UNITEDHEALTH GROUP INC Q4 FY2024 earnings call

• Expressed condolences for Brian Thompson and highlighted the commitment of over 400,000 employees in the organization. - Emphasized the task of improving healthcare quality and outcomes while lowering costs, building on America's healthcare strengths like world-leading innovation. - Addressed challenges such as the first year of CMS Medicare rate cuts, state-driven Medicaid member redeterminations, and the Change Healthcare cyberattack. - Outlined initiatives to improve consumer experience, including enhancing digital tools, making healthcare easier to navigate, and working on reducing prior authorizations for Medicare Advantage patients. - Committed to fully phasing out remaining non-100% rebate pass-through arrangements by 2028 and encouraging full pass-through of savings to patients. - Mentioned investments in growth capital and returning value to shareholders through dividends and share repurchases.

Optum Health: Revenues grew to about $105 billion in 2024 and are expected to approach $117 billion in 2025. Optum Rx: Revenues in 2024 grew to over $130 billion and will be about $146 billion in 2025. Optum Insight: Revenues were $19 billion in 2024, and in 2025, will approach $22 billion. UnitedHealthcare: Full year revenues in 2024 approached $300 billion, and for 2025, will approach $340 billion as it grows to serve upwards of an additional 1.9 million people balanced across both the commercial and public sectors.

• 2025 outlook is strong with expected performance in key growth pillars. - 2025 full year medical care ratio expected to be 86.5% plus or minus 50 basis points, driven by factors like IRA impacts, second year of Medicare funding cuts, and mix shift toward public sector offerings. - Cash flow from operations expected to approach $33 billion or 1.2 times net income in 2025. - Expect operating costs for 2025 to improve further, with opportunities from AI-driven initiatives.

• Unanticipated impacts on 2024 medical care ratio including mix of people served, timing mismatch in Medicaid, cyberattack and South America business impacts, rapid prescribing of high-cost medications, and aggressive hospital coding intensity. - Risks related to pharmaceutical pricing dynamics, including high drug costs in the U.S. and potential challenges in PBM reform and its impact on business. - Continued challenges with Medicare rate cuts and Medicaid redeterminations affecting financial performance.

Q: Why was the 2024 medical care ratio 150 basis points above the original outlook?

A: It was due to challenges like a $5 billion gap from the care ratio range, nearly $1 billion business disruption from the cyberattack, Medicare rate cuts, and factors like mix of people served, timing mismatch in Medicaid, cyberattack and South America impacts, rapid prescribing of high-cost meds, and aggressive hospital coding intensity.

Q: Are you confident in the adequacy of pricing for 2025?

A: Yes, as the 2025 outlook incorporates a view of care activity commensurate with 2024, with elements like Medicaid gap narrowing, commercial pricing capturing care activity, strong Medicare AEP results, and expected growth in managed offerings.

Q: Did you comment on the change in consumers for Optum Health?

A: Consumer counts are driven by strategic initiatives like deemphasizing urgent care, which is a narrow offering they have been diminishing.

Q: What do you think PBM reform means to your business?

A: PBMs are crucial in holding drug companies accountable. UnitedHealth is committed to full pass-through of rebates to clients and working to achieve lowest net cost for everyone, engaging with policymakers to drive transparency and pass-through.

Q: Any early perspective on the Medicare Advantage advance notice for 2026?

A: Rates are preliminary, won't be finalized until April, and looking forward to engaging the new administration on Medicare Advantage program items.