UnitedHealth Group on Tuesday anticipated the hack of its Change Healthcare division to result in up to $1.6 billion this year but maintained its 2024 earnings forecast, indicating a less severe impact of the cyberattack than many on Wall Street expected.
UnitedHealth Surpassing First-Quarter Expectations
Despite significant disruptions, the healthcare conglomerate surpassed expectations for first-quarter earnings, benefiting from lower medical costs compared to the elevated rates experienced late last year, causing its shares to rise by 5.3%. Until Monday's close, UnitedHealth shares had declined by almost 15% since the disclosure of the ransomware attack on February 21st.
READ ALSO : Change Healthcare Attacked by Ransomware, Causing Outages Disrupting Clerical and Reimbursement Systems
UnitedHealth's positive results contributed to the rise of the Dow Jones Industrial Average on Tuesday. Shares of several rival health insurers, such as Elevance, CVS Health, and Humana, also saw increases, with Humana experiencing a climb of over 2%.
The Change Cyberattack
The cyberattack on Change, a provider of healthcare billing and data systems crucial to the US healthcare system, caused disruptions in payments to doctors and healthcare facilities across the country for a month, particularly taking a significant toll on their community health centers that cater to over 30 million impoverished and uninsured patients.
Following the hack, the health insurer temporarily eased or eliminated prior authorization requirements for certain claims, raising concerns about potential increases in medical costs. However, executives announced on Tuesday that these relaxed measures have since been reinstated. Additionally, there were delays in claim submissions as medical care providers could not access the change system and grappled with paperwork challenges.
UnitedHealth noted an increase in the medical care ratio, rising to 84.3% from 82.2% compared to the previous year, and that the disruptions caused by the hack are projected to affect profits by up to $1.35 per share this year.
UnitedHealth has not yet revealed the extent of personal data compromised in the hack, which, according to federal law, the company must disclose within 60 days.
UnitedHealth reported an adjusted profit of $7.16 per share in the quarter. This figure excludes a 25-cent impact from business disruptions resulting from the data breach. Estimates from LSEG were at $6.61 per share. The healthcare conglomerate reported a net loss of $1.53 per share. This loss was attributed to a $7 billion charge associated with selling its Brazil unit, Amil.
UnitedHealth's Commitment to Care Providers
UnitedHealth Chief Executive Andrew Witty stated during a conference call discussing the results that significant progress has been made, and the company is committed to ensuring that care providers' connectivity needs are fulfilled.
UnitedHealth has already offered over $6 billion in advance funding to specific healthcare providers. Although some of its primary services have resumed, many others are still struggling from the effects of the outage.
Roger Connor, CEO of UnitedHealth's OptumInsight unit, which oversees Change, stated that Change's pharmacy claims and payment management businesses are currently operating at 80% capacity. The company plans to introduce more products online in the following weeks and anticipates that Change will return to its typical performance levels by next year.
