UnitedHealth Group, the parent company of UnitedHealthCare and Optum Health, plunged 20% after the healthcare giant lowered its expected performance for the year. The company's executives explained on a phone call with analysts on Thursday that they were surprised by the increase in the use of physicians and outpatient services in UnitedHealthCare's Medicare Advantage business.
UnitedHealth CEO Andrew Witty called the company's performance “unusual and unacceptable”, while CFO John Rex said it was “very disappointed” to share the company's outlook news with analysts.
“Inside UnitedHealthCare, the pressure is mostly contained in the premium business, and we’re seeing a sharp increase in nursing activity becoming noticeable when we close this quarter,” Rex said.
Rex said the company now expects adjusted earnings per share of $26 to $26.50. Just in January, the company expected adjusted revenues of $29.50 to $30, according to the Wall Street Journal.
Executives were asked about President Donald Trump's tariffs that could reach the United Nations' health business' medicines. CEO Witty said he thinks it's “quite good” that setting various price protections through existing contracts will help keep the company isolated, which other healthcare experts point out, who believe that the healthcare giants won't feel the direct impact in the near term.
“In fact, in terms of the extent of the price protection mechanisms that we already have in contracts and various legislations, I would say it is quite better than that, which also limits the ability of manufacturers to increase through prices through systems,” Witty said.
UnitedHealth said the new technology will make the company more effective and help deliver better financial results in the future.
“Looking forward, we see a long-term technological advancement that will translate into more and sustained operational efficiency, which in turn drives opportunities for further innovation and advancement for the company and the industry as a whole,” Rex said.
The Trump administration recently announced that next year's Medicare Advantage plan has raised the tax rate by 5.06%, much higher than the 2.23% proposed by the Biden administration. The bump is expected to raise $25 billion in additional revenue for healthcare companies, according to the Wall Street Journal. This has caused insurer stocks to soar earlier this month.
According to the Wall Street Journal, United Health's net income in the first quarter was $6.47 billion. At the time of writing, UnitedHealth's share price fell more than 22%, trading volume per share of more than $453. Currently, the stock is down 10% from its position a year ago.
