rex: Our Medicaid enrollment outlook for 2024 balances two key elements.
John F. Rex: First is that state redetermination activities will be largely completed by mid year and second that growth within existing states, such as North Carolina and other new opportunities will partially offset these impacts.
John F. Rex: Within our domestic commercial offerings, we expect to serve about $1 5 million additional people in 24, a strong result, and.
John F. Rex: And we are encouraged by the continued positive customer response, we are experienced and as we look ahead.
John F. Rex: Our ample capital capacities continue to underpin our long term growth objectives cash flow from operations in 2003 was $29 billion or one three times net income.
John F. Rex: We returned nearly $15 billion to shareholders through share repurchases and dividends and deployed over $10 billion in growth capital to build for the future.
John F. Rex: To summarize our 'twenty three performance and start to the new year further solidifies and reinforces our confidence in both the 24 and long term growth objectives. We shared with you at the end of November.
John F. Rex: Now I'll turn it back to Andrew.
Andrew: Thanks, Joan and thank you to heading into 2024, I Hope you all since our confidence.
Andrew: We have talented people who are committed to our effort to help build a simpler more consumer friendly health system for the people we serve.
Andrew: And we are well positioned to continue to deliver on the well established commitments we've made.
Speaker Change: Operator, let's open it up for questions.
Speaker Change: Thank you 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 star <unk> on your Touchtone phone. We ask you limit yourself to one question. If you ask multiple questions will only be answering the first question. So we can respond to everyone.
Speaker Change: In the Q this morning.
Speaker Change: We will go first to Justin Lake with Wolfe Research.
Justin Lake: Thanks, Good morning.
Wanted to.
Justin Lake: Touch on the on the cost trend commentary specifically between the Investor day at the end of the year. It looks like the MLR was a little bit higher can you tell us what what you saw there over the last month, maybe give us some color John I know you guys did a great job in the second quarter of getting ahead of cost trend.
Justin Lake: Utilizing some of those facility.
Justin Lake: Facility kind of insights that you have on scheduling et cetera, we're trying to figure out whether this is just seasonality or.
Justin Lake: A further pickup in utilization given the Q3 to Q4 that you saw so maybe you could tell us what you're seeing into January and just tell US where you think the Q1 comes in versus the full year. Thanks.
Speaker Change: Hey, Justin Thanks, so much for the question, let me just make a couple of comments I'm going to ask John Rex to give you a little bit more detail on the on the area you just talked about.
John F. Rex: I think overall as we look at 'twenty three overall that came in very much in the <unk> zone, we expected towards the top end of that zone, but very much within the zone of what we're expecting for the full year and we signaled back in the middle of the year and the bulk of that story is driven by the outpatient shift in behavior around seniors that we talked about back in June.
Speaker Change: You are right, though post the Investor Conference. What we certainly saw was a click up in some seasonal activity each of which individually are kind of pretty small but added together just made a bit of a difference in that last run out of the quarter.
Speaker Change: Around things like RSV, vaccination, which which brought with it dragged with it if you will some extra utilization of services from seniors who have come in for that vaccine lithium to be clear all of that is good news for healthcare Reits. So these are seniors many of whom have not been so the office for a long time, they've come back in and <unk> got vaccinated.
Speaker Change: The physicians have picked up other things, while Athena is a little bit of that going on combined with little bit of heightened COVID-19 activity, just as we rolled out of the year.
None of which we really think is jewelry blee impacting our outlook for 24. So we feel very solid around our 24 guidance point of 84, plus or minus 50 bps.
Speaker Change: Maybe I'll ask John just to give you a little bit more click down kind of insight into into all of that but go ahead, John yes. Good morning, Justin Youre, absolutely right. So the prime factor here when we think about the full year view and where we ended up being what we talked about material later in the year in terms of the outpatient care activity among senior populations and that.
John F. Rex: <unk> continuing consistent with what we saw back much earlier in the year and very supportive of what we staked out in terms of the benefit design that we stepped into 'twenty four with.
John F. Rex: In particular for senior populations in our Medicare advantage products. So all of those elements very much supportive of that of that view in the end the activities, we undertook earlier in the year.
John F. Rex: As it relates to kind of where we landed the full year. So 10 basis points really above kind of what we indicated at the Investor Conference back in November of differential and Andrew hit on those items, Let me just kind of take it a little bit.
John F. Rex: Deep here, so definitely on some typical seasonality you're involved in there and the incremental elements were I'd point out a couple of items of seniors did really respond strongly to RSV vaccinations and scheduled physician visits.
John F. Rex: Sometimes those physician visits what we noted we were driving other care activity.
John F. Rex: Around that both in some cases seniors that had perhaps been to a physician in a little while.
John F. Rex: And so they visited their PCP gotten RSV vaccine.
John F. Rex: And then in the meantime, they're Pcp's, we're able to close some additional care gaps as they were there was a great thing because some of these seniors who haven't been in for a while so important activity to occur there in the fourth quarter. So that was one of the elements that we that we saw there.
John F. Rex: As it relates to kind of what we're seeing with that.
John F. Rex: Elevated care costs for Covid, what we saw in the in the fourth quarter and particularly in December overall, we've been noticing is that COVID-19 admit for inpatient states are running a higher cost per case than we than we traditionally thought that actually kind of makes some sense there more intense.
John F. Rex: At cases, typically that are going into inpatient say I will say, we did notice in December that the total level of Covid Avnet.
John F. Rex: We're probably 50% to 60% above the October November average that we had seen so that was kind of the highest part of the year in terms of Covid inpatient admin.
John F. Rex: Those elements in some together that more than accounts for the 10 basis points differential in our full year view Justin.
As that pertains to your second question as we look out into the next year and what we see in terms of patterns I would call. It patterns commensurate with what we saw this year in terms of just the movement.
John F. Rex: With this kind of 84% view that we view for the for the for the full year as I step back and reflect and just kind of thinking about where broadly where where the analyst consensus has you picked particularly the <unk> is kind of in the right. It looks like an appropriate zone in terms of staked out there.
Speaker Change: One would expect so thank you Justin Yeah, John Thank you and just and thanks for the question I appreciate that.
Question. Please operator.
Speaker Change: We'll go next to Josh Raskin with Nephron research.
Joshua Raskin: Hi, Thanks can you describe the competitive environment for Medicare advantage and I'm, specifically thinking about how you've adjusted benefits in 2024 as part of a three year process I don't want to put words in your mouth, but it sounds like you're trying to adjust for the majority of the risk model changes in one fell swoop.
Joshua Raskin: But I'm curious how you think that plays out and positions us not just for 'twenty four but then for 25 and 26 as well.
Speaker Change: Hey, Josh. Thank you so much before asked Tim Knoll to give you more detail on your question I mean listen I think I think the way we've looked at the shift in the rate notice is a three year set of adjustments and that's why we've been very thoughtful about how we plan not just frankly benefit design, but how we.
Speaker Change: Continue to accelerate our management of Opex through the organization, how we've continued to focus on eliminating unnecessary care and waste within the system through our various <unk>.
Speaker Change: Medical management capabilities. So it's really a three pronged set of agendas, which we're going to be focused on over the next three years.
And we've been very very thoughtful about making sure that we are.
Speaker Change: Setting those tables in a way, which we can be sustainable through the cycle. So that will not take a sharp left turns or right turns half way through the period with that kind of kind of overall perspective, maybe ask Tim to give you a little bit more deep dive on the competitive environment and how he is how he is very specifically planning for this.
Timothy A. Wicks: Yes, Thanks, Josh for the question. So yeah I agree with Andrew's comments couple of things to start with is there's been a number of changes to the Medicare advantage and part D programs over the last 18 months to two years that are really phasing in over multiple years and as we plan for.
Timothy A. Wicks: For 2024, we once again took a very rational view to the environment and also our long term view with always our overarching goal being benefits stability.
Timothy A. Wicks: For our members as we stepped into.
Timothy A. Wicks: As we step into benefit planning in future years, we really feel like we've got a very thoughtful way to respond to all of those changes that will be encountered by the Medicare advantage and part D programs.
Into 2025 and beyond and.
Timothy A. Wicks: Certainly as we look forward, we don't believe that we have on any material pricing catch up to do in future periods and feel like we've got a very thoughtful response to the changes that will be encountered by the program into 2025 and 2026. So we think the forward view of our competitive outlook.
Timothy A. Wicks: It is quite solid and quite strong as we think about growth over the long term.
Speaker Change: Alright. Thank you very much next question. Please operator.
Speaker Change: We'll go next to a J rice with UBS.
Speaker Change: Okay.
J Rice: Hi, everybody.
J Rice: Just I apologize sort of granular, but we're getting there.
J Rice: So a lot of questions about it the.
J Rice: Two metrics days claims payable down a couple of days year to year sequentially.
J Rice: From third quarter and then the prior period.
J Rice: Period development being down $100 million.
Maybe accounts for some of the variance on MLR I'm guessing.
J Rice: I don't know if thats, what you are guiding for when you updated last updated your outlook, but any comment on that as well.
Speaker Change: Let me, let me ask John to address the a J. Thank you.
John F. Rex: Yes, good morning, a J. So first on the days claims payable so two eight day sequential decline two days year over year. So primarily the single largest factor would be exactly as you pointed to the change in prior period development. So that has a significant impact if you look about a year ago, where you were in prior period development and where we were even the <unk>.
Speaker Change: Q, so that has significant impact on that part that would be the.
The main factor in terms of other contributing factors that we saw we did see in the in the fourth quarter. Some modest acceleration in provider claims submission timing. So just speed up in terms of those those submissions.
Speaker Change: How quickly we are receiving them from data service in terms of receipt.
Speaker Change: We also saw the.
Speaker Change: Noted that as it related to the four two.
Speaker Change: Through the fourth quarter, some higher claims intensity in the first part of the quarter, particularly October so thats a factor that impacts the denominator med X per day and the days claims payable metric.
Speaker Change: And that was a piece that was in that also as it relates to the $100 million of unfavorable medical development in the quarter I would put that mostly at the items that we were talking about in the in my response to Justin's question. So.
The respiratory related activity that we saw in there.
Speaker Change: Modestly higher cost per case for inpatient Covid add Mets.
Speaker Change: Really kind of those were the main factors that we that we had in there in terms of contributing to the unfavorable development.
Speaker Change: It's a good question a J.
As John just said, even even back in the sort of second half of Q3.
Speaker Change: We saw we've seen subsequently the <unk>.
Speaker Change: We pick up on this phenomenon of more services being delivered around the vaccination was already started as we were rolling out through Q3, which is really what explains that so so in many ways is kind of Q3 issue kind of Q3 issue of negative development and then the slight pressure at the end of the year is kind of the same story.
Speaker Change: And.
Speaker Change: Which is why we don't we don't feel that has any real direct relevance in terms of thinking through 2024.
Speaker Change: Thanks for the question no appreciate that next question. Please operator.
Speaker Change: We'll go next to Lisa Gill with Jpmorgan.
Lisa Christine Gill: Thanks, very much good morning, I wanted to Optum health and just maybe talk about the medical cost trend there.
John just going specifically to the comments that you made did you see something similar in Optum health are we seeing anything different there and then also I just want to understand that the claim lag there we've heard from some others that there can be a pretty big claim lag when we think about the providers versus the payers.
Lisa Christine Gill: So let me ask John to start and then maybe ask Heather to make a couple of comments on the claim dynamic go ahead John.
John F. Rex: Yes, Lisa so so definitely seeing seniors obtaining RSV vaccinations and kind of some of the respiratory activity that was going on in the quarter. So broadly similar features for Optum health one of the comments that we've made throughout the year, though also has to do with the progression here of taking on a large.
John F. Rex: Block of new memberships. So we took on about 900000, new members as we started the year in one of the comments we've made throughout the year is.
John F. Rex: Engaging with these members because the most important thing we need to do is how the clinical engagement with these members in terms of start improving their health outcomes getting them in to see physicians, having our clinicians interacting.
John F. Rex: Having interacting with them and it's a comment we made throughout the year as we've seen the Optum health margin progression. So one of the great things, we probably started the year kind of roughly a 20% engagement level with that new that 900000 member block, we exit the year, having engaged with about 80% of these members Super important.
John F. Rex: Factor as we think about Optum health as we think about 2024, and how that progression and that's been a big focus of the team at often help all year long of getting that engagement and so we can have impact on their health.
John F. Rex: In a way that it gives especially given what this population is like they typically have complex needs. That's important another really important market.
John F. Rex: As it relates to the new membership that patients that were bringing into Optum health for 2024 again, so I talked about that 20% engagement level. We started 2003 with for 2024, we're going to start at a 50% engagement level with that new membership. So we're making advances in that and that's exactly what we should expect from.
Speaker Change: From the team they've their efforts have been have been really really strong Greg. Thanks, John maybe you have a comment on Lisa's question around claims and then I'd like to ask all of them are also to follow up on your perspective on engagement on what's driving that please go ahead, Sir so the only thing that the thing I would add too so I appreciate it.
Speaker Change: John's point, when you think about engaging that.
Speaker Change: Patient early then Julian that clinicians hands and I think thats. The way, we think of our clinicians is that important to airplanes out visibility then tail kind of action and the way we think about our clinicians is once we get that engagement and as John said early engagement. So important then our clinicians having the tools and I think we've been what's really a central.
Speaker Change: For us it was 130000 clinicians having visibility early what to do next and the first thing is that they've got the technology <unk> got solutions around them, they've got referral management practices that they can engage with high quality specialists when they need to for outpatient.
Speaker Change: For outpatient procedures, and then <unk> got the supports in behavioral health and home and community based human community services that we've been investing heavily in over the last year.
Speaker Change: And the last thing I would point to is the contract protections that we've been focused on with our payers to be sure that the structures are in place. So that our clinicians can practice in a responsible way that that visibility into the dynamics that are happening with the patients and then they've got disappoints in place with them.
Speaker Change: <unk>.
Speaker Change: AMA.
Speaker Change: Yeah. Thanks for the question look I think.
Speaker Change: To reiterate the point around our highest risk complex members, where we're engaging at a two times higher rate than at the same time last year.
Speaker Change: Within engagement in our clinical programs.
I'd focus around referral management and high value evidenced based medicine programs, including our optimal care program, where a majority of our clinicians are engaged with these evidenced based programs are able to catch patients that.
Speaker Change: The care that they need and importantly.
Speaker Change: Get the support with the provision of wraparound services, including specifically home based services. So that the highest risk groups have their care connected from the primary care setting into the home. Thanks for the question Amit. Thanks, John maybe just to tie up the whole question, Yeah, and Lisa tying up just on the last part of your question here regarding <unk>.
Visibility into care activity claims lags I don't know that we don't that's not a.
Factor just given the model of <unk>.
Speaker Change: <unk> business and how those groups run.
Frankly, it's one of the areas, where we get probably early sensing mechanisms in terms of the care activity. That's going on is one of the early sensing mechanisms from matts earlier in the year. When we were able to talk about what we're seeing in the senior populations in there.
Speaker Change: Our activity within the orthopedic and other procedures. So that's not a factor in fact, if anything it's probably a strength of the organization.
Speaker Change: John and Lisa. Thanks, So much for the question I mean, we obviously just spend a couple of minutes talking about engagement.
Speaker Change: And I hope that gave you a strong sense of some of the progress we've made over the last 12 months in this area I would say with night and day in a different position today than we were a year ago in terms of our ability to be engaged with these complex.
Speaker Change: Flex patients, making sure physicians are ready to go.
That's a really important aspect of what's building our confidence for 2024 and <unk>.
Speaker Change: Make no apology for just spending a couple of more minutes.
Speaker Change: Sure you hear some of the great work Thats gone on over the last year to ensure that we've got these very high levels of engagement and real substance behind that engagement.
Speaker Change: These patients.
Speaker Change: We'll be supported a managed really positively going through 'twenty four that's what then underpins and unlocks the whole opportunity of value based care for Optum health.
Speaker Change: So thanks for your question and then move onto the next question.
Speaker Change: We will go next to Stephen Baxter with Wells Fargo.
Yes, hi, Thank you I was hoping you could talk a little about what youre seeing for cost performance in the group commercial or exchange or Medicaid businesses, when you step back.
Speaker Change: All appropriate distribute all the pressure really you've seen them twice, maybe three to seniors virtually the lineup or anything else. There. Thank you.
Speaker Change: Steven Thanks, so much maybe ask Brian just to give you a kind of overarching summary of what UHC scene and it's different books of business, Brian I. Appreciate that thanks, Stephen for the question and I think I'll just lead with I feel really good not only about how we finished the year in the United Healthcare 2023 growth at the top end of our ranges performance run in.
Brian: <unk> across the board, but also as we step into the businesses for 2024 feel very good about the key assumptions that underpin our plan and very optimistic and you mentioned a couple of areas Youre right. As we've discussed some of these elements with respect to cost trend. They are centered in our senior community and I think the message around those other businesses nothing to see here and really aligned with our expectations.
Speaker Change: Patients some good stability and durability in the underlying elements, both utilization and unit cost of our trend outlook and obviously feel very confident in how we're showing up competitively. When you look at our growth outlook, so very optimistic about United healthcare durability in those other lines that you are suggesting and lots to look forward to hearing the year alright. Thanks, Brian next question. Please.
Speaker Change: Yeah.
Speaker Change: We will go next to Lance Wilkes with Bernstein.
Lance Arthur Wilkes: Great. Thanks.
Can you talk a little bit about Optum Rx the drivers of growth in the quarter in particular top line and then if you could comment a little on revenue per Rx and do you have any programs that either in the fourth quarter or <unk> 24 that you've been rolling out that are capturing some of the increased demand on topics like GOP ones that might be.
Speaker Change: <unk> so some of the strong performance. Thanks.
Speaker Change: Thanks, So much for the question before asked Patrick to start the response.
Speaker Change: <unk>.
Patrick: First off I just wanted to note was super strong selling year for Us tomorrow.
Patrick: Tomorrow is probably our best ever extraordinary on across a wide range of categories plans public service states.
As well as obviously commercial and really really pleased with the differentiated product offering really build on transparency choice and of course cost.
Patrick: And so we feel we've built a strong momentum in 'twenty three rolling into 'twenty for Patrick you May want to go a little deeper maybe shed a little detail on weight engaged specifically around the question that lends raised around GOP.
Patrick: Thanks Lance for the question, so as Andrew said really diverse growth.
Patrick: Both new business and high retention rates. So one of our best selling years ever I'd also call out the pharmacy services expansion and the organic growth there across the diverse set of pharmacy services cost management, and then last as you mentioned new products and services just to call out one way to engage so comprehensive management.
Patient provider support client support lifestyle modification digital so a comprehensive solution across optum, not just optum Rx partnering with Optum health and Optum insight already live with clients and robust interest in the marketplace because.
Patrick: Patients members employers of one comprehensive solution that demonstrates better health outcomes at lower total cost of care. Thanks.
Thanks, So much back in line. Thanks for the question next question. Please.
Speaker Change: We'll go next to Kevin Fischbeck with Bank of America.
Speaker Change: Okay.
Kevin Mark Fischbeck: Great. Thanks.
Kevin Mark Fischbeck: I guess I'm still struggling with the concept of 2023 coming in worse, but that's having no impact on the 2020 for outlook.
Kevin Mark Fischbeck: Are you, saying that the incremental pressures really just like flu RSV.
And therefore unlikely to replicate at these levels next year, because the negative development speaks to costs earlier in the year also coming in worse, which implies that the baseline is the core baseline is also higher so can you just help me reconcile.
Kevin Mark Fischbeck: Why this isn't raising the base for next year and I guess within that you may feel comfortable with the guidance range for MLR, but is there a reason to be at the higher end of the range to start the year at the midpoint still where you're orienting. Thanks.
Speaker Change: So I'll ask John to go a little deeper obviously, obviously as you know Kevin we've set a an MLR target next year, which is in fact higher than the actual close out for this year in any case.
It takes into consideration some of that kind of elevation, which we've seen throughout the year. So I'm going to core the core elevation associated with the outpatient senior behaviors that we've been talking about now for several quarters.
Speaker Change: And then as we've.
We've talked a little bit already.
Speaker Change: End of Q4 type of.
Speaker Change: Small seasonality seasonality variation, we don't think is really durable all relevant to the rest of the year, but job John maybe go a little deeper on the sure. Good morning, Kevin. So yes, so the elements that contributed to the unfavorable development being around respiratory activity.
John F. Rex: That was going on as as seniors came in to get vaccines and other care was being delivered and such and that higher.
John F. Rex: In patient cost per case for that Covid admit that we are seeing so those would largely be the prime contributors of the elements that we're seeing here in terms of that unfavorable though so youre absolutely correct in your assumption that doesn't impact our run in assumption as we think about our outlook for 2024.
Four in which.
John F. Rex: So it keeps us right squarely in where we thought we'd be as we were at our Investor Conference that is taking out the 84% plus or minus 50 basis points.
John F. Rex: Really as we look across the scope of our businesses and we think reflect on how we performed in 2000.
In 2003.
John F. Rex: The scope of it being very much with what we saw back in mid year of 2023 that this is that the run.
John F. Rex: Running factors are about outpatient care activity, among senior populations, which we incorporated into our bid the elements that you're appropriately referring to an <unk> again not factors impacting our view at all in terms of how we staked out 'twenty four and how we expect it.
John F. Rex: Perform in 'twenty four.
Speaker Change: Really good question.
Speaker Change: And I would also just add I mean, we as you would fully expect Kevin will review in the leading indicators.
Speaker Change: Carrier activity frankly daily weekly monthly.
<unk> been all year and we've also been investing significantly in increasing numbers of early warning signals. If I can put it that way to strengthen our radar capability to see this.
Speaker Change: I can tell you, we're really not seeing any deviation from what we've been telling you all year in terms of the core activities across the system.
Speaker Change: Seasonal bumps at the end of the year, obviously, a little different.
Speaker Change: Terms of outpatient utilization all of those lines of activity that we've been discussing a different times with you the patents.
Speaker Change: We're very supportive of how we've stepped out for 'twenty four.
Speaker Change: Thanks for the question next question please.
Speaker Change: Well go next to Scott Fidel with Stephens.
Scott J. Fidel: Alright. Thanks.
Scott J. Fidel: Was hoping to just hop back over to the op and health for a second and just as it relates to the.
Scott J. Fidel: The margin targets that you gave us at Investor day for the $7, 7% to 8% just wanted to see if those are still the appropriate targets for 2024, and then maybe if we can walk through the sort of pacing exercise with our H margins.
Scott J. Fidel: Given the expected step up from the accident rate in the fourth quarter.
How you think about those OE margins for <unk>, and then sort of pacing over the course of the year. Thanks.
Speaker Change: Scott. Thanks, so much discussion I'm going to ask Delta decides to make a couple of comments and then I'm going to loop back to Jonathan just to talk through some of the phasing of the year around margin on that but.
Delta: Bottomline no change in our guidance for Optum health, we feel good about where we staked out for Optum health next year.
Delta: A ton of work done during 2023 to strengthen the business you saw that beginning to show through as we roll through the second half we continue to expect that to be a very strong driver of improvement as we go into.
Delta: 2020 for a lot of that work, we talked about already today around engagement is a key element of our confidence in being able to build a.
Delta: Profile of that business and maybe you could go a little deeper and then John can close I was discussing on the progression.
Speaker Change: Thanks for the question Scott.
Speaker Change: We're confident in our $7, 7% to 8.0% target for 2024.
Speaker Change: Guest engagement in detail.
Speaker Change: The second important piece is our medical management programs, which we've.
Speaker Change: Scaled effectively I talked a little bit about optimal care and evidence based guidelines.
Speaker Change: Reiterate is the work we're doing across our network with payment integrity again with the idea of being able to provide the right.
Speaker Change: <unk> services across our network.
Speaker Change: The last piece I would also hit on as our initiatives around Opex, which have been progressing well and are on track.
Speaker Change: Driving operating efficiencies in the G&A discipline across the organization and it really with a focus on more consistency in our systems and unification of our operating platform. So we feel very good about the $7 seven to eight points as a percent as we go into 'twenty four alright. Thanks, so much Joe.
Joe: Yes, Scott.
Speaker Change: So as Omar said, if they feel feel very good about where we established our margin objectives for 2024.
Speaker Change: The elements Super important here is again, how these new patient cohorts progress as they as they come into our business and we're able to engage with them clinically and improve their health outcomes and make sure we're able to close care gaps.
Speaker Change: And the progress that our teams.
Speaker Change: Accomplished during 2023 in terms of getting those engagement levels.
We will assist a lot in terms of the health.
Speaker Change: The health of the people that we're serving here in that particular cohort from 2023 of the 900000, new patients that were able to serve and how how.
Speaker Change: That business, how that business that performs over the course of the year. So that's a big step into it another big step into it is that this group of 750000.
Speaker Change: New patients that came onto the business. The fact that we're able to.
Engagement levels significantly higher than we were at last year with the new cohort will help also so it gives us a lot of confidence in where we're stepping out in terms of that.
Speaker Change: Serving these people.
Speaker Change: Throughout the course of the <unk>.
Speaker Change: Coming year in terms of your comment you would expect them typical than seasonality factors to weigh into how the quarter. How the quarters performed so much much more think about that as seasonality factors that are probably having impact here.
Speaker Change: So typical in terms of seasonal factors that we would have experienced this year, starting with a with a stronger base that sets us up well to it.
Speaker Change: To reach our targets alright, Thanks, Joe next question.
Speaker Change: Okay.
Joe: We will go next to Erinn right with Morgan Stanley.
Erinn: Great. Thanks, so much for taking my question.
Erinn: Great. Thanks, so much for taking my question.
Erinn: On Optum Rx over the past year Theres been some evolving dynamics around in news flow around the regulatory changes for TVN.
Erinn: <unk> there was some news flow there as well as pharmacy reimbursement model changes such as cost plus type of approach.
Erinn: How are you thinking about potential implications in some of these dynamics if any at all in and indeed <unk> has had a material impact on Optum Rx or how you're thinking about those profit drivers remaining intact clinical end point of <unk>. Thanks.
Speaker Change: Thanks, So much for the question, let me ask Kevin to give you some comments, though as you know has been very very involved.
With the various.
Kevin Mark Fischbeck: Legislative processes and be good to get his perspective on that.
Speaker Change: Alright. Thanks, So maybe just just quickly I'll say.
Completely respectful of the evolving dynamic and just make the headline debt.
Speaker Change: Our business is incredibly dynamic I'd be remiss, if I don't say again at this juncture that we continue to engage because it's incredibly important to note that in a space, where affordable drugs affordable prescription drugs that consumers is on everybody's mind, including ours and Thats, what the PVM itself today.
Bill.
Speaker Change: We are really pressing can make sure that policymakers understand that it's important to preserve choice for our clients.
Speaker Change: It's important to make sure that we that we preserve value based structures, because we know that value base is the way to ensure that we deliver at lower price.
Lower cost drugs, and we can't break that that alignment of incentives, where pbms work with payers to reduce costs and that it is incredibly important that discounts remain because there is no indication that rebates drive less cost less lift prices up and pbms work as a counterweight against that.
Speaker Change: Against high drug costs that being said you have seen in our model how diverse the businesses and across ophthalmology across the PVM across the pharmacy services, it's a multitude of businesses and we really listen to our clients. We exist on behalf of our clients and we compete in a highly competitive market and we win because.
Model translates it translates in transparency, it translates and innovation and it translates in partnership to our clients. So we will follow the client will be incredibly respectful of the legislation that I feel really good that we act quickly we act responsibly and we work towards value and you see that in the results you see that in the growth, but most importantly, you'll see that in.
Speaker Change: The client validation of the model so I feel good about where we're positioned I felt good about.
<unk> experienced in 2023 as a guide to that but feel really confident in the growth in 'twenty four.
Speaker Change: Thanks, so much and arrow and thanks very much for the question.
Speaker Change: Sure they'll continue to be debate around this area of high drug cost of course is a big issue for everybody first and foremost we need to see list prices come down that's the most important thing that can make a big difference here I would say that as you look at all the different ideas, which floats up from time to time around reform in this area. There really isn't anything that we don't offer in <unk>.
Speaker Change: Some formal fashion to our clients and our customers and the reality is we think that's the right position. We think we should be offering a portfolio of different tools different product designs, which allows people to choose what's right for them because while the state wants what a union cooperation ones differs and it's super important that their views are taken into account here we built.
We've we do that well and the diversity of our product offering and that's what's underpinning our record growth and underpins our confidence for 2004.
Speaker Change: Appreciate that Aaron next question.
Speaker Change: We'll go next to Nathan Rich with Goldman Sachs.
Great. Good morning, Thanks for the question.
Nathan Rich: I wanted to ask on the Medicare AEP enrollment.
Nathan Rich: You talked about the 100000 lives that you added I guess were there any differences in terms of what consumers responded to this year or differences in the retention rate relative to what youre expecting in gist.
Nathan Rich: Can you help us think about the drivers of membership growth over the year.
Nathan Rich: <unk>.
Nathan Rich: Needed to get to the guidance that you gave for the full year.
Yes, Nathan Thanks, so much for the question, let me ask Tim to give you that.
Timothy A. Wicks: Yes, thanks for the question Nathan So once again.
Medicare environment selling environment is highly competitive and we apparently saw one of the more aggressive years of pricing them that we've ever seen them in the 2024 session.
Timothy A. Wicks: We guided at Investor Conference to growth of 450 to 550000 lives on which is a little bit more modest than we have grown in past years, but it's reflective of our response to the new risk model changes, but we saw an outpatient utilization patterns early in 'twenty, three and reflecting that into 2024.
Timothy A. Wicks: Pricing and.
Timothy A. Wicks: And as we close out AEP I would say that we were a little bit light against what we were thinking kind of end of November most of that actually in the group business.
Timothy A. Wicks: Some of the very aggressive benefits a little bit more switching drove some of our term rates a bit higher and AEP than we were initially thinking.
Timothy A. Wicks: But we still feel like we're going to have a much heavier weighting of our growth outside of the annual enrollment period from February to December.
And this is really just a continuation of a trend that we've seen play out over the last five years really and in fact last year. We drove 430000 lives of growth or about 60% of our total growth in the period from February to December on this as a portion of the selling season that we really do well.
Timothy A. Wicks: Given our large dual footprint and also the <unk>.
Timothy A. Wicks: Fact that some of the selling and AEP tends to be focused on some of those headline benefits that have been really aggressively positioned throughout the.
Timothy A. Wicks: Remainder of the year, there tends to be some switching back on this folks think more deeply about things like network. The fulfillment of supplemental benefits overall service and delivery of product. So I guess the headline is it's it is a very aggressive marketplace. This year, we feel like we're positioned.
Timothy A. Wicks: Really well for 25, and 26 and how we've priced and very pleased with what we've done so far and excited about our opportunity once again to have a really great growth in the selling period from February to December of 'twenty four.
Speaker Change: Right Tim Thanks, So much last question. Please operator.
Speaker Change: We will go next to Gary Taylor with Cowen.
Gary P. Taylor: Hi, Good morning, most of my questions been asked.
Gary P. Taylor: Throw this one out too we have been seeing more articles about health system, just dropping their MAA contracts some of those vertical site.
Gary P. Taylor: You did I know historically most of these types of contracts that.
Gary P. Taylor: Conflicts that make the press historically ultimately come to.
Gary P. Taylor: Terms. So I'm just wondering is this just the media thread or do you think there's something more measurable.
Gary P. Taylor: Happening here with your health system partners.
Speaker Change: Hey, Gary Thanks, amongst let me ask Brian to respond to them Hey, Gary. Thanks for the question I would say overall the disruptions that we see in the market. This year are I would say at or even lower than historical comparisons on average, leaving 2023, I will say, though that any disruption for our consumers is too much they come to rely on an in network provider relations.
Brian: <unk> they have a coverage expectation from their health plan. So we obviously want to avoid that type of network disruption. We however, do need to balance that ambition with affordability now as we speak specifically to the Medicare advantage space. We did have some deals that came down to the wire and I do think that had some impact on AEP and again go into Tim's commentary around our <unk>.
Brian: Confidence February forward, where we have those deals intact I think youll see that response in our growth as well, but again on average really not much change overall compared to historical periods on disruption.
Speaker Change: Well, Brian I think obviously.
Speaker Change: Gary what you're seeing here is we're working really.
Speaker Change: Really hard on behalf of our clients on behalf of patients on behalf of government to make sure that we're getting the very best cost.
Speaker Change: Associated for the care delivered and it's important that negotiation is robust and.
Speaker Change: The good news is that the overwhelming majority get resolved, we really don't like to see disruption happened. Unfortunately, occasionally it does but rest assured we're making good progress in this area as Brian said no no real kind of difference in outcome to what we've seen in previous years.
Speaker Change: With all of that let me say, thank you for all of your questions very much appreciated.
Speaker Change: As you've heard we're confident in our mission focused on our growth pillars, delivering innovation that matters and disciplined in our operations and in our approach to the market.
Speaker Change: And we look forward to delivering on our commitments in 2024 to our customers patients and shareholders very much. Appreciate your attention. This morning. Thank you and look forward to talking with you between calls thank you very much.
Okay.
Speaker Change: That will conclude today's call. We appreciate your participation.
Speaker Change: Yes.