UnitedHealth Group Incorporated (UNH) Earnings Call Transcript & Summary

I'm Zach Sopcak from UnitedHealth Group Investor Relations. Before we start, I want to take a moment to remind you that today's discussion will include forward-looking statements that are subject to risks and uncertainties and actual results may material differently. These risks and uncertainties can be found in the cautionary statements on our SEC filings, which are posted on our website. The posted materials also contain a reconciliation of the non-GAAP financial measures referred to in our remarks and the most comparable GAAP measures. And with that, I'll pass it to Ricky. Thank you.

Thank you, and almost good afternoon, everyone. So I'm Ricky Goldwasser form Morgan Stanley's Healthcare Services team. I'll tag on to Zach's disclosures for any Morgan Stanley disclosures, please go to our website, morganstanley.com, into the research section. So I am extremely excited to have the United team with us today. So to my left, John Rex, United's CFO; Heather Cianfrocco, CEO of Optum Rx; and Tim Noel, CEO of Medicare and Medicaid. We have some prepared questions that I put together for the team. But if you have any questions for John, for Heather, for Tim, please just raise your hand, and we'll get you the mic.

And with that, John, -- we've seen a lot of changes in the health care marketplace. We are seeing it. We're seeing nontraditional players stepping into the [indiscernible] changes to utilization, changes in RFP. So what's your perspective on what's happening and the pace of events and the pace of change?

Thank you. First, thank you for having us, Ricky. Really appreciate being here today. It's great to see everyone out here in person and the hallway full packed, so that's fantastic, but good attendance here. So yes, you're absolutely right. Much going on within the health care world in terms of innovation, I would say. And I would say pacing of innovation is one of those elements where, certainly, we are seeing acceleration. I think another important point you brought up is the different participants that are looking at health care and how they can have impact. I put one core thesis around your question here. Much of what you're seeing going on revolves around enabling value-based care in terms of the innovation. And coming at it from many different -- from many different areas, whether it's in benefits, even technology that's serving across the board. But I would say in terms of the cohesive theme, certainly those elements that would look to how do we enable more value-based care in this country. How do we enable more patients to have access to value-based care, enable more physicians to be able to deliver that and organize the health care system in a way to do it. And then you see different participants looking at the opportunity from really kind of maybe the strength that they sit in and how they might enter the system. Personally, I think we couldn't be more excited by what we're seeing. We have been on this value-based care journey for some time now, quite a very, very long time, probably in terms of when we first started getting into kind of even the early days of care delivery businesses going back maybe almost 15 years ago at this point in getting to those businesses. We think that's important for the system. We think that's important for the country in terms of moving towards the shared goals that we have, in terms of better patient experiences, outcomes and a better profile in terms of the economics to deliver for the country. So really glad to see it actually. And I think it kind of moves the system along at a pacing that we think will be important and super productive. But I'd say that's at the core. And I think your initial point, does it seem like it's accelerated yet? It does seem like it's accelerating. And it actually is super interesting in terms of the different participants that are looking at the sector and how they can enable it and the willingness to try new things.

So if -- you've raised a number of points. You talked about innovation. You talked about value-based care. You talked about consumer. So there's a lot here to unpack. United has always been sort of, I would say, ahead of the curve, right? In terms of innovation and identifying opportunities. To your point, you've been in care delivery, in value-based for a very long time. What's sort of kind of like next on that innovation curve?

Really good question. And I'm going to ask my colleagues here to talk -- speak to that in their respective very broad areas, too, and experience. So first, maybe we're third inning in terms of value-based care. So super early on in terms of that journey, both for our company and clearly for the country, I think in terms of the opportunity and potential for that. And it's expansive, and it hits both Heather's and Tim's businesses profoundly in terms of how they think about that opportunity also. So I think that continues to be an incredibly important dynamic over the next decade still and in terms of the evolution and one of the single most important item. The other element, though, that I would mention is just the increasing -- the increasing closeness to the consumer in the business of health care. For companies maybe like ours that if you go back in a decade, had a historical background in more B2B orientation, you're seeing that shift definitely. And some of that is led by the fact is when you're delivering care, when you're providing the care directly, that creates a much more intimate consumer experience and much more closeness to the consumer. But it really needs to be in the total experience they're having across all of health care. I actually think that when you look out and you see where the elements of technology, everything else we'll be touching, it's how does the consumer -- how do you get yourself much closer to the consumer. So it makes a lot of sense from many levels. One, just their experience, their satisfaction with it, the efficacy you can have on their health experience, the impact for good in that element. From a straight up kind of level of element that all of you would be interested, in the durability of that relationship. That may be one of the most important things that a company can do is advancing and lengthening the durability of that relationship because you put a lot of resources into getting that relationship. Adding a few years, hopefully, a lifetime to that relationship is very meaningful. But Heather, Tim, maybe?

Well, maybe, I mean, I guess, the things I would add. I think that was really well said. And I think that to the point, value-based kind of consumer, those are things we've been at for a long time. So -- and Tim can talk a lot about really the MA business has been such a learning for us as an enterprise around how to serve a consumer, how to evolve what the consumers' health care needs and how to drive value-based care because really value-based care, in many cases, started with our MA population. But I think if I look to the future, to your point, Ricky, what's next? I mean, I think to your point about acceleration, it's moving so fast. I'm not sure we can all say what the next generation is going to look like. The things we focus on in addition to just being naively focused on what the consumer needs and accessing them and value-based care. I think in terms of maybe 3 things. One, precision, getting better with information and analytics that we already use internally to drive our own businesses, whether that's the great care that's delivered in our value-based care programs is driven by our own analytics, predictive analytics, even through Optum Insight, whether it. So I think one is precision of information. One is the value of the clinician. We tested that in the pandemic, and we see even more how important that is. We have over 100,000 even just in OptumCare alone. Those are full-scale practitioners and then those that serve with expanding scope Tim's business. I think the value of the clinician, we're really going to see that and push that over the coming years. And then I guess the third one I would say for me, at least from my perspective, being around these businesses for a while in different roles with United has partnerships that it's not going to be just UnitedHealth Group, we've had partnerships for years. You're going to see more of them. And I think they could be with really interesting partners.

Yes, for me, for the senior population, I agree with all that. Two things come to mind, one at-home care. And we've been on this journey for a while. We performed over 2 million health assessments in the home through our HouseCalls program. But we're finding out that this traditional notion of care, especially for seniors being focused around a physician's office just isn't really relevant anymore. And for many seniors, especially the ones that have the most mobility challenges, the ones with the most chronic conditions, oftentimes folks living in urban underserved communities or outlying underserved communities. Care in the home is really the best way to meet them where they need to be met. So the evolution of our HouseCalls program into a longitudinal care model as well as appropriately plugging people into the health delivery system through transportation resources and things of that nature are also really important. I think we're really just kind of scratching the surface. And the orchestration of assets around the patient, around the consumer is where I see this trending, and we're making some good inroads, super excited about the Optum at Home model that we're deploying for our duals, but that to me is something that you'll see evolve in the future. And really I think leave a lasting impression on the U.S. health care system and care for seniors as we look into the future. And then just more around innovation and ease of use and simplicity. We've done a lot of things there, but that can never be underplayed for seniors, making everything easier to use, work better, meeting folks where they are, whether that's digitally, whether that's concierge service, navigational service through a call center, but that's super important, too.

It seems that, that ease of use and simplicity, right? It goes beyond even the seniors, right, to all of us. It's making health care simpler and more accessible. So when you think about it simpler consumer -- and Heather, you talked about partnerships, you announced the Walmart partnership, I think what was it last week. How does that partnership sort of fast forward that consumer-centric sort of approach?

Well, an important foundation of that partnership and where we're starting with that relationship is really helping enable value-based services into clinics on site in Walmart locations. Extremely important because it's an extension of value-based care capabilities. And we and clearly, Walmart and others are really focusing on how you bring more of that to people because of the impact on it. So it helps in terms of extending that reach. We think it's super important in terms of the population that Walmart serves and creating access points for those people, very important access points where they can develop a relationship with the clinician and we can help enable with the tools and capabilities that we've been developing now for some time and so how do you serve them in a value-based relationship, how do you make that work for the person, for the person and the provider and make that simple. So very important in terms of kind of where that is staging in terms of the initial look. So we see it as a potential to accelerate deployment of value-based capabilities to more people and really getting it to people that we think can benefit the most from that relationship.

I think there's also really just something interesting, but to John's point, it's certainly testing our value-based enablers of the tools under our value-based programs into different access points. And that's important. and there can be -- this is one example, but you could think of many other access points where you could test those same tools and insights that drive our value-based programs. But there's another part of it that's also the health equity piece. We've been working for years on health equity and really trying to do more to provide access to the underserved. And we have many partners that do that. Walmart is one that's also spent a lot of time on social determinants and pushing for -- addressing health equity and disparities. And I think there's some opportunity there in the future that we'll see that we'll build upon a common ground for really driving not just in our products and services, but in our own investments into communities through partnerships.

And could you help with that durability that you talked about?

It helps with the durability of that extension to -- and Tim hit on this and he's talked about even what we're doing in the home. It's how do you extend meeting the consumer where they are from the [state] location, meeting the consumer where they are and creating that lasting relationship. So these aren't fleeting 1-year relationships. These are lasting decades long plus relationships.

And it's interesting, and I have to go back to one of the things that you started the conversation with. I wrote it down. It was basically sort of that each of the market participants, right, addresses it based on their asset base, instead of kind of like what their heritage is coming from. So I wanted to kind of like take that and kind of like think about kind of like feed that MA membership and that kind of like Medicare Advantage business that you have and how that's kind of like really kind of like shaping how you think about sort of the strategy. So clearly, you're the #1 player in Medicare Advantage. And it's so interesting to us when we did our analysis, and we're like yes, you're #1 player, more than 25% share, but you still have opportunities to grow, right? Because there's still a lot of geographic markets where you haven't kind of like scratched the surface in. So how would that population to really kind of like shaping your view kind of like in your strategic sort of investments into the business to keep and maintain that competitive advantage?

Well, you said it well, how is the senior shaping our view and that's exactly what we're doing as we continue to ask seniors about what they want and need and -- we build products and services experience that cater directly to what those needs and wants of this population are. And one of them, as I talked about, is more care in the home, or care in the home makes their experience with their health plan easier to use, more simple. And simplicity is obviously a key component of it. Choice, seniors want to have more choice, broader networks, nonnetwork based programs, more preferred pharmacies. We bring that to them. Innovation is really, really important. We aspire each and every year to bring meaningful innovation that changes the lives of the seniors we serve to market and have had a track record, successful track record of doing that. We're planning in 2023 to roll out what we call the UCard to 7 million seniors. And what the UCard does is it brings together the traditional health insurance card with all of our rewards cards with our gym membership and with our over-the-counter and food benefits, brings it all into one place, makes that a very easy to experience benefit for seniors. And then we continue to offer great stability. Stability is super important to seniors. And I think people know that if they enroll themselves or if you're a broker and you enroll one of your clients in the United Healthcare product that we have this track record of stability and you can count on us to maintain the benefits that we've had people enjoy for years and years. So for me, it's around that differentiated value proposition of those things, along with this wrapper of service, this navigational support model that we offer to folks. And for our duly eligible members, each and every one of them has access to a one-on-one relationship with one of our service advocates. So it's around continuing to expand that differentiated value proposition that's become well known in the marketplace by brokers, by consumers and also by health care providers.

And Ricky, when you were taking this up, one of the things you said was like, how does it shape your view coming from where you are? And I think I can tell where you're getting at. So that business that Tim runs have been very foundational for us in terms of how we think about ultimately serving everyone. And the opportunity that we've had to serve the senior population, the way that we have has been tremendous sort of privileged of course, and tremendous for us in terms of learning and how you impact their health, how you impact their experience. And Tim was just going on a lot of the innovation. That's a super interesting business because Tim's team, innovations only last so long in that business. They can be replicated fairly quickly, which is great for seniors, great for seniors that you see that progress in terms of that. And it pushes the -- those of us that get to serve that population in terms of being more innovative. And I think what you're getting at is the shape how we think about serving other people over time and absolutely have been very foundational to the company.

I think the other thing, not only, of course, coming from Optum, it obviously shapes our products and services, even our capital deployment and how we think about assets that are complementary to continue to serve Tim's members. So it's teaching us a lot, and it shapes product and services. But then don't forget, many of those products and services, we also offer to other payers. So then I think it also just benefits not just the senior population but other payers and their strive to bring affordability and to drive value-based products, too.

So we mentioned at-home a lot. Is that an area where you feel that today you have sort of kind of like the infrastructure that you need? Or is the scenario that you think that there are more interesting opportunities, right, to complement what you already have?

So we're building strongly in that area. And you're right, we do have significant infrastructure in terms of how we're serving. But we want to be able to serve much more broadly also. And so what I mean how do we serve -- and then Tim should get into this, how do we serve the senior population more broadly and make the annual assessment visits even more rich and robust for seniors and have more impact. How do we bring different types of caregivers into the equation, so different levels of caregivers of the equation and the frequency of interaction and the support that they can provide. And I'd say that they can provide both the patients that we're serving and that patient's family. Because as you know, well, you can have tremendous impact of good on that patient by also serving their family and having their involvement. And Tim talk a little bit about how you're...

Yes. So -- and I frankly think we're in a very good position, materially better position in terms of the depth of resources that Optum offers to us, for you, some of my Medicare members than we were maybe even a couple of years ago. And we certainly have a robust offering that does encompass longitudinal care for seniors with respect to palliative and hospice and post-acute as well as bringing primary care into the home and then also bringing some other services into the home that allows folks to be in place a little bit more effectively. And the strides that Optum has really made in a very significant manner recently is how to orchestrate all of these assets and the delivery of all of these assets around the consumer, around the patient to facilitate a really terrific member experience as well as a caregiver experience around that. And I think to John's point, there's always more that you'll want to be able to do in the home setting. But I think there are enough elements and components in place that it can be organically built to kind of tie the pieces together that still need to be tied together. But as it exists today, it is a longitudinal care model that is really working and providing better outcomes, better satisfaction and then something that I'm really happy with.

Heather's business is serving patients and homes too, in her Infusion business.

Yes. Yes, we actually -- infusion, we're really proud, that's one of our pharmacies where we actually have over 1,100 clinicians. And we serve in a couple of different settings, sort of based on consumer preference. But a lot of infusion moving, we saw, obviously, a big move in infusion services into the home. But I think the exciting thing and what we're learning from and you can either see that in our home infusion pharmacies or even behavioral health pharmacy is the way we're working across. So with those other Optum home and community services, the Optum at Home, the HouseCalls programs and the clinicians to sort of bring those together. So that not only we're expanding the scope of the clinicians that go into over -- that see -- make 2 million visits a year in serving Tim's business. But in addition to that, whenever they need additional services, they can't be within the scope, they can refer to Optum Infusion and some of our other pharmacies, including the behavioral health services that our community behavioral health. So I think that's really when you think about what -- it's going to keep us -- the next couple of years are going to keep us incredibly busy just in connecting our own assets and services and products to continue to just meet that continuum of needs in the home and where consumers want to be met. So I think there's a lot of work ahead, even in just integrating the assets we have today.

So let's see if we have any questions. We have a mic here, if there are any raised hand -- there's one there.

John, it's Ari from Newport, Rhode Island. Obviously, we're going to have public disclosures about the upcoming Medicare Star ratings across the board here in a few weeks. How should we think about it? Should we look at United when it becomes public, if there is a decrement in your overall ratings, let's say, 5.5. Should we look at it in isolation? Or should we look at it relative to the whole industry? So the whole industry is down 1 point, 1 star rating, you guys are only down 0.5. Are you guys in better shape? Or should we just care about the absolute change?

So I'll let Tim to take that one. And one of the things I love about Tim's business actually sitting with his team when we were doing business planning sessions, one was -- one of the foundational aspects of that entire business is how forward-looking those teams are. They are out in '24, as you said at this point already in looking at '24. The conversations we have are super forward-looking in terms of how they think about clinical assets they want to have, how they think about benefits they're going to deploy and their ability to be so far into the future is one to kind of say, that's exactly what you're getting at. But why don't you give a few thoughts on that?

Yes, Ari, thanks for the question. So John is right, we had a long-term view historically as we planned. We don't plan for this, we plan for the next couple of years out to promote the durability of our benefits into the future. And that certainly was tested when the health insurance tax was coming in and coming out. So that was preeminent certainly in those days to have a long-term view of the business. And we continue to have that long-term view. So to answer your question, what is really important is how does the star ratings pair with our expectations, our long-term expectations of what our star ratings were to be in 2024 payment year. And I'll tell you, we have some visibility to it, and they are consistent with our long-term view of the business.

It's just hard to see from here. So it's not clear if there is a question or not. Okay, there's one over there.

Could you share your virtual care strategy and how you guys think about telemedicine, especially because you've got to focus on the in-home and the customer experience and tying all that together?

Absolutely. And we'll have a few comments because they're virtual capabilities kind of across the company. So one, just having how do we create easy access for people in terms of how do we make it super easy for them to interact with their providers virtually. At core is for our membership base, we'd also like that capability to exist with their own providers also because that's where you get the best extension because the component of virtually one could consider maybe a replacement for urgent care and a component of virtual, which is an ongoing potential interaction with that member, and it may work much better for that member to have that capability. And as you know well, kind of the virtual has -- the use of virtual soared during a period a couple of years ago, had stayed high in certain categories, such as behavioral, very high in those -- in those areas and is very effective. So it's been across kind of a journey through that area. But important, how can we create connectivity to the person's own member? How can we just create easy access. Heather, there's some pieces of virtual that sit in your business too and...

Yes. And I guess I would say is what John said, there's something about -- we've been obviously really thoughtful about virtual and all of us accelerated through the pandemic. But where we've seen, whether it's the OptumCare practitioners using virtual as an element. Interestingly, we see on the primary care side. And I think we've shared some of this, but we see some of that have moderated from that virtual care use on the actual primary care side. But behavioral health, we still see increased utilization of virtual care, which is good because that was already an area that was just -- there was such bottlenecks in access. So that has hopefully opened up some access. But I think the most -- one of the most interesting things in the virtual care is our dedicated focus and investment in really what we call our digital virtual care. And that specific virtual care that you can sort of have the same doctor again and again, and that's one of our models, and we've expanded that. We're seeing more and more not just access to urgent care now, but we just expanded it this year to primary care. So the ability through our best center for digital health and virtual care to access not just urgent care, but also the primary care. And one of the things that I think is something for us to watch is benefit designs around that. You're seeing UnitedHealthcare offer benefit design that are virtual first. And those have a lot of applicability. We're seeing them -- I think we can now offer them in multiple states, up to 17 states. And that's getting that ability to navigate now. And a lot of our virtual offerings, I think, offer a lot of flexibility depending on consumers needs.

And we look at it a little bit from broad engagement with the patient and the consumer. I know Tim even the [indiscernible] level of engagement that you're having with seniors you serve too.

Yes. But John hit on it. I mean, for seniors, it is important to be able to access the physician that they have a relationship with. It also can be an important part of a care model after a patient, a member has had an admission, follow-up orthopedic care where the patient sitting in the synapse is sometimes a super efficient way to have timely care provided. And then we also like it has a way to round out access, especially in some of our rural counties where there's some access challenges, there's opportunities to use virtual care to round out some of those natural challenges to be able to have all the specialty care that a person might need. So a couple of different areas that it will play for seniors, but it will have a significant role in the future for sure.

So we have time for one more. Utilization, right? It is a topic that we've been talking a lot about sort of whether the pace of return to utilization is something that's behavioral, right, is it sort of capacity constrained. And it's very interesting because here at the conference, the answer depends on who we're asking. And so again, sort of what are your assets? Where are you in the marketplace impact sort of your responses, you see it all, right? You really do have the 360 view. So how is utilization shaping? And any thoughts, right, about how -- what's kind of driving that?

Sure. So a couple of kind of big, very macro level elements. When we start -- when this all started back in March 2020, new into this area, it was probably hard to know how that would shape and what would happen. Probably one of the important learnings we've had over that period over the last couple of years is the fairly close correlation between COVID incidence and elective utilization. That's actually held in there probably better than any of us had -- what we would -- none of us would have had experience with that up to that point. But that's been a lasting component as you see rising COVID hospitalizations. You typically see there's been an immediate reduction in terms of elective utilization and then going the other direction. The other piece of utilization when we started this out, that we were, at that point, super watchful of, and by the way, it continue as watchful today is what would have happened to people over a period of time from deferred care that they did not receive, and particularly preventative care screenings, all those elements. And you and I often talk about this, what are we seeing in terms of how are people coming into the system? Are they coming in a more acute level? And as we talked about on the really kind of our first half experience in this was we haven't seen that rising acuity level. Even though we have seen screenings come back to normal, I know in Tim's business, seniors are getting their preventative care, they're getting their screenings, and we would have expected to see rising acuity and that has not manifested itself yet. It's an area that we continue to monitor super closely as a company, but just an area that hasn't happened. And conventional wisdom would have told you that would have been the case. And I guess, there's nothing to tell us not to still expect that as we look forward, but we have -- but we haven't seen it. So even on screenings, what we're seeing -- what we saw with screening, we continue to see initial diagnosis, they're presenting at levels kind of the diagnosis levels that you would have anticipated -- that we had back prior to all this. They're not coming in at higher acuity levels. And often to the question why, well, I think we'll continue to be watchful and respectful of it and probably just assume that's what we'll continue to do.

Okay. Well, thank you very much.

Okay. Thank you.

And thank you, everybody, for being here in person.

Thank you.