UnitedHealth Group saw its third-quarter profit surge beyond the $4 billion mark as company executives provided a cautiously optimistic outlook that financial hits from COVID-19 should moderate next year.
Investors cheered the results Thursday by pushing up by 4% the stock price at the Minnetonka-based health care giant.
All the twists and turns with the pandemic over the past 20 months call for an outlook that's "respectful of the fact that the current situation is without precedent," John Rex, the company's chief financial officer, said during a call with investors.
While the pandemic-related impacts remain difficult to predict, he said UnitedHealthcare, the nation's largest health insurance business, and the company's fast-growing Optum health care services division are both growing and operating well.
Given current trends, UnitedHealth Group expects to see less of a negative impact from COVID-19, Rex said, and will provide more details on the outlook at an investor conference later this year.
As part of its Thursday earnings release, UnitedHealth Group did not change its forecast for COVID-19 costs for 2021. Previously, company executives said they expected pandemic costs of $1.80 per share, due to everything from deferred health care and broader economic impacts to the expense of COVID-19 testing and treatment.
A late-summer surge of COVID-19 illnesses resulted in the company's UnitedHealthcare insurance division paying for hospital treatments for about 60,000 health plan members during the third quarter, Rex said. The peak came in August, when the insurer paid for about 30,000 hospitalizations related to COVID-19.
As of Thursday, about 5,000 pandemic patients covered by the health insurer were receiving hospital care, Rex said, adding that the tally was a little more than half of the daily totals during the August peak. Hospital use by COVID-19 patients in many states has slowed with an easing of cases across the country since early September.
"Our expectation is that it will clearly be lower than it was in 2021, as we think about it," Rex said when asked about the potential COVID-19 hit to next year's earnings. "We also don't think it will be nothing. I can't imagine we hit January 1 and everything ceases immediately."
During the third quarter, UnitedHealth Group's profit again beat expectations and prompted the company to raise its financial guidance for the third time this year. Optum led the way, providing 54% of the company's operating earnings during the quarter, Rex said.
The division's OptumHealth unit, which runs a growing network of doctors' offices, urgent care clinics and surgery centers, saw revenue and earnings growth that exceeded 30%.
Optum started the year expecting to add another 10,000 employed or affiliated physicians to its ranks, and already has added about 8,000 doctors, said Dr. Wyatt Decker, the OptumHealth chief executive.
Even so, Optum, like other health care providers across the country, is feeling the effects of a staffing crunch amid high demand for patient care, Decker said.
"We're managing through this," he said. "I won't kid you — it's tight and we're keeping a close eye on it throughout all our operations in the 43 states where we provide care."
UnitedHealthcare is hearing about staffing woes as it negotiates payment rates with clinics and hospitals, said Dirk McMahon, the UnitedHealth Group chief operating officer. Eventually, higher labor costs for health care providers will have an impact on the insurance company's premiums, he said.
"Many of the hospitals and other providers have to pay more for their [staffing] and that's going to be reflected in the economics as we go forward," said McMahon, who led the call with analysts because Chief Executive Andrew Witty was recovering from a kidney stone.
"He had an urgent but straight-forward procedure [Wednesday] night," McMahon said. "All went very well and we expect him fully back in just a few days."
UnitedHealthcare enrollment in the U.S. grew to nearly 45 million people by the end of September. The insurer has seen growth this year of more than 330,000 from employer groups and individuals buying commercial coverage. The company's acquisition this summer of Golden Valley-based PreferredOne was one of several factors in growing revenue from commercial accounts by 7% year-over-year, executives said.
Third-quarter earnings were up 29% at $4.1 billion on revenue of $72.34 billion, an 11% increase compared with last year. Profit of $4.52 per share beat expectation of analysts surveyed by Refinitiv by 11 cents.
After adjusting for one-time factors, UnitedHealth Group now expects full-year earnings of $18.65 to $18.90 per share, up from the range announced in July of $18.30 to $18.80.
UnitedHealth Group employs about 340,000 people including about 18,000 in Minnesota.