Operator:

Good morning, and welcome to the UnitedHealth Group's Second Quarter 2024 Earnings Conference Call. A question-and-answer session will follow UnitedHealth Group's prepared remarks. As a reminder, this call is being recorded. Here are. Some important introductory information. This call contains forward-looking statements under US federal securities laws. These statements are subject to risks and uncertainties that could cause actual results to differ materially from historical experience or present expectations. A description of some of the risks and uncertainties can be found in the reports that we file with the Securities and Exchange Commission, including the cautionary statements included in our current and periodic filings. This call will also reference non-GAAP amounts. A reconciliation of the non-GAAP to GAAP amount is available on the financial and earnings reports section of the company's investor relations page at www.unitedhealthgroupcom. Information presented on this call is contained in the earnings release we issued this morning and in our form 8-K dated July 16, 2024, which may be accessed from the investor relations page of the company's website. I will now turn the conference over to the Chief Executive Officer of UnitedHealth Group, Andrew Witty.

John Rex:

Thank you, Andrew. I'll start this morning by providing context on some of the unique items in the quarter. Then, I'll follow with perspectives on care activity and general business updates. The overarching theme I hope you leave with today is that UnitedHealth Group continues to deliver broadly diversified growth with expanding opportunities, work that positions us for continued strong performance in '25 and beyond. Now to update on Change Healthcare. Our focus has centered on the patients, care providers and customers who rely on us to keep the health system running. Payment and claims [slows] (ph) for most care providers are back to normal, but we know that is not the case for some, so we continue to work with those who are not there yet. UnitedHealth Group has provided more than $9 billion in loans and advance payments to help providers mitigate the impact of the attack, all at no cost to them. Cyber impacts in the quarter totaled $0.92 per share, and we now estimate the full year impact will be $1.90 to $2.05 per share. But let me break that down a couple of steps further for you. Of the total in the quarter, $0.64 per share were direct costs incurred in restoring the clearinghouse platform and other response efforts. These included higher medical expenses directly stemming from the temporary pause of some care management activities. For the full year, we now estimate these direct costs at $1.30 to $1.35 per share. The $0.40 to $0.45 per share increase in this estimate is primarily related to care provider financial support and costs for producing and mailing the consumer notifications that will begin later this month. As a reminder, these direct costs are included in net earnings but are excluded from adjusted earnings per share. The other component affecting our results relates to disruption of the ongoing Change Healthcare business. This largely encompasses the loss of revenues combined with the costs of keeping these capabilities fully ready to serve. Notably, these effects are not excluded from adjusted earnings. In the second quarter, this impact was $0.28 per share. For the full year, we now estimate the business disruption impacts at $0.60 to $0.70 per share compared to the $0.30 to $0.40 we estimated last quarter. Most of the service functionality is now restored and revenues are rebuilding even as the pacing of this process varies. These important services are now more modern, secure and capable, and continuing to advance rapidly. Our ambition continues to be to return to baseline performance in '25 and to grow strongly from there. Turning to international. Following the sale last quarter of our much larger Brazil operations, we classified the remaining South American businesses as held for sale. This is a natural step following the Brazil sale. We highly value the relationships we have built with our dedicated colleagues over the last several years and wish them continued success. In a diverse enterprise with a strong growth record and capabilities such as ours, such portfolio evolutions enable us to keep our focus on the many compelling growth opportunities before us. The second quarter includes a total of $1.3 billion in South American impacts, the majority of which is non-cash and largely due to foreign currency translation losses accumulated over the years. About $220 million of this stems from a regulatory action in Chile, affecting all health plans. You'll see that as a component in the supplemental financial tables we provided this morning. The action relates to industry premium increases dating back to 2020, but as configured, will be reflected in consumer premium credits to be issued in future years. As a result, the entire $220 million was recorded as a reduction to premium revenue in the second quarter, increasing our reported medical care ratio by about 25 basis points. Turning to the second quarter medical care ratio, it was also impacted by about 40 basis points, or $290 million due to the suspension of some care management activities after the cyberattack. That makes for a total of about 65 basis points of non-repeating impacts, including South America. Beyond these effects, the care ratio in the quarter was also modestly affected by three other factors. One being member mix within Medicare Advantage and dual special needs plans, which this year has been shaped by the unusual competitive benefit configurations in the marketplace. A second being the timing mismatch between the current health status of remaining Medicaid members and the state rate updates, a timing mismatch we expect to realign in the months ahead. And third, the lingering upshift in provider coding intensity, which we believe was spurred by the temporary suspension of our care review activities and carried past. This impact is not reflected in our cyberattack direct response costs, and we have been addressing it. Nonetheless, we continue to expect our full year medical care ratio, excluding 30 basis points of cyber and South American effects to be within the range we offered in November, albeit at the upper end. For our 2025 Medicare Advantage planning process, we assumed care patterns and mix at the levels we are seeing today, in addition to fully incorporating the second of the three-year phased funding cuts, and we have been fully attuned to how the Inflation Reduction Act will affect Medicare Part D offerings in '25. Also, as noted, we expect the Medicaid timing mismatch to subside as rates are updated throughout the remainder of this year and into next, appropriately reflecting current member health status. Turning to the performance of our businesses. At UnitedHealthcare, revenues of $74 billion grew by $3.6 billion. UHC domestic commercial membership grew 2.3 million in the first half of this year as employers and consumers responded to our distinctive offerings. And while the '25 selling season is ongoing, we are encouraged by the continued momentum we see. Our recently filed Medicare Advantage bid for '25, again took a balanced approach to provide as much stability for seniors as possible, while factoring in the realities of the funding cuts and current care patterns. You can expect us to continue to prioritize balanced and durable performance over transitory market share gains. In Medicaid, we expect membership levels to stabilize as we head into the second half of the year and our teams are executing well with both renewals and expansions. Optum Health revenues grew by 13% to $27 billion, and the operating margin expanded over last year. We are on track to approach 5 million patients in value-based care by the end of this year and are progressing strongly on our earlier and deeper engagement with patients, with a purposeful focus on our newer regions to more rapidly improve health outcomes and experiences. Optum Rx revenues grew 13% to over $32 billion, driven by strong customer response to the differentiated value, consumer experience and clinical expertise we offer. At Optum Insight, for the services beyond Change Healthcare, we see strong performance in line with our expectations. The revenue backlog increased to nearly $33 billion, growth of over $1 billion from a year ago, driven by business process and information technology services for health systems. A few additional items of note. As we highlighted in April, we established an additional $800 million in medical reserves in the first quarter to reflect the potential for the cyberattack to have affected claims receipt timing. With claims now flowing at more normalized levels, we continue to prudently analyze these trends. Similar to last quarter, the second quarter results do not reflect any favorable earnings impacting medical reserve development. Days [and] (ph) claims payable at 45.2 compared to 47.1 in the first quarter. The change was due primarily to the return to more normal claims submission patterns from providers and to a lesser extent, some impact from reclassifying the remaining South American operations to held for sale. Cash flows from operations in the quarter were $6.7 billion, or 1.5 times net income, even with the accelerated funding for care providers. In June, our Board of Directors increased the dividend by 12%, marking the 15th consecutive year of double-digit dividend increases to shareholders. During the quarter, as I mentioned earlier, we prioritized devoting resources to support care providers in the wake of the cyberattack over some activities such as share repurchase. It was the right thing to do, devoting all our efforts to provide stability for the health system. Still, with our ongoing strong capital capacities and with support needs abating, we expect to achieve the full year repurchase objective we shared with you last November. In summary, it is the confidence we have in the performance of our diversified businesses that allows us to affirm full year adjusted EPS in the range of $27.50 to $28.00, the objective we established last year. Even as we have absorbed the unanticipated $0.60 to $0.70 in business disruption impacts. Within this, we expect a balanced pacing in the second half. Now, I'll turn it back to Andrew.

Operator:

[Operator Instructions] We'll go first to A.J. Rice with UBS.

Andrew Witty:

Yeah, A.J., thanks for the question. Let me ask John to get right to it.

Andrew Witty:

Well said, John. And maybe just to reiterate one thing John said and then maybe add a further point, A.J. Super important just to hear what you said in terms of that member mix, obviously, we deal with it during this year, but we obviously had the opportunity to incorporate into our '25 planning and bids. So, feel very good about that. And then the secondly, maybe just to reflect, step back just a little bit on as we think of MLR. Really, the biggest incoming dynamic on MLR at the beginning of this year was the funding reduction in MA, the V-28 significant reduction in funding. And you can see that we are fundamentally navigating that, I think, extremely well. And yes, there are a couple of areas of pressure at the margin. I think as you just heard from John, they're primarily boxed off in terms of they're going to work their way through the pricing cycle with Medicaid or in the case of concerns around coding activity, we're very focused on that, confident we'll be able to -- we are addressing that. So those things feel transitory. Most importantly, we feel good about the way our response to the V-28 funding cut is playing out for us in the overall business. And really that -- as we started the year, that was the much bigger thing to make sure we got right, and I'm feeling like we're well on our way through the first year of this three-year cycle, and we've talked to you repeatedly about how critical it is to make sure we navigate that over the long run, and we feel good about that. So, thanks, A.J. Next question?

Lisa Gill:

Thanks very much and good morning. I want to focus for a minute on SG&A, which came in much better than expected. Can you maybe talk about the key components of where you're seeing cost savings, the durability? And, Andrew, you touched a little bit about AI efficiencies there. Are you starting to see that in this quarter? And how much opportunity is there from an SG&A perspective when we think about AI?

John Rex:

Yeah. Good morning, Lisa. As you can -- I guess I'd start by -- it is early in that journey in terms of the potential and opportunity for what we can do. And yes, it was a very strong quarter in terms of cost management. But let me just step back a moment here. As you can imagine, given how some of these businesses were built and the fragmentation of the system, there are duplicative functions and uneven consumer experiences throughout that we're addressing. And as our businesses begin to scale, our ability to produce efficiency accelerates while, at same time, we can improve those customer experiences and expand the best practice across the broader base. The comments that Andrew was offering in his answer to your question, it's just really a natural outgrowth as these businesses begin to move beyond what we have viewed the earliest phases to a more adolescent phase. That's what we're seeing. Very strong this quarter. Over the longer term, we can expect advancement. I wouldn't expect it to remain at this level consistently as we look ahead over the next few quarters, though. It was a super strong quarter. But we are going to look to invest in many of these items that Andrew just articulated here, getting to a more modern streamlined experiences as these businesses evolve further. So I wouldn't expect it to persist right at this level as we make those investments, and we're anxious and ambitious to make those investments.

Operator:

We'll go next to Josh Raskin with Nephron Research.

Andrew Witty:

Hey, Josh, thanks so much. I'm going to ask Tim Noel to address the first part of your question. On the second part, you're not going to be surprised. I'm going to defer from making any predictions about next year. It's still a little early. We'd like to see where everybody else plays out in this cycle. I think we [also are] (ph) in the 2024 cycle. Ultimately, the way growth plays out in the marketplace depends on how everybody bids, not just on how you bid. And it only takes one bid to be kind of out of expectation to completely distort your view of how things could play out. So, just going to defer a little bit on that one, but on the first point, Tim, I'd love you to make a few comments.

Andrew Witty:

Great. Thanks so much, Tim. And, Josh, appreciate the question. Next question, please.

Stephen Baxter:

Yes. Hi. Thanks. Can you speak in a little greater detail about your expectation that the Medicaid pressure starts to subside in the second half of the year? I guess specifically, can you maybe speak to what you actually know about rates today, either draft or finalized, versus perhaps speaking to a general reliance on actuarially sound rates playing out over a reasonable period of time? Just trying to understand the level of visibility that you have a bit better. Thank you.

Krista Nelson:

Yeah, thanks so much for the question. So as it relates to visibility, we've got visibility into the majority of our rates for ‘24. And while there's just a slight gap in the second quarter, we really like how our 7/1 rates are shaping up and continue to work with state partners to influence key assumptions before those rates become final in the future. And while we might see a little bit of dislocation the rest of the year, states have really committed to accurately reflecting the change in acuity from redeterminations into current and future adjustments and really expect this to even out as we pace through the remainder of ‘24 and early ‘25. Thanks for the question.

Operator:

We'll go next to Justin Lake with Wolfe Research.

John Rex:

Good morning, Justin. I’d say first, yes, the way you described our assumptions around core full year MLR are consistent with our expectations. So how you describe that is quite consistent. As it relates to just looking at towards the 3Q and such, I'd expect that to be in the neighborhood of 84%, very likely a few tens of basis points higher than that. So, it's kind of a little bit above that in that zone. As it relates to kind of other elements that we've pulled out here, no, they shouldn't be material. Those cyber effects should continue to abate. As we mentioned, we're not adjusting for the elements we talked about the provider and coding intensity, so that kind of pulls through a little bit. But there shouldn't be any material other impacts that we're thinking about. Thank you.

Operator:

We'll go next to Scott Fidel with Stephens.

Andrew Witty:

Scott, thanks so much for your question. I'm going to ask Dr. Amar Desai, who leads OptumHealth to give you a few comments there. I mean, let me just preface that by saying, look, we feel good -- very good about the continued progression and in particular, the way in which OptumHealth is -- has adjusted to deal with the new funding environment. I'm also very, very encouraged by the degree of external payer engagement with our OptumHealth platform as they deal with the environment themselves and look at Optum as a part of that solution. And I think the performance of the business you see is, it continues to improve over last year. You continue to see decent progression. And let me ask Amar to give you a little bit of a sense of how he sees the second half of the year playing out.

Andrew Witty:

Great. Amar, thanks so much. And, Scott, thanks again for the question. Next question please.

Kevin Fischbeck:

Great, thanks. Just wanted to clarify, I guess, something and ask another question. It wasn't clear to me what you were saying about no favorable reserve development. Does that mean the $800 million that you mentioned previously is still somehow in the numbers? Or is that kind of worked its way through at the end of Q2? And then I guess just trying to understand better where the outperformance is because obviously, you guys have assumed $0.60 to $0.70 of Change costs in your guidance but reaffirm the numbers and it doesn't sound like Medicare is the answer, doesn't sound like Medicaid is the answer, Change isn't the answer. So where has the outperformance come in that’s allowed you to maintain guidance? Thanks.

Andrew Witty:

Yeah. Thanks, John. And let me just also reiterate that point. I mean part of what you're seeing here, Kevin, is obviously, the big change this year was the V-28 funding cut price reduction, which obviously focuses primarily on our Medicare Advantage business that Tim runs and the OptumHealth business that Amar runs, both of whom are responding super well. But let's be clear, while those pricing cuts are focused on two businesses, team UHG is responding, right? The entire corporation is engaged in how it manages itself better, reduces cost across the company, leverages technology, accelerates our consumer agenda, all designed to play our part across the board in how we offset the pressure that's been inflicted on those two important businesses. Why we're confident we can navigate this? I think you're seeing that in the performance of the business, and we're going to continue -- it’s why I said what I said earlier today. We're going to continue to focus on every aspect of our business to make sure that the model we've laid out and we believe is the right one for delivering best value care for patients is the one that prospers and we're super confident in that. Next question?

Andrew Mok:

Hi, good morning. The OptumInsight backlog was down about $200 million sequentially. Can you give us color on the drivers of that and the nature of conversations you're having with providers following the cyberattack? Do you expect further declines in the backlog this year? Thanks.

Roger Connor:

Yeah, Andrew, thanks very much for the question. Just in terms of backlog, obviously, an important measure and there has been some impact from the Change events within that. What it doesn't include, obviously, is what we're doing in terms of bringing in new clients and what we're doing in our whole innovation space. But fundamentally, we are very confident in terms of the performance going into next year with the cyber event certainly from an impact on the overall health system is not absolutely minimal. When you look at our overall focus, it's now on driving that business recovery. And that's all about bringing volume back into the system. And we're seeing that actually really ramping up and seeing momentum acceleration. We're not only trying to bring volume back into our current customers. We're also going to bring new clients in, and that's exciting because this event has really transformed the marketplace. They're looking for, again, access to innovation, access to security in the system and that’s what we've brought back. We've brought back a very secure system, and that is resonating or seeing that momentum. You add that to the underlying strength of the OptumInsight business. Again, Change is only 15% of our overall business performance this year, was planned. That's why we're confident in terms of getting back to our baseline performance in 2025.

Operator:

We'll go next to Nathan Rich with Goldman Sachs.

Andrew Witty:

Okay. Thanks so much for the question, Nathan. Brian, if you'd like to go first?

John Rex:

Yeah. And regarding Change, yes, as we mentioned in our comments and Roger mentioned, our ambition is to get back to baseline expectations performance for that business in 2025. So those baseline expectations being what we would have expected prior to any of this happening. And clearly this quarter, we have increased the impact of the business disruption here. So as we bring those back, there's the pacing of those revenues coming back, taking sometimes a little bit more time to bring in, but that is our ambition, actually, as we look ahead.

Operator:

We'll go next to Erin Wright with Morgan Stanley.

Andrew Witty:

Erin, thanks so much for the question. Let me ask Heather, who runs Optum for us, to make a couple of comments on that, if you don't mind, Heather.

Andrew Witty:

Heather, thank you. Erin, thanks so much for the question. We have time for one final question, please.

Lance Wilkes:

Great, thanks. For OptumHealth, could you talk a little bit about what pricing has been like there? And, in Investor Day, it seemed like you may have seen some improved pricing as far as global cap rates, and likewise given higher global cap rates out of the MA business. Was wondering if ‘25, we should be expecting continued improvement in that, or whether there needs to be a retrenchment or retracing of that kind of makeup for what was given? And also, are you starting to exclude things from global cap as you look at 2025? Thanks.

Amar Desai:

Thanks for the question, Lance. Look, we continue to have very strong relationships across our over 100 plan partners. And in fact, in a pretty dynamic rate and benefit environment, we've seen increased outreach from payers looking for an enduring partner that's very adept at operating within fully capitated value-based arrangements. In particular, the discussions have been productive around benefit design, funding, market level planning and we're confident in the position as we go into 2025. We're down the path in adding plan partners as well as adding geographies for 2025. Foundational within that to those relationships and as we think about those arrangements is quality, quality of care of our providers that are anchored in the community, our strong ability to drive clinical outcomes, improvements and achievement in star measures, and of course strong documentation and diagnosis. We also are seeing that the strength of our network that's aligned in geographies is an important focus area for plan partners, and of course continued focus on clinical engagement which I mentioned previously. So when you take that together, great momentum across those areas gives us confidence as we drive value for our plan partners and as we pace through the next two years of the risk model changes and grow.

Operator:

This does conclude today's conference. We thank you for your participation.

Operator:

Good morning and welcome to the UnitedHealth Group First Quarter 2024 Earnings Conference Call. A question-and-answer session will follow UnitedHealth Group's prepared remarks. As a reminder, this call is being recorded. Here is some important introductory information. This call contains forward-looking statements under US Federal Securities Laws. These statements are subject to risks and uncertainties that could cause actual results to differ materially from historical experience or present expectations. A description of some of the risks and uncertainties can be found in the reports that we file with the Securities and Exchange Commission, including the cautionary statements included in our current and periodic filings. This call will also reference non-GAAP amounts. A reconciliation of the non-GAAP to GAAP amounts is available on the Financial and Earnings Reports section of the company's Investor Relations page at www.unitedhealthgroup.com. Information presented on this call is contained in the earnings release we issued this morning and in our Form 8-K dated April 16, 2024, which may be accessed from the Investor Relations page of the company's website. I will now turn the conference over to the Chief Executive Officer of UnitedHealth Group, Andrew Witty.

John Rex:

Thank you, Andrew. This morning I'll first provide color on some of the unique items in the quarter directly related to the Change Healthcare cyberattack, followed by care activity trends, business updates, and finally thoughts on the remainder of '24. But first, let me start at the most fundamental level. The UnitedHealth Group businesses continued to grow and perform well during the quarter, and we are encouraged by the momentum and the many opportunities to serve we're seeing across the enterprise. On the Change Healthcare cyberattack, as Andrew noted, our guiding focus throughout has been to make sure patient care is delivered and care providers' access to funding is secured as we work to bring back services fully. The cyber impacts in the quarter totaled about $870 million or $0.74 per share. At this distance, we estimate the full year impact will be $1.15 per share to $1.35 per share. Let me break that down into its key components. Of the $870 million, about $595 million were direct costs due to the clearinghouse platform restoration and other response efforts, including medical expenses directly relating to the temporary suspension of some care management activities. For the full year, we estimate these direct costs at $1 billion to $1.15 billion or $0.85 per share to $0.95 per share. It's important to note these direct costs are included in net earnings, but are excluded from adjusted earnings per share. The other component affecting our results relates to the disruption of ongoing Change Healthcare business. This is driven by the loss of revenues associated with the affected services, all while incurring the support and costs to keep these capabilities fully ready to return to service. Notably, these effects are not excluded from adjusted earnings. In the first quarter, this impact was about $280 million or $0.25 per share. At this distance, we currently estimate the business disruption at $350 million to $450 million or $0.30 per share to $0.40 per share for the year. This, of course, will depend on the ultimate timing of service and transaction volume restoration. These elements are broken out for you in the supplemental tables provided with our press release this morning. Of course, we will provide regular updates on our progress and outlook throughout the course of the year. While much of Change Healthcare's functionality and services have been restored, we are working hard to restore more and the objective we all share is for an even stronger Change Healthcare to be fully returned to expected performance levels next year. I'll come back to some of these elements in more detail in just a moment. Turning to underlying care patterns. The headline is that these continue within our expectations. Outpatient care activity among seniors remains consistent with the elevated levels we began seeing in the first half of '23 and for which we planned. So we continue to be comfortable with the outlook we established last June when we filed our 2024 Medicare Advantage benefit offerings. The winter seasonal activity we discussed with you in January, particularly related to strong vaccine uptake, higher respiratory illness incidents, and related physician office visits has subsided. Overall inpatient care activity also remains within our expectations. The first quarter medical care ratio at 84.3% included roughly 40 basis points or about $340 million related to the temporary suspension of some care management activities. These have been recently reinstated. The majority of the remaining $325 million of full year medical expense impact included in our outlook will land in the second quarter. Notably, we did not reflect any favorable earnings impacting medical reserve development in the quarter. Out of prudence, due to the potential for the cyberattack to affect claims receipt timing, we reflected an additional $800 million of claims reserves. We'll continue with a judicious view as we progress over the next several quarters. Turning to the performance of our businesses. The most important takeaway is they are growing and performing at a level, which allows us to maintain the adjusted earnings per share objectives we established last November, even while taking on the business disruption impacts of the Change Healthcare attack. At UnitedHealthcare, revenues of $75.4 billion grew nearly $5 billion. Within our domestic commercial membership, we're off to a strong start, powered by disciplined growth, serving 2.1 million new consumers in the first quarter. We are encouraged by the momentum and positive customer response to our differentiated offerings and look forward to building further upon that momentum heading into '25. For Medicare Advantage, as you would anticipate, we are deeply into our '25 planning activities. As we finalize our '25 benefit designs over the next several weeks, we will build competitive offerings that once again appropriately reflect the funding and cost environment. We approached this last year with a deliberate three-year plan, which continues firmly on track and positions us well going into '25. Our Medicaid business ended the first quarter with 7.7 million members. As Andrew noted, key wins in Texas, Virginia, and Michigan demonstrate the value state customers see in our offerings. In Virginia, UHC was the highest-scoring plan with particular strength in member-centric care, benefits and service delivery, quality, and value-based payments. In Texas, UHC was awarded the maximum number of possible service areas, expanding the number of people we will have the opportunity to serve. And in Michigan, UHC achieved perfect scores in such critical consumer-centric areas as social determinants of health and health equity, further solidifying our value proposition. Optum Health's revenues grew by 16% to $26.7 billion, as we increased the number of patients served and are on track to approach five million patients in value-based care by year end. For the most complex patients that Optum Health serves, we have engaged 75% through the first quarter this year, a significant increase in the number of patients engaged over last year. This reflects progressively earlier connectivity with patients and the ability to improve their health outcomes and experiences more rapidly. Optum Rx revenues grew 12% to $30.8 billion, driven by new client starts, continued expansion within existing partnerships, and growth within pharmacy services. Optum Insight, as you know, is where the Change Healthcare business resides. In the quarter, about $500 million of the $870 million total impact is within Optum Insight. Just under half of this are direct response costs, think clearinghouse restoration activities, which we have excluded from adjusted earnings, and slightly over half are the business disruption effects, which are not excluded from adjusted earnings. For many of the impact of Change Healthcare services, transaction volume drives revenues. So the effect of the attack in the period is one of keeping all the lights brightly burning at full readiness to resume services, while revenue production was essentially suspended. To be clear, the Optum Insight team did the critical and right thing, promptly shutting off services and finding any method possible to keep the care system working, including helping clients find alternative solutions. Coming out of this incident, the team will be working tirelessly with customers to recover transaction volumes and demonstrate that Change Healthcare is ready to serve and is more valuable than ever. Beyond Change Healthcare, the Optum Insight revenue backlog increased to nearly $33 billion, growth of over $2 billion from a year ago, driven by health system partnerships to provide business process and information technology services. A couple of other items of note that were affected by the cyberattack. Days claims payable in the first quarter were 47.1 compared to the 47.9 in the fourth quarter '23, and 47.8 a year ago. The accelerated payments to care providers and the Brazil sale reduced what would have been our reported measure for the quarter by about three days. The medical cost payable balance increased $1.6 billion from year-end '23 to $34 billion. The change reflects a $3 billion increase in the incurred but not yet reported component or IBNR. This is a result of the prudent ongoing claims receipt assessment, offset by a $1.6 billion reduction in the fully processed claims component, due to care provider payments acceleration. Cash flows from operations in the quarter were $1.1 billion, impacted by about $3 billion due to the funding acceleration to care providers and collection extensions to affected customers, and were additionally impacted by the timing of some public sector receipts. To summarize, a continued focus on better serving patients and the health system underpins our mission and growth drivers, which remain strong. And as we move further into this year, the broadly strong performance across our enterprise allows us to continue to expect full year adjusted earnings per share in the range of $27.50 to $28.00, even as we incorporate a $0.30 per share to $0.40 per share of business disruption impacts. Now I'll turn it back to Andrew.

Operator:

Thank you. The floor is now open for questions. [Operator Instructions] And we'll go first to Lisa Gill with JPMorgan.

Andrew Witty:

Yeah, Lisa, thanks so much for the question. Yeah, as we've said a few times and certainly repeated this morning, we've looked at the changes that CMS finalized last year really thoughtfully and we see this as a three-year strategy in response. Obviously, it's phased in over three years. We want to make sure we don't do anything that chases short-term growth, for example, but puts a lot -- puts at risk long-term sustainability. What you're also not going to see from ours is a kind of knee-jerk reaction between growth and margin. We want to be very focused on ensuring that year in, year out, we're a super reliable performer in this environment. As you look at the most recent final rate, I don't think it really changes the story. Obviously, a little disappointing that we don't think CMS really reflected what we've seen over the last year in terms of actual in-market medical trend. But in reality, it's just a little extra pressure for '25 on top of what we'd already seen previously. We're well-positioned for that in terms of all the work we've been doing really from the get go last year. Really from February last year, we've been getting ourselves lined up for this. You're seeing that reflected in Q1 in a few really key features, right? So you're seeing really strong cost control inside the company as you'd absolutely expect us to do, making sure that we're not incurring any expense that we don't need to support our members and patients on the outside of the organization. You saw us take a very thoughtful bid strategy last year, and of course, we continue to focus on how to make sure that we manage medical cost as effectively as possible, ensuring quality of care delivered and avoiding waste. All of that plays through. I'm very, very pleased with how this first quarter has played out in that respect. If you look at the performance of Optum Health and our MA business within UnitedHealthcare, both very strong performance during this quarter despite the pressure that's been incurred on them from the rate notice last year and I think that bodes super well for the rest of this year and the strategy that we've laid out for the next three. Thanks, Lisa. Next question.

Josh Raskin:

Hi. Thanks. Good morning. Can you just explain what medical costs you categorized as accommodations to support care providers? I think the UM management that you guys are talking about, what a certain medical -- what puts a certain medical expense in that bucket? And then when you look at your actual claims received or claims processed inventories, what percentage of a normal or expected quarter did you actually see in the quarter versus how much did you just sort of put into IBNR?

Brian Thompson:

Sure. I appreciate the question. Yeah, Josh, I believe we started March 8th and what we did, I call it foregone utilization management protocols and those are really in two categories. The first is we suspended our inpatient level of care reviews, where we assess for appropriateness of inpatient versus outpatient and that was the lion's share of our adjustment and we've got a long history of understanding those elements. It's just a unit cost adjustment. So pretty simple and easy to estimate and adjust for. The second element inside those practices was some outpatient prior authorizations that we also suspended. Those were a smaller element inside this quarter. Those will play out a little bit more in next quarter as you think about that lag between notice and actual incurral date. But again, pretty easy for us to estimate. These are practices we've had in place for a very long time and feel comfortable about the adjustment that we made.

Operator:

We'll go next to A.J. Rice with UBS.

Andrew Witty:

So I'm going to ask John just to comment on the $800 million more specifically. I mean, I think as we said a couple of times, A.J., really not seeing anything stand out in terms of care pattern differentiation from what we really expected. I mean, as we mentioned earlier, that kind of pressure we saw at the end of Q4 and rolling into the very beginning of the year around some kind of winter syndrome vaccination dynamics, we talked about a lot last time. As expected that did subside. Beyond that, I would -- which was what we were anticipating. Beyond that, I wouldn't say there's anything really to call out within all of that. John, could you maybe go a little deeper on the $800 million?

Andrew Witty:

Thanks, John. Thank you, A.J. Next question.

Justin Lake:

Thanks. First, I just wanted to quickly follow-up on A.J.'s question here around $800 million. Can you just be specific around, is that conservatism related to 2023, meaning you would have had up to $800 million of development that would have benefited the quarter or are you saying that you just took extra reserves that actually impacted Q1? Because we're looking at an MLR that's 50 basis points above where you kind of expected it and if you're saying trend is in line, so we're trying to figure out, was there a 50 basis point miss or are you saying that really that's just the conservatism here. And then any -- my question was really around the relative visibility on cost trend, right? Last year, it was somewhat opaque. You kind of told us that there was some uncertainty and then if that uncertainty turned to certainty around, hey, trend is higher in Q2. How do you feel about your visibility this year? Do we have to wait till 2Q to kind of be able to declare that, hey, we're kind of through this and you're not seeing what the rest of the industry is seeing or do you do you think we probably have to get that updated again in second quarter? And lastly, any commentary on Q2 MLR and where you think you end up in the full year range for MLR would certainly be helpful if you could provide? Thanks.

Brian Thompson:

Yeah. Thanks, Andrew. And I think you summarized it well. I'll reiterate what you heard from John, which is what we're seeing in these underlying service types, inpatient, outpatient, et cetera, are in line with what we had planned for, so I'll reiterate that. Just to add to that level of improved visibility this year over last, certainly COVID being the biggest driver, but also re-determinations. Last year, we were at the beginning of that. This year, we're nearing the end of that. So two key unknowns a year ago I think that contributed to perhaps a little less visibility, both of which I think we've really got a better view to this year. And the last thing I'll just point out is, as we've paced through one-one, I also feel good about our business mix. Again, early in the stages of evaluation of that, but how our growth has changed and what we've seen in those profiles from the growth that you're seeing in our Commercial business to the growth in our Medicare business as well, really feel good about all those elements. So, yes, optimistic about the rest of the year and how it's playing out against what we had planned for.

John Rex:

Yeah, Justin, good morning. So I think the way you look at it, so overall the net view being, so we didn't let any earnings or medical care ratio impacting development flow-through into the quarter. And when you look at it, so you can come at it, as to the normative course of assessments would have indicated some potential for favorable development in the quarter. We would -- we took a position also that there was likelihood that there were claims we didn't receive. And so in terms of the claims completion factors and such and so how that may have impacted and so you're really netting that all off in the course of the quarter to try to just normalize that out, not having any impact from any of those -- from those elements, and taking a pretty prudent view of where you might be in terms of the claims you received. In terms of your question here on the Q2 MCR, at this distance, I put it in a similar zip code to 1Q, including similar impact from the cyber effects that we had also, and as I noted in response to A.J.'s question, we'll be continued to be very judicious as we look at those patterns also on claims receipts. So we'll continue with the judicious view of how we think about -- how we think about development and those impacts as we step out here in the next couple of quarters to make sure we're getting our claims receipt timings fully incurred here.

Operator:

We'll go next to Stephen Baxter with Wells Fargo.

Andrew Witty:

Yeah, Stephen, thanks so much. So I'm going to ask Roger Connor, who runs Optum Insight to give you a little detail on this. First off, so I just want to -- I just want to take a moment to pay credit to the teams for the speed in which they brought back the overwhelming majority, the functionality of Optum -- of Change Healthcare after the attack. It's been extraordinary example of really the resources of UHG, and frankly, the support of many of the biggest companies across America in the tech environment coming in to help recover from this particular attack, which was straight out an attack on the US Health System, and designed to create maximum damage I think. We've got through that very well in terms of the remediation and the build back to functionality, and Roger, maybe you could share a little bit of what you're seeing and expect in terms of customer dynamics over the next few months.

Andrew Witty:

Roger, thanks so much. And I think, Stephen, what you heard in Roger's response there is a couple of really important features of the character of UnitedHealth Group, super high resilience and we will always stand by our customers and clients, and when an attack like this happens, which puts our customers and clients at risk, we will do whatever it takes to make sure they get through that, whether it's technical fixes or financial support, we are going to stand by our clients, who in this case are the providers and the systems across America who look after American patients and we will do that. And I think that means a lot to a lot of people and it's an important capability to have running through the backbone of American healthcare. With that, Stephen, thanks for the question. Next question.

Kevin Fischbeck:

Great. Thanks. Just want to go more -- a little bit more into the visibility that you guys think that you have into claims today. It sounds like you feel like you're largely back, but I guess, where would you say today that you are from a percent visibility into claims versus the same time last year? And I know that there's forecasted improvement, but I think there's a lot of focus on the ability to price 2025 correctly. So by the time you're submitting your MA bids, how much back to normal? What percentage back to normal do you think you'll be from a claims perspective at that point? And then finally, I'm used to hearing you guys reiterate 13% to 16% long term EPS growth, but I didn't hear that in the prepared remarks. I just wasn't sure if that was due to time or whether there was anything that you were trying to say there. Thanks.

John Rex:

Good morning, Kevin. So as we sit here today on April 16th, I would say, UHC is pretty much back to normal levels in terms of claim submission activity. We view it as normalized now. That we're seeing claims slowing like they -- we'd expect them to be flowing and moving along. So that's all progressing quite well, which assists a lot with the piece that you were just describing here in terms of where we think that is and as we move forward and look over the next month plus to finalize our bid submissions and such. So feel good about that in terms of our visibility and insights.

Operator:

We'll go next to Nathan Rich with Goldman Sachs.

Andrew Witty:

Hey, Nathan, thanks so much for the question. Listen, I think you'd probably expect we don't comment on these sorts of matters and I don't think it would be appropriate to do so today, and certainly, we never have done in the past. So it's not something we're going to get into in the call, but I appreciate the interest. Thanks. Next question.

Andrew Mok:

Hi. Good morning. Commercial risk and ASO membership both came in above the high end of your initial guidance, can you help us understand what drove the membership -- a better membership results for each segment? Thanks.

Dan Kueter:

Yeah. Hi, Andrew, and thanks for the question. Certainly encouraged with the broad based growth, share gaining growth, I would say, in our Individual segment, our Local Market segment, and our National Accounts business. Some of the key drivers underlying that, about a third of our Group growth gains were attached to our most innovative products and the expansion of those into 37 states now, on a fully-insured basis, to be -- and also fully available nationally on an ASO fee-based business. Specifically inside the risk business, our individual and family exchange-based plans were a significant driver of the growth. We've seen some latency. From membership, we expected that would have come in from re-determinations into the final portions of 2023, now begin to emerge into 2024. That's been a significant contributor to that risk-based growth in the first quarter. As a punchline, I like our growth, I like the pricing, very much like the profile of both the groups and the consumers that we're attracting. And finally, I'm really pleased with the consumer experience that our teams are delivering to those that we serve. Thanks for the question.

Operator:

We'll go next to Lance Wilkes with Bernstein.

Andrew Witty:

Yeah, Lance, thanks so much. And I'm glad you've asked about Optum Health. I'm going to ask Dr. Desai to respond to that. Amar runs our Optum Health business. He has been doing a great job of continuing to mature that business for us, which for me, I think is one of the great headlines of Optum Health. Its continuous maturation as a sophisticated value-based care delivery organization, and Amar, maybe you could respond to Lance's question.

Andrew Witty:

Great. Amar, thanks so much. Next question.

Sarah James:

Thank you. We wanted to understand a little bit better the $3 billion in IBNR. So just our back-of-the-envelope math suggests if 15% to 20% of claims from UHC run-through change, post-event that would be like assuming a third of the change-related claims are delayed, is that in the ballpark of where your change completion factor assumptions were? And keeping that conservative assumption of a claims like throughout the year, what does that imply for the seasonality of the remaining $0.41 to $0.61 GAAP impact from change?

John Rex:

Yeah. So I don't know if I'd kind of go right with some of those stats that you pulled out in terms of where those fell, but here's some insights I can offer on that. So, one of the elements we wanted to break out on the IBNR component is, so, as you know, what we report on the balance sheet you received this morning, medical costs payable is a combination of IBNR and medical claims payable. And so we're hoping to provide some more transparency for you as you looked at the quarter and such, and a $3 billion increase in IBNR is significant. And then offsetting that on the -- on that line item would have been the -- really the funding advances. The component where we just made sure that as soon as the claim was in-house processed, we were speeding it out-the-door to get it to providers. That was one of the components in addition to the interest-free loans we made that we were helping the provider community -- the provider community with. As you talked -- as you discussed kind of where we were, let's say, today, we feel that UnitedHealthcare is essentially at normalized levels in terms of -- in terms of claims receipts. As we sit here, we're going to be super prudent in how we look at that because we know there are providers out there that could still be having trouble submitting claims, and still having troubles with payment flows and such, and so we're going to be very appropriately constrained in how we think about that dynamic playing out here over the next -- over the next couple of quarters. But really, those are the kind of mechanics of what's going on between the IBNR component that you spotlighted and the full line of medical costs payable.

Operator:

We'll go next to Gary Taylor with Cowen.

Andrew Witty:

Thanks so much, Gary. John?

Andrew Witty:

Okay. Thanks, John. Next question.

Erin Wright:

Okay, thanks. On capital deployment, you didn't change your expectations for share repurchases, but how should we think about the priorities more broadly, whether it's M&A or otherwise in your ability to be opportunistic on that front? Thanks.

John Rex:

Yeah, Erin. Yeah, we didn't update any of those components here. We continue to take a very balanced view in terms of how we think about our opportunities. You saw, certainly, that we had activity in the quarter from -- in terms of both share repurchase and dividends. Also, we continue with robust opportunities in the marketplace in terms of other capabilities that we are looking at. So that all continues strong. So you'll see us continue to balance those out nicely in terms of -- in terms of the opportunities that are out there and with capacities really to approach all those elements strongly.

Operator:

We'll go next to Whit Mayo with Leerink Partners.

Andrew Witty:

Thanks so much for the question. I mean, obviously, we're not going to get into give kind of '25 numbers or expectation just yet, but Tim Noel, who runs our M&R business, certainly give you some good perspective on the rest of your question. Tim?

Whit Mayo:

Great. Thanks so much, Tim. Next question.

Ann Hynes:

Hi. Good morning. So, I would say your commentary on care patterns is definitely more positive than what investors feared. And you referenced several times that trend came in line with your expectations, can you actually tell us what growth rates you're assuming like the major trend categories in guidance, whether that's inpatient and outpatient, and maybe some year-over-year growth versus historical averages? And within that, can you specifically talk about what you're assuming for MA? That'd be great. Thank you.

John Rex:

Yeah. Ann, good morning. So the components that I would call outliers are the similar components that we've talked about for a while here in terms of trend outlooks. So in particular, still go back to outpatient care for senior, what we've seen in orthopedic, cardiac, those kind of categories primarily have been the big factors. I think you brought up a really important point though. So the percentage growth in those was much bigger last year. You're coming off an environment where both the supply side had been constrained and the willingness of seniors, in particular, consumers to access that environment had been constrained for a couple of years. So those percentage factors were quite significant. You heard us talk about very significant levels on those double-digit levels of last year as we looked at those. The way we look at those really though is because you would expect that to start normalizing in terms of the percentage change. So you really look at that in terms of the number of units consumed per patient served. And so you look at those levels, that's what we're talking about and we're seeing those kind of continuing at those levels. They're continuing at those levels in terms of the number of units consumed, delivered, and -- but those percentage levels, of course, would start normalizing out a little bit in terms of what you'd seen. So that continues to be the area. It's outpatient care for seniors. It's those categories that we'd call real outlier areas versus our historical levels of trend factors. The other -- the other historical levels of trend factors remain much closer to kind of our traditional views that we've always had as a company. In the quarter, other things you look at just to get indications, and by the way, we kind of vastly expanded all those areas. First fills, you've heard us talk about that a lot. Also, first fills in the quarter, an indication of outpatient care, physician visit activity, it's kind of normalized in there also in terms of stabilizing for us and many -- the many other factors of the company historically looked at. Thank you.

Brian Thompson:

Sure. I think John said it well. The first headline is what we're seeing is what we plan for. But as he alluded to, some of those elements, we plan for them to be elevated year-over-year. And I don't want to lose sight of unit costs. We've talked for some time that multi-year provider group and hospital contracts renew a little later than perhaps the inflation we've seen and that is up year-over-year. The biggest driver was the outpatient. We're really pleased to see that in line with as John explained. But also, we've been able to see increases in Specialty Rx. We've planned for those. Those are in our pricing appropriately, et cetera. And we've certainly worked hard to create more access in the behavioral space. So all of those elements are modestly up, but up as we had planned for and they'll hopefully sound familiar to you because we spoke to all of these at our investor conference as we ended the year. So I think that's what I would summarize or add to John's commentary. Heather?

Andrew Witty:

Great. Thanks so much, Heather. Just one number Heather just shared with you there, which I'm very pleased of and it's a significant improvement year-over-year is that 75% engagement of the most complex members in Optum Health. And just for that, that means three out of every four most complex, most disadvantaged folks in the country have had a direct engagement with us in the first three months of the year. That's a great rate of touch. Opens the door then for us really getting to know those folks, helping the system, helping bring the system to support that many of these people, particularly those who are trapped in their homes have just not had access to that kind of care opportunity. That engagement is the first step of doing that. We have -- we really believe that is a key to how we not only deliver an effective care delivery from a cost point of view, but also make sure they get the very best quality that they deserve. So really pleased to see that step up year-over-year. I think we have time for one last question. If we could take that question, please, Jennifer.

Jessica Tassan:

[Technical Difficulty] A few more details maybe on the --

Jessica Tassan:

Hi. Sorry about that. I'm interested in a few more details maybe around the launch of Change 2.0. If you could talk a little about what payer receptivity to reconnection has been? Whether Change retains its legacy data rights post breach? And then just any change or updated thoughts on kind of the long-term thesis on Change for something like a real-time transparent payments and decision support network? Thanks so much.

Roger Connor:

Yeah, Jessica, thanks very much for the question. First of all, on your first part about Change 2.0. Again, we're just confident in terms of our ability to reconnect. I mentioned the level of functional restoration that we have. You can imagine now the next stage of this is working with payer and provider to reconnect them in a safe way and an appropriate way, and all of the conversations that we're having with them are positive as we work through it. As I mentioned, there's still work to do and that's going to take us a little bit of time, but we're continuing to work through that functionality. I think it's important also to recognize, where Change sits in the overall Optum Insight portfolio. Change Healthcare was about 15% of our projected revenue for this year and when you look at -- that means I've got thousands of people who are continuing to work on other products outside of Change, not impacted by this and their underlying performance this quarter has been strong. If you adjust for the Change out, that business' earnings actually grew by around 10%. But what we haven't slowed either, as you mentioned, is our innovation agenda. The excitement of the Change portfolio across the Optum Insight portfolio is what we can bring to this market to transform it from an innovation point-of-view. And the real-time settlement work that we're doing, plus work that we've been doing with Optum Health on value-based care and provider risk enablement, that's all still going ahead. So in terms of our innovation agenda and the performance of the underlying business within Optum Insight, we're very positive.

Andrew Witty:

Thanks, everybody, for all of your questions this morning. It's been a bit more of a complex quarter for sure this time around, but one that's also showed the depth and breadth of our company's capabilities. We're recovering quickly from the Change Healthcare attack and are a stronger, more capable company as a result. We're continuing to build our business based on the five strategic growth pillars that we're relentlessly focused on, and we're steadfastly confident in our ability to achieve our 13% to 16% long-term growth objective as we look to the years ahead. We very much appreciate all of your time and attention this morning. Thank you.

Operator:

Good morning and welcome to the UnitedHealth Group Fourth Quarter and Full-Year 2023 Earnings Conference Call. A question-and-answer session will follow UnitedHealth Group's prepared remarks. As a reminder, this call is being recorded. Here is some important introductory information. This call contains forward-looking statements under U.S. Federal Securities Laws. These statements are subject to risks and uncertainties that could cause actual results to differ materially from historical experience or present expectations. A description of some of the risks and uncertainties can be found in the reports that we file with the Securities and Exchange Commission, including the cautionary statements included in our current and periodic filings. This call will also reference non-GAAP amounts. A reconciliation of non-GAAP to GAAP amounts is available on the financial and earnings report section of the company's Investor Relations page at www.unitedhealthgroup.com. Information presented on this call contained in the earnings release will be issued -- we issued this morning in our Form 8-K dated January 12, 2024, which may be accessed from the Investor Relations page of the company's website. I will now turn the conference over to the Chief Executive Officer of UnitedHealth Group, Andrew Witty.

Dirk McMahon:

Thanks, Andrew. Our growth is rooted in innovation and our intense desire always to do better. We're investing heavily in ways to accomplish that, increasing digital engagement and using AI to be more efficient, and then measuring our performance through net promoter scores to be sure we're hitting the mark. The impact of our digital engagement efforts was evident in our one-one performance metrics. As Andrew noted, we brought on one of our biggest cohorts of new people served by our commercial offerings, and our technology played an important role in making the process work well. Since last month, the UHC mobile app consistently ranked number one or number two in the Apple App Store Medical Category and on Google Play. Through the first week of the year, mobile app installs were up over more than 100% year-over-year, and our chat volume was more than twice our historical average. At Optum Rx, digital investments enabled us to bring on a record number of new clients, who brought with them more than 3 million new consumers, on-boarded with improved customer service scores and at an overall cost, 8% lower than last year, more consumer served, higher satisfaction, and lower costs. Our investments in AI and other advanced technology play an important role in improving customer service and in productivity throughout the enterprise. For example, we are removing repetitive tasks from our workflows by using AI to help with tasks such as responses to consumer inquiries, updating provider directories, and summarizing interactions with customers and patients. This frees up our service staff and clinicians to focus on solving more complicated tasks for the people we serve. And recently we launched a new capability, where we use real-time admissions and discharge data to engage high-risk MA members immediately after an emergency department visit. Connecting them to follow-up care to ensure higher-quality post-admit outcomes and avoid readmissions. This rapid response, driven by timely clinical data has improved member engagement rates by over 300% and has an NPS of 83. NPS remains a vital way to measure how we're performing for our customers and consumers and how our digital initiatives and other efforts are impacting those measures, and leading to improved retention. Couple of examples, through digital optimization, we're providing consumers with on-demand access to care, highly personalized benefits information, real-time support, and integrated pharmacy capabilities. This is translating into significant NPS improvements in many of our businesses. And we removed friction from the system through expanded access to 24/7 virtual visits and UnitedHealthcare's efforts to eliminate nearly 20% of prior authorizations. Throughout ‘24, you should expect to see an even greater investment in our digital capabilities, as we continue to identify opportunities to, leverage technology to reduce administrative costs, improve productivity, and further enhance the consumer experience at both Optum and UnitedHealthcare. And now, I'll turn it over to John Rex, UnitedHealth Group's, Chief Financial Officer. John?

Andrew Witty:

Thanks, John, and thank you, Dirk. Heading into 2024, I hope you all sense our confidence. We have talented people who are committed to our efforts, to help build a simpler and more consumer-friendly health system for the people we serve. And we are well-positioned to continue to deliver on the well-established commitments we've made. Operator, let's open it up for questions.

Justin Lake:

Thanks, good morning. I wanted to touch on the cost trend commentary, specifically between the Investor Day at the end of the year, looks like the MLR was a little bit higher, can you tell us what you saw there over the last month? Maybe give us some color, John, I know you guys did a great job in the second quarter of getting ahead of cost trend and utilizing some of those facility kind of insights that you have on scheduling et cetera. We're trying to figure out whether this is just seasonality or a further pickup in utilization given the Q3 to Q4 that you saw. So, maybe you could tell us what you saw -- seeing into January and just tell us where you think the Q1 comes in versus the full year? Thanks.

John Rex:

Yes. Good morning, Justin. You're absolutely right. So the prime factor here when we think about the full-year view and where we ended up being, what we talked about much earlier in the year in terms of the outpatient care activity among senior populations. And that continuing consistent with what we saw back much earlier in the year and very supportive of what we staked out in terms of the benefit design that we stepped into ‘24 with, in particular for senior populations in our Medicare Advantage products. So all those elements very much supportive of that view and the activities we undertook earlier in the year. As it relates to kind of where we landed the full year, so 10 basis points really above kind of what we indicated at the investor conference back in November of differential and Andrew hit on those items. Let me just kind of take it a little bit deep here. So, definitely some typical seasonality involved in there and the incremental elements were -- I point out a couple of items, seniors did really respond strongly to RSV vaccinations and scheduled physician visits. Sometimes those physician visits, what we noted were driving other care activity around that. So in some cases, seniors that hadn't perhaps been to a physician in a little while, and so they visited their PCP, got an RSV vaccine, and then in the meantime, their PCPs were able to close some additional care gaps as they were there, which is a great thing because some of these seniors hadn't been in for a while. So important activity to occur there in the fourth quarter. So that was one of the elements that we saw there. As it relates to kind of what we were seeing with elevated care costs for COVID, what we saw in the fourth quarter in particular in December. Overall, we've been noticing is that COVID admits for inpatient stays are running a higher cost per case than we traditionally saw. That actually kind of makes some sense. There are more intense cases typically that are going into inpatient stay. I will say we did notice in December that the total level of COVID admits were probably 50% to 60% above the October-November average that we had seen. So that was kind of the highest part of the year in terms of COVID inpatient admits. If I take those elements and sum together, that then more than accounts for the 10 basis points differential in our full-year view, Justin. As that pertains to your second question, as we look out into the next year and what we see in terms of patterns, I would call it patterns commensurate, kind of, with what we saw this year in terms of just the movement, with this kind of 84% view that we view for the full-year. As I step back and reflect and just kind of thinking about where -- broadly where the analyst consensus is, you picked particularly the 1Q. It's kind of in the right -- it looks like an appropriate zone in terms of staked out there for what one would expect. So thank you, Justin.

Operator:

We'll go next to Josh Raskin with Nephron Research.

Andrew Witty:

Hey, Josh, thank you so much. Before I ask Tim Noel to give you more detail on your question, I mean, listen, I think the way we've looked at the shift in the rate notice is, it is a three-year set of adjustments, and that's why we've been very thoughtful about how we've planned, not just, frankly benefit design, but how we continue to accelerate our management of OpEx through the organization, how we continue to focus on eliminating unnecessary care and waste within the system through our various medical management capabilities. So it's really a three-pronged set of agendas, which we're going to be focused on over the next three years. And we've been very thoughtful about making sure that we are setting those tables in a way which we can be sustainable on through this cycle, so that we're not taking sharp left turns or right turns halfway through the period. With that kind of overall perspective, maybe I ask Tim to give you a little bit more deep dive on the competitive environment and how he is very specifically planning for this.

Andrew Witty:

Thank you very much. Next question, please operator.

A.J. Rice:

Hi, everybody. Just, I apologize, it's sort of granular, but we're getting asked a lot of questions about it. The two metrics, days claims payable down a couple of days year-to-year sequentially, some from third quarter. And then the prior period development being down $100 million, maybe accounts for some of the variance on MLR, I'm guessing. I don't know if that's what you were guiding for when you updated -- last updated your outlook, but any comment on that as well?

John Rex:

Yes. Good morning, A.J. So first on the days claims payable, so 2.8 day sequential decline, two days year-over-year. So primarily the single largest factor would be exactly what you pointed to, the change in prior period development. So that has a significant impact, if you look about the year ago where we were in prior period development and where we were even the 3Q. So the significant impact on that part, that'd be the main factor. In terms of other contributing factors that we saw, we did see in the fourth quarter some modest acceleration in provider claim submission timing. So just speed up in terms of those submissions, how quickly we're receiving them from data service in terms of receipt. We also noted that as it related to the fourth quarter some higher claims intensity in the first part of the quarter, particularly October. So that's a factor that impacts the denominator, Medex per day in the day's claims payable metric. And that was a piece that was in that also. As it relates to the $100 million of unfavorable medical development in the quarter, put that mostly, the items that we were talking about in my response to Justin's question. So the respiratory-related activity that we saw in there, the modestly higher cost per case for inpatient, COVID admits, really kind of those were the main factors that we had in there in terms of contributing to the unfavorable development. Thank you.

Operator:

We'll go next to Lisa Gill with J.P. Morgan.

Andrew Witty:

So let me ask John to start and then maybe ask Heather to make a couple of comments on the claim dynamic. Go ahead, John.

Andrew Witty:

Great. Thanks, John. Maybe, Heather, you could comment on Lisa's question around claims, and then I'd like to ask Amar also to follow up on your perspective on engagement and what's driving that. Please go ahead, Heather.

Andrew Witty:

Amar?

Andrew Witty:

Amar, thanks. And John, maybe just to tie up the whole question.

Andrew Witty:

Yes. Thanks, John. And Lisa, thanks so much for the question. And we obviously just spent a couple of minutes there talking about engagement, and I hope that gave you a strong sense of some of the progress we've made over the last 12 months in this area. I would say we're night and day in a different position today than we were a year ago in terms of our ability to be engaged with these complex patients making sure our physicians are ready to go, that's a really important aspect of what's building our confidence for 2024. And make no apology for just spending a couple more minutes, making sure you hear some of the great work that's gone on over the last year to ensure that we've got these very high levels of engagement and real substance behind that engagement. So that these patients will be supported and managed really positively going through '24. That's what then underpins and unlocks the whole opportunity of value based care for Optum Health. Lisa, thank you for your question. And I'll move on to the next question.

Stephen Baxter:

Yes, hi. Thank you. I was hoping you could talk a little about what you're seeing for cost performance in the group commercial or exchange or Medicaid businesses? As you step back, is this still appropriate to attribute all the pressure really, you've seen in 2023 to seniors or should we be mindful of anything else there? Thank you.

Brian Thompson:

Yes, I appreciate that. Thanks, Stephen, for the question. And I think I'll just lead with, I feel really good not only about how we finished the year in UnitedHealth Care 2023, growth at the top end of our ranges, performance run in positions across the board, but also as we step into the businesses for 2024, feel very good about the key assumptions that underpin our plan and very optimistic. And you mentioned a couple of areas. You're right, as we've discussed some of these elements with respect to cost trend, they are centered in our senior community. And I think the message around those other businesses, nothing to see here and really aligned with our expectations, some good stability and durability in the underlying elements, both utilization and unit cost of our trend outlook and obviously feel very confident in how we're showing up competitively when you look at our growth outlook. So very optimistic about UnitedHealthcare, durability in those other lines that you're suggesting and a lot to look forward to here in the year.

Operator:

We'll go next to Lance Wilkes with Bernstein.

Andrew Witty:

Hey, Lance, thanks so much for the question. Before I ask Patrick to start the response on Optum Rx. First off, I just want to note a super strong selling year for us in Optum Rx, probably our best ever. Extraordinary and across a wide range of categories, plans, public service states, as well as obviously commercial. And really, really pleased with the differentiated product offering, really built on transparency, choice, and of course cost. And so we feel we've built a strong momentum in ‘23, rolling into ‘24. Patrick, you may want to go a little deeper, maybe share a little detail on weight engaged, specifically around the question that Lance raised around GLPs?

Andrew Witty:

Thanks so much, Patrick. And Lance, thanks for the question. Next question, please.

Kevin Fischbeck:

Great, thanks. I guess, I'm still just struggling with the concept of 2023 coming in worse, but this having no impact on the 2024 outlook. I mean, are you saying that the incremental pressure is really just like flu RSV and therefore unlikely to replicate at these levels next year, because the negative development speaks to costs earlier in the year also coming in worse, which implies that the baseline is -- the core baseline is also higher. So can you just help me reconcile, you know, why this isn't raising the base for next year and I guess within that you may feel confident with the guidance range for MLR, but is there reason to be at the higher end of the range to start the year or is the midpoint still where you're orienting? Thanks.

John Rex:

Sure. Good morning, Kevin. So yes, so the elements that contributed to the unfavorable development being around respiratory activity that was going on as the seniors came in to get vaccines, another care was being delivered and such. And that higher inpatient cost per case for the COVID admits that we're seeing. So those would largely be the prime contributors of the elements that we are seeing here in terms of that unfavourability. So you're absolutely correct in your assumption. That doesn't impact our run-in assumption as we think about our outlook for 2024, and which -- so keeps us right squarely in where we thought we'd be as we were at our investor conference, is taking out the 84% plus/minus 50 basis points. Really as we look across the scope of our businesses and we think reflect on how we performed in ’20 and in ‘23, the scope of it being very much with what we saw back in mid-year of 2023, that this is -- that the running factors are about outpatient care activity among senior populations, which we incorporated into our bids. The elements that you're appropriately referring to in 4Q, again, not factors impacting our view at all in terms of how we staked out ‘24 and how we expect to perform in ‘24. Really good question.

Operator:

We'll go next to Scott Fidel with Stephens.

Andrew Witty:

Scott, thanks so much for the question. I'm going to ask Dr. Desai to make a couple of comments, and then I'm going to talk about where we've staked out for Optum Health next year. A ton of work done during 2023 to strengthen the business. You saw that beginning to show through as we roll through the second-half. We continue to expect that to be a very strong driver of improvement as we go into 2024. A lot of that work we talked about already today around engagement is a key element of our confidence in being able to build our profile of that business. And Amar, maybe you could go a little deeper, and then John can close out with discussing on the progression.

John Rex:

Yes, Scott. Good morning. So as Amar said, feel very good about where we established our margin objectives for 2024. The element super important here is, again, how these new patient cohorts progress as they come into our business, and we're able to engage with them clinically and improve their health outcomes, make sure we're able to close care gaps. And the progress that Amar and teams accomplished during 2023 in terms of getting those engagement levels will assist a lot in terms of the health of the people that we're serving here, and then particularly, this cohort from 2023 to 900,000 new patients that we're able to serve and how that business performs over the course of the year. So that's a big step into it. Another big step into it is this group of 750,000 new patients that came on to the business. The fact that we were able to. Yet engagement level is significantly higher than we were at last year, where the new cohort will help also. So it gives us a lot of confidence in where we're stepping out in terms of serving these people throughout the course of the coming year. In terms of your comment, you'd expect them typical than seasonality factors to weigh in how the quarters performed. So much more think about that as seasonality factors, so they're probably having impact here. So typical in terms of seasonal factors that we would have experienced this year, starting with a stronger base that sets us up well to reach our targets.

Operator:

We'll go next to Erin Wright with Morgan Stanley.

Andrew Witty:

Erin, thanks so much for the question. Let me ask Heather to give you some comments there. As you know, Heather's been very, very involved with the various legislative processes, and it'd good to get her perspective on that.

Andrew Witty:

Heather, thanks so much. And Erin, thanks very much for the question. I'm sure there'll continue to be debate around this area. High drug cost, of course, is a big issue for everybody. First and foremost, we need to see list prices come down. That's the most important thing that can make a big difference here. I would say that as you look at all the different ideas, which float up from time-to-time around reform in this area, there really isn't anything that we don't offer in some form or fashion to our clients and our customers. And the reality is we think that's the right position. We think we should be offering a portfolio of different tools, different product designs, which allows people to choose what's right for them. Because what a state wants, what a union wants, what a corporation wants differs. And it's super important that their views are taken into account here. We believe we do that well in the diversity of our product offering, and that's what's underpinning our record growth and it underpins our confidence for ‘24. Appreciate that, Erin. Next question?

Nathan Rich:

Great. Good morning. Thanks for the question. I wanted to ask on the Medicare AEP enrollment that you talked about, the 100,000 lives that you added. I guess were there any differences in terms of what consumers responded to this year or differences in the retention rate relative to what you're expecting? And just can you help us think about the drivers of membership growth over the year as you needed to get to the guidance that you gave for the full-year?

Tim Noel:

Yes. Thanks for the question, Nathan. So once again, the Medicare environment, selling environment is highly competitive. And we probably saw one of the more aggressive years of pricing that we've ever seen in the 2024 session. We guided at investor conference to growth of 450,000 to 550,000 lives, which is a little bit more modest than we have grown in past years, but it's reflective of our response to the new risk model changes, what we saw in outpatient utilization patterns early in '23 and reflecting that into 2024 pricing. And as we close out AEP, I would say that we were a little bit light against what we were thinking, kind of, end of November. Most of that actually is in the group business, some of the very aggressive benefits, a little bit more switching, drove some of our term rates a bit higher in AEP than we were initially thinking. But we still feel like we're going to have a much heavier weighting of our growth outside of the annual enrollment period from February to December. And this is really just a continuation of a trend that we have seen play out over the last five years really. And in fact, last year, we drove 430,000 lives of growth or about 60% of our total growth in the period from February to December. This is a portion of the selling season that we really do well in given our large dual footprint and also the fact that some of the selling and AEP tends to be focused on some of those headline benefits that have been really aggressively positioned. And throughout the remainder of the year, there tends to be some switching back as folks think more deeply about things like network, the fulfillment of supplemental benefits, overall service and delivery of product. So I guess the headline is it is a very aggressive marketplace this year. We feel like we're positioned really well for ‘25 and ‘26 on how we priced, and very pleased with what we've done so far and excited about our opportunity, once again, to have a really great growth in the selling period from February to December of ‘24.

Operator:

We'll go next to Gary Taylor with Cowen.

Andrew Witty:

Hey, Gary, thanks so much. Let me ask Brian to respond to that.

Andrew Witty:

Yes. No, it's well said, Brian. And I think, obviously, Gary, we -- what you seen on behalf of patients, on behalf of government to make sure that we're getting the very best cost associated for the care delivered. And it's important that, that negotiation is robust. And the good news is that the overwhelming majority get resolved. We really don't like to see disruption happen. Unfortunately, occasionally, it does. But rest assured, we're making good progress in this area. As Brian said, no real kind of difference in outcome to what we've seen in previous years. With all of that, let me say thank you for all of your questions. Very much appreciated. And as you've heard, we're confident in our mission, focused on our growth pillars, delivering innovation that matters and disciplined in our operations and in our approach to the market. And we look forward to delivering on our commitments in 2024 to our customers, patients and shareholders. Very much appreciate your attention this morning. Thank you, and look forward to talking with you between calls. Thank you very much.

Operator:

Good morning and welcome to the UnitedHealth Group Third Quarter 2023 Earnings Conference Call. A question-and-answer session will follow UnitedHealth Group’s prepared remarks. As a reminder, this call is being recorded. Here is some important introductory information. This call contains forward-looking statements under U.S. federal securities laws. These statements are subject to risks and uncertainties that could cause actual results to differ materially from historical experience or present expectations. A description of some of the risks and uncertainties can be found in the reports that we file with the Securities and Exchange Commission, including the cautionary statements included in our current and periodic filings. This call will also reference non-GAAP amounts. A reconciliation of the non-GAAP to GAAP amounts is available on the financial and earning reports section of the company’s Investor Relations page at www.unitedhealthgroup.com. Information presented on this call is contained in the earnings release we issued this morning and in our Form 8-K dated October 13, 2023, which may be accessed from the Investor Relations page of the company’s website. I will now turn the conference over to the Chief Executive Officer of UnitedHealth Group, Andrew Witty.

Dirk McMahon:

Thanks, Andrew. I recently hosted UnitedHealthcare's National Accounts Forum, where we bring together client leaders twice a year to share ideas and gather feedback. These are some of the biggest and most sophisticated companies in America that collectively employ and sponsor coverage for millions of people. And to no surprise, healthcare costs top their list of concerns, especially the rising cost of drugs. In addition, they want innovation, new tools to help their employees take full advantage of their benefits, achieve better health outcomes, and save money. And of course, it has to be digital. Let me offer a few examples of innovation that have fueled our growth outlook, starting with our mobile platform, the primary access point for millions of UHC members. Each year, we had new capabilities to provide consumers with increased on-demand care access, highly personalized information about their benefits, real-time support, cost estimation tools, integrated pharmacy capabilities, and enhanced rewards. Another example, our newest and fastest growing commercial offerings, which feature no annual deductibles and incentivize people to make good healthcare choices by offering an unprecedented view into quality and cost. When seeking care options, consumers see potential care providers' latest reviews and quality designations, and they see what they will actually pay for their care, which will help them make the most informed decisions. UnitedHealthcare members in these offerings are receiving more preventative care, while paying about 50% less out of pocket, compared to people enrolled in traditional offerings. And their employers can reduce the total cost of care with an average savings of 11%. These results are why such new offerings are among our fastest growing. Beyond these consumer-facing innovations, we're leveraging the latest technologies to create greater operational capacity and productivity, so we can better serve consumers and focus on the highest value work. Our teams are significantly improving how quickly we respond to the millions of benefit questions we receive each year. We are using AI and natural language processing to expedite call documentation, to rapidly generate accurate summaries of consumer interactions with our contact centers, saving millions of dollars in administrative work and freeing up capacity for our people to prioritize engagement. We're also utilizing these technologies to translate and interpret unstructured data, such as physician notes, which will help, for example, provide deeper insights for life sciences customers, so they can better assess the efficacy of their treatments. Of course, these are just a few of the 100s of AI applications powered by OptumInsight we are actively developing, testing, and deploying today to further elevate the consumer and care provider experience, while driving increased quality and lower costs. And with that, I'll turn it over to our CFO, John Rex.

Andrew Witty:

Thanks John. Before opening up for questions, I'll offer some preliminary observations about next year, while reserving most of this conversation for our investor conference on November 29th. Our businesses continue to build momentum, while maintaining flexibility and adaptability for an ever-changing landscape, even as we invest for the future. We're focused on our strategic growth pillars and driving efficiencies throughout the enterprise at an accelerated pace. At this distance, analyst earnings estimates for 2024 reasonably reflect the performance view we expect to offer in November, with consensus near the upper end of our likely initial outlook range. Importantly, the growth we're realizing today and our expanding capacity serve to further reinforce the confidence we have in our long-term 13% to 16% growth objective. And with that, I'll now ask the operator to open up for questions.

Lisa Gill:

Good morning, and thanks for the comments. I wanted to start with GLP-1s and really understand from two sides. One, when we think about rates for 2024, can you talk about what you've incorporated in rates around GLP-1s, especially around weight loss as we have new products coming to the market? And how do I think about that from the PBM side when we think about the services that you can wrap around that and sell from a PBM perspective?

Brian Thompson:

Sure. Thanks for the question there, Lisa. First, to put in context GLP-1 is over 80% on the diabetic side. So as we think about weight loss, up to maybe 20% of our total spend and it's largely performing in line with what we had planned as we went into ‘23. And we feel very confident and comfortable about how we're looking at that going forward into ‘24. As you think about it, keep in mind, the vast majority of the coverage here is in our fee-based business, that's our self-employed customers and that's still at less than a third, around 30% of our book. As we look forward, are our customers considering to cover more or less? I would say it's a mixed bag, some are seeking coverage albeit dissatisfied with the price points. Some are backing off given the cost, but I wouldn't really be directional one way or the other on whether or not we're seeing more or less coverage on the weightless side as we look forward. But again, to Andrew's point, beyond just getting to the obvious lower price points, we're really trying to work with manufacturers to get to some aligned value-based constructs, getting pricing to a point where it's based on outcomes and adherence levels, all the way to outright risk on utilization levels, and pairing those with therapies and programs that can put less reliance on lifelong adherence requirements like these drugs currently have. We're not there yet. We're optimistic, but we can get there, but clearly price point is a key barrier.

Patrick Conway:

Thank you. As Andrew said, our customers, payers, employers, people we serve are concerned about the prices of GLP-1s as set by manufacturers. OptumRx will continue to negotiate lower prices through discounts over time, be transparent with our customers, and implement clinical evidence-based guidelines so the right people get appropriate medicines. And as you alluded to, Lisa, obesity and cardiometabolic disease is a major public issue -- health issue in the U.S. and across all of [Oxfam] (ph), we are developing and implementing comprehensive solutions of which medicines are only a part of on behalf of our clients and people we serve to drive better health outcomes for all and value to the health system.

Operator:

Yes, we'll go next to A.J. Rice with [UBS] (ph).

Andrew Witty:

A.J., thanks so much for the question, appreciate it. So let me just make a few comments, particularly as it speaks to the OptumHealth part of the question that you raised. So as you look at 2023, essentially what we've seen, and we refer to this in Q2, greater growth in the number of people, patients, that we've been privileged to serve this year, particularly the more complex patients. So very strong, and you heard in our opening commentary, very strong growth in the number of fully accountable lives running at about 900,000, substantial fraction of that coming in the more complex cases. As I said back in the last call, we're very, very pleased to have that growth. We believe that is really foundational or key foundation for future long-term growth of the business. However, within that, the mix of that population is a little different to what we expected. That takes time to then build the engagement capabilities that we need to be able to work with those people and their care providers to ensure the very best care is delivered in the most efficient and effective way. And that's really the bulk of the investment that we're talking about. It's really taking the time, looking after those folks in the way they need to be looked after right now in advance of those being able to engage with them fully and deliver then the various interventions and advices that we can provide that we're really building throughout Optum to ensure that not just in one year, but over multiple years, those folks get increasingly better care delivery and better outcomes. And recall that these patients in many cases have really been somewhat, you know, not necessarily looked after, as well as they could have been by the system, because of their very complexity. In some cases, they're not able to get to clinics, which is why we've been building up our home care capabilities and other wraparound services to the classic clinic approach. That's really the driving force. Now, as that speaks to the future, two things really, A.J., one is we're super confident around our ability to continue to grow the number of patients, who are able to look after. Number two, as those capabilities that have been accelerated during this year begin to affect both the quality positively and the cost of how these patients' care is delivered, you're going to see that shine through an improved economic performance of OptumHealth. And as we look forward, we're very confident about continued strengthening of that business. Make no mistake, OptumHealth is having a very strong growth year and we're taking the opportunity this year to really ready ourselves and build strength for the next many years of that business. AJ, thanks so much for the question. Next question?

Josh Raskin:

Hi, thanks. Good morning. Understanding that you expect Medicare Advantage to grow at a healthy pace, I think you said above market again in 2024. Could you speak to that progress expected at OptumHealth? I know we'll get details at the Investor Day, but how are you thinking about the transition of patients from sort of fee for service to these fully risk engagements and then maybe general levels of investment for growth in light of the risk model and reimbursement model changes?

Operator:

We’ll go next to Justin Lake with Wolf Research.

Andrew Witty:

Justin, thanks so much for the question. Let me ask John Rex to respond to the first part and then Brian Thompson, the second.

Andrew Witty:

Great. Thanks, John. And Brian?

Andrew Witty:

Thanks so much, Brian and John. Next question, please?

Stephen Baxter:

Yes, hi, thanks. I wanted to ask about the PBM business, obviously interest in alternative or maybe even experimental models has been a big area to-date, you know, the past quarter or so. I guess what are you hearing from your health plan employer clients on their degree of interest in doing something totally transformational in terms of how they manage those benefits? Thanks.

Patrick Conway:

Yes, so as we interact with our clients, employers, payers, and others, on this, first I'll note, a recent survey came out, approximately 90% of those clients are satisfied with their PBM. They're also satisfied with the level of transparency. Specifically for OptumRx, we will continue to innovate and provide additional solutions to our clients that are comprehensive, integrated and transparent. I'll call out one other area, transparency to the consumer. This has been a journey for us that we continue to drive transparency to the consumer. To call out one example with Price Edge, a product recently launched, that's providing consumers the most affordable medicine at the point of care. We are seeing millions of consumers access, use this tool as we provide it to them. And so you'll continue to see us to drive consumer transparency and innovative solutions to our clients.

Operator:

We'll go next to Nathan Rich with Goldman Sachs.

Andrew Witty:

Yes, Nathan, thanks so much for the question. I mean, there's an old adage, which I quite like in this context, which is the innovation that is not affordable is not innovative. And that's really the key to all of this. Though I have no argument, I don't think anybody at UnitedHealth Group has any argument with the prospects and possibility for the future of this drug class. We recognize the need and nothing would make us happier, honestly, to be able to lean forward and see more and more folks take advantage of these sorts of opportunities. But ultimately it has to be affordable. And what we're hearing from our clients is they just -- they are really struggling to see how they embark on that journey of what they regard as a kind of open-ended financial risk. Now that's exactly why Brian earlier made the comments he did about we're trying to put forward to various manufacturers a variety of different options, but we need the manufacturers to move. It's as simple as that. And we remain extremely open-minded to any model that works. We're working with our clients to ensure that they understand the various options. But they are giving us very, very clear signals. They need our help to make this a more affordable proposition for their employees and their members. And we'll continue to lean into that. Thanks for the question, Nathan. Next question?

Scott Fidel:

Hi, thanks. Good morning. [Indiscernible] if you can give us your updated thoughts on from this vantage point, what you're thinking about the trajectory of just overall wage inflation in healthcare? And how you're sort of planning for that? We have been seeing sort of moderation from the COVID peaks, but there certainly seems to be some pro-inflationary risks out there when thinking about some of the federal policy proposals, state proposals, and then obviously some of these Union actions too. So just curious on how you're thinking about wage inflation and health care moving forward and risks to that inflecting back upwards? Thanks.

Dirk McMahon:

Yes, well, to start, what I would say is as we go out and we negotiate with various health systems for prices as we move forward, you know, one of the key things involved in those discussions is, you know, what wage inflation is and how it's impacting their costs. You know, as we sit here today, it's lucky that we sort of have three-year contracts, so it's muted a little bit. But what I would also say is, you know, we see a little bit of upward pressure on unit costs related to wages, but as I sit here today, it's not something that we haven't planning for and priced about. As I think about our own business, we haven't had trouble recruiting people such as nurses, clinicians. We've actually, you know, people really want to work for us and from a capacity perspective, one of the things as we've talked about our growth so far, we have to make sure we have the appropriate labor capacity to manage all the risks that we take. And as a consequence, we do spend a lot of time looking at the market. And as I said, people want to come to work for us. They like the mission. They like the ability to transform healthcare. And we're pretty pleased with our ability to hire and manage our operations going forward.

Operator:

We'll go next to Kevin Fischbeck with Bank of America.

Andrew Witty:

Kevin, thanks so much for the question. So listen, by far and away the most important phenomena here are the things we've talked about to you already. So just to reiterate a little bit what we said to you back in Q2. So we've seen obviously the elevation in MLR which has stabilized, hasn't really come down, isn't accelerating up, but definitely is a phenomena year-over-year, number one, number two, increased behavioral care costs. Remember that within OptumHealth, our behavioral business is, that's where our behavioral business sits, and that has also seen significant increase year-over-year. We're very positive about that, because it's a signal that people are engaging in seeking help for their behavioral conditions. And we know that, that entwines very importantly with their ongoing medical costs. But nonetheless, it's an element of elevation. And then as you rightly reiterate, a piece of it is the growth in our value-based lives and the mix of those lives. And by mix, that means complexity mix, as well as geographic mix. And it takes, as I said already today, takes a little bit of time to build up the capabilities to allow us to engage properly with those folks at the level we want to. And we have really have -- we have not held back on doing that, Kevin, and that's really the bulk of the investment during this cycle where we've really lent into building those capabilities in readiness for the next, we hope, many years of serving these individuals higher and higher capability. You know, of course, and I made a comment earlier about re-engineering our cost base. Of course there are changes going on in our cost base across the whole organization, including OptumHealth in response to the change in pricing signals from CMS. But I would put those very much, kind of, secondary to the core elements I've just described. We're in a position obviously where we know exactly what these populations are that we're now looking after. That's been very much the basis of our forward views in terms of how we're starting to lay out for ‘24, ‘25, ‘26. And we feel very confident about our ability not only to grow as an organization, but to continue to strengthen margins back into the zone that you've historically been used to. Thanks so much, Kevin, for that and next question?

Sarah James:

Thank you. I wanted to circle back to your comments on the strength in commercial growth and national accounts for next year. Can you give us a little bit of color on the pricing environment, given all the comments you've made on the moving pieces and cost trends, and then help us put into context that, and the broader economy with how your clients are thinking about product selection, either in breath or the type of products that they're purchasing from you in ’24?

Dan Kueter:

Yes, thanks, Andrew. Hi, Sarah. Thanks for the question. The growth that John mentioned in his comments is settled business in our national accounts fee-based segment. So we're very happy with how that's completed. We're pricing and negotiating our fully insured business for January right now, and we're comfortable with how that's materializing as well. Employers continue to focus on both affordability and innovation, and our innovative products continue to resonate significantly in the market, as Dirk highlighted in his comments. Thanks, Sarah.

Operator:

We’ll, the next two David Windley with Jefferies.

Andrew Witty:

Hey, David, thanks so much for the question. Let me ask Roger Connor, who's our new CEO of OptumInsight to respond, Roger?

Andrew Witty:

That's great. And I wonder whether Dan Schumacher, who's been very heavily involved in our various health systems partnerships, might just want to reflect a little bit on the question obviously was around pro-health, but rather than talking specifically, maybe just share a few thoughts about the overall evolution of those health system profiles and how they play out over the first couple of years.

Andrew Witty:

Dan, appreciate it and thanks so much for the question. Next question, please.

Ann Hynes:

Hi, good morning. I would like to ask a GLP question more on the medical side. It sounds like right now price appears to be the greatest barrier for widespread adoption, assuming the outcome data continues to be positive. If pricing gets to a point that you view and your clients view as affordable. What do you think would be the long-term impact on care on the medical side? Are you seeing any near-term effects right now on MLR? I should say an MLR benefit. And do you think it would be reasonable to assume overall MLRs should decline with greater adoption of these drugs? And maybe what categories of health spend do you think or do you view would be the biggest opportunity going forward? Thanks.

Operator:

We’ll go next to John Ransom with Raymond James.

Andrew Witty:

So thanks very much for the question. I'll ask Dr. Amar Desai, who leads our OptumHealth Organization, just to comment a little bit on the, kind of, shape of the folks we look after there, and the degree to which they come from both UHC and obviously many of our external partners, Amar?

Andrew Witty:

Amar, thank you. And thank you for the question. Jennifer, I’d say the last question now please.

Lance Wilkes:

Great. Thanks for taking the question. On Medicaid and Medicaid Redetermination, could you comment a little bit on the margin and implications of the members that are getting redetermined off? We've already seen a lot of double coverage or zero MOR on that? And then just in general, are enrollment -- disenrollment trends kind of consistent with your expectations and do you see where those members are going to as far as individual, employer, or uninsured? Thanks.

Tim Spilker:

Yes. Thank you, Lance, for the question. And maybe I'll start with just the enrollment trends, because I think that really informs a whole number of factors. So first off, what we're seeing, I think, consistent with what states have reported is significant disenrollment for procedural reasons. And what's more, a lot of variability, frankly, across states in terms of the pacing and re-enrollment and even states now that are suspending terminations or re-enrolling members based on guidance. So those stops and starts certainly have an impact, you know, on our membership, as well as membership mix. But frankly, that's why we continue to develop even more ways to engage members and support our states. You know, our goal really is to help individuals find coverage and so a couple points on that. Our reach rate for the programs that we've implemented exceeds that of our traditional programs, and we're seeing strong re-enrollment rates between 15% and 20% depending on the state. And so as a result, as John mentioned in his comments, we're retaining a significant majority of the members we engage with, certainly more to do. And second, in terms of your question around just kind of outlook, again, I think the factors around the re-enrollment has an impact on just how we think about mix. But I think it's also important that to consider the rate environment. You know, states are taking into account a thoughtful, taking a thoughtful and data-driven approach to rate setting. And with visibility now into around 45% of our revenue for ‘24, really appreciative of the approach that states are taking. So all in all, I would say both membership, as well as our outlook is in line with what we expected at this point with a lot of variability. I think our membership looks good in terms of the outlook that we set at the beginning of the year. And at this point, I feel all of this is manageable.

Operator:

This does concludes today's conference. We thank you for your participation.

Operator:

Good morning and welcome to the UnitedHealth Group Second Quarter 2023 Earnings Conference Call. A question-and-answer session will follow UnitedHealth Group’s prepared remarks. As a reminder, this call is being recorded. Here is some important introductory information. This call contains forward-looking statements under U.S. federal securities laws. These statements are subject to risks and uncertainties that could cause actual results to differ materially from historical experience or present expectations. A description of some of the risks and uncertainties can be found in the reports that we file with the Securities and Exchange Commission, including the cautionary statements included in our current and periodic filings. This call will also reference non-GAAP amounts. A reconciliation of the non-GAAP to GAAP amounts is available on the financial and earning reports section of the company’s Investor Relations page at www.unitedhealthgroup.com. Information presented on this call is contained in the earnings release we issued this morning and in our Form 8-K dated July 14, 2023, which may be accessed from the Investor Relations page of the company’s website. I will now turn the conference over to the Chief Executive Officer of UnitedHealth Group, Andrew Witty.

Dirk McMahon:

Thanks Andrew. Making high quality care, more affordable and more accessible is what we do. So it is really great to see people getting the care they need, especially as our teams are working to build more capacity and our benefit networks and care delivery resources to accommodate consumers' evolving needs. Affordability is vital. For far too many people, cost remains the most significant barrier to high quality care. We are leaning in hard on behalf of consumers, employers, and health plans to lower out of pocket costs and drive greater affordability throughout the system. As you heard from Andrew, recently we've seen an uptick in outpatient surgeries. Finding the most appropriate site of service is crucial, because the cost of those procedures can differ dramatically depending upon where they are performed. Overall, evidence shows that comparable procedures performed in ambulatory surgery centers cost about half as much as traditional settings with comparable outcomes. For consumers, that translates into many 100 of dollars in out of pocket cost savings for just a single procedure. And the patient satisfaction levels at our centers are among the highest in healthcare with NPS approaching 90. Also high on our affordability agenda is continuing to lower the cost of prescription drugs. Our customers including employers, unions, health plans and governments count on us to help them access the most effective medicines at the lowest possible cost. In fact, pharmacy benefit managers like ours are the only link in the drug supply chain whose main purpose is to improve affordability for everyone. We go further by recommending benefit designs and providing tools to help consumers navigate their options and find the best value for their prescription. A recently launched feature called Price Edge, which provides the lowest cost option for a patient's medication. Already has delivered millions of dollars in customer out of pocket savings. Especially drug cost continue to be a focus of every customer OptumRx works with. Our differentiated approach to specialty is designed to serve the unique needs of patients, payers, providers, and pharma partners and has allowed us to greatly expand our access to limited distribution drugs. We work to tailor our programs with individualized single point of contact care for rare disease and clinical excellence programs for conditions such as MS, autoimmune diseases, and cancer. Clients working with OptumRx, who implement all our specialty medication management programs can save up to 20% on the specialty drug cost. Most related to specialty biosimilars are another area where we are helping drive affordability and consumer choice. Earlier this year, we began offering Amjevita, a biosimilar to Humira at parity ensuring patients and their doctors have more options to choose from when deciding on a course of care. Recently OptumRx and UnitedHealthcare announced the addition of two new Humira biosimilars, Cyltezo and Hyrimoz to our standard prescription drug list also at parry. This increased competition for the innovator drug will result in double-digit savings for our customers. You might also recall that a year ago, we announced our initiative to offer lifesaving drugs at no cost to our customers. This benefit is available to everyone in UnitedHealthcare's Group fully insured commercial plans and has been adopted by more than 500 of our self-funded customers, increasing adherence, and saving people millions of dollars. Finally, another important customer innovation that is making the health system simpler is Optum Financial’s integrated card, which enables seamless access to benefits, programs, and rewards for more than 13 million consumers, who have been issued the card since we broadly rolled it out at the start of the year. Adoption and satisfaction levels have been very strong, make it much simpler for seniors to navigate the system and understand their benefits and creating a more satisfying consumer experience. These and many other results are validating our strategic approach to healthcare. I know from my many meetings with customers that these affordability, transparency, and simplicity initiatives are resonating. They are a key reason for our continued growth in a highly competitive environment and for our confidence in maintaining our momentum as we look ahead. With that, let me hand it over to Chief Financial Officer, John Rex.

Andrew Witty:

John, thank you. Overall, for UnitedHealth Group, looking to the second-half of the year and into 2024 and beyond. We're confident that we're capturing the current landscape in our planning decisions, which in turn gives us confidence in our ability to sustain the growth momentum shown in our first-half and continue to demonstrate the adaptability, performance, and mission-driven purpose of this enterprise, especially in evolving environments. With that, operator, let's open it up for questions. One per caller, please.

A.J. Rice:

Thanks. Hi, everybody. Maybe I appreciate the comments about what you're seeing in the care demand. Maybe on the OptumHealth side, if you guys, obviously top line continues to be very strong there. There's a little bit of margin degradation from first quarter to second quarter? How much of that relates to what you're describing around senior utilization? I know you've got a capitated component and you've got a free for service component. But I think last quarter you also said that the growth in membership would be something that would pressure margin short-term, but obviously be a long-term positive? And then there's a lot of other things in OptumHealth. Are they helping or hurting margin? Give us a little bit of flavor for what's happening underneath the aggregate number.

A.J. Rice:

Alright.

Lisa Gill:

Hi. Thanks very much. Good morning. I just want to understand when I think about the guide to the upper end for the full-year MLR. How much of that is driven by this MA outpatient trend versus behavioral? And when I think about behavioral utilization, is that being driven by a particular population, or is it more broad-based? And, you know, how do I just think about behavioral as a percentage of your cost?

John Rex:

Lisa, good morning, it's John. So in terms of your question, the majority of the guide to the upper end of the full-year is driven by what we've described in terms of the activity, the care activity we're seeing amongst the seniors in outpatient, so that's the core there. In terms of behavioral, what we've noticed in behavioral is an increase in the number of people accessing care. Andrew have this in his comments, but a very, very significant increase even just since a year ago in terms of the number of people that are looking to access care, it’s a great thing, we are planning on that continuing. We don't see why that trend slows down, so we're designing our benefits for that to continue. As you recall, I know Lisa, behavioral resides within OptumHealth, and so that's a kind of an impact that we'd see in that component. And Wyatt, maybe some other commentary?

Andrew Witty:

Yes, Wyatt, thank you so much. So, Lisa, I think you got it there. Overall, it’s very much around the senior trend phenomena. Within OptumHealth, that the behavioral piece plays its part we see that very much as an area where we will continue to step up and make sure that we're delivering the care in the way that Wyatt just described to you. Next question please.

Nathan Rich:

Hi, good morning. Thanks for the question. John, you mentioned the balance pacing of EPS in the back half of the year between 3Q and 4Q. Could you talk about your expectations for MCR, specifically between the two quarters? And how are you thinking about the trend of care activity as we head into the back half of the year given what you're seeing with respect to demand, as well as some of the supply bottlenecks that took care being delivered maybe being removed? And do those factors differ significantly between Medicare and the commercial or Medicaid lines of business? Thank you.

Andrew Witty:

Right. Thanks so much John and thanks Nate. Next question.

Justin Lake:

Thanks, good morning. My question is on commercial trend. That you mentioned it's in line with expectations. I wanted to delve a little bit deeper. I think you might have said previously that you'd priced for commercial trend to be above normal this year, so some conservatism. So does that mean that it's running above normal, but in line with your pricing at this point? If it's above normal, can you tell us how Q2 emerged versus Q4, Q1, meaning that an uptick versus -- in 2Q versus 1Q or 4Q? And then just lastly, any insight on the commercial components, is outpatient at pressure here as well? Thanks.

Operator:

We'll go next to Josh Raskin with Nephron Research.

Andrew Witty:

Josh, thanks so much for the question. I'm going to ask Tim Noel to give you a little bit more commentary. But I think bottom line, I don't really think the benefits are driving this. I think this is -- when you look at the concentration of what we're seeing in terms of the outpatients, the orthopedics, in particular, those sorts of areas, it looks very much more like a kind of deferment of care. Super interesting when you look at maybe what's changed a little bit within that. We've seen a shift in the fraction of people who, once they have been essentially recommended for surgery, actually go through, and complete the procedure. Arguably, what might drive that change is, one, more supply. So actually, it's more possible to go get it done; but two, maybe a little less reticent from an individual to go into a facility in a post-COVID environment versus a COVID environment. That feels like the thing that's shifted. And maybe ask Tim to just add a little bit to that as well, Tim?

Andrew Witty:

Tim, thanks so much. And Josh, thanks very much for the question. Next questions?

Lance Wilkes:

Yes, a question on the commercial side of the business. Can you talk a little bit about membership and in the fee-based business being down? And also may be related to that and your outlook going forward, in Medicaid redetermination, are you seeing any trends with respect to recapture of those sorts of members? Or anything that's driving the opportunity for either growth in membership or maybe you're seeing in-account attrition due to weakness in the economy? Thanks.

Dan Kueter:

Yes, Lance, thanks for the question. Growth is on track for the full-year. And what you see in Q2 really is represented by the contraction of one large customer in our fee-based business. Your question about attrition and redeterminations, the outcome of those, which will be some puts and takes, will probably determine where within our range we will fall. But the punch line is, we're on track to hit our range for this year. Thanks for the question, Lance.

Operator:

We'll go next to Kevin Fischbeck with Bank of America.

Andrew Witty:

Hey, Kevin, thanks so much for the question. So first off, as I mentioned earlier, the pressure is really coming from those three sources, the senior trend phenomenon that we talked a lot about, the very specific Optum piece around behavioral and then the growth in the book. And within that, very much to complex care patient, which, as I'm going to repeat again, is an extremely positive element of our growth going forward. That's going to be an extraordinarily important foundation stone for the future of the company. We're going to continue to lean into that growth, first and foremost. We do expect to see margins continue to strengthen, particularly as you roll through into ‘24. You're absolutely right. We believe we've caught this in our pricing for next year. But more importantly, the longer time we have to look after folks and wrap around care, we can deliver much better outcomes for them, as we talked about earlier and we can also make the economic proposition better. It really builds much more sustainable capability. So all of that will kick in, as well as we roll through subsequent quarters and years. This is going to be a continuing building pressure. I feel very good about that range we've laid out for OptumHealth over the next several years. And actually, I think if I had the choice on a slightly suppressed margin in Q2 or the very significant growth that we've taken in. I'll take the growth all day long. And I'll take that growth, because it's going to underpin years of growth going forward. Appreciate the question, Kevin. Next question?

Gary Taylor:

Hi, good morning. I just want to talk about some of the -- or ask about some of the levers and offset, because it is a little counterintuitive to hear the commentary intra-quarter about higher MLR and then seeing your largest profit segment, OptumHealth, with lower margin. So this quarter, obviously, investment income was far stronger The Street was looking for, at least versus our model G&A, was better. But I know moving into the back half, I think you believe there's more time potentially to pull some of those G&A levers. So could you just talk about investment income, G&A or what other offsets there might be in the back half? And how much of that is carrying forward into your ‘24 thinking at this point?

John Rex:

Good morning, Gary, it's John. So yes, you're right. Those investment income has frankly, been growing strongly over the past number of quarters and continues to grow. Some of that is the backdrop of the rising interest rate environment, as you know, very well. Some of that is also a result of very active management by our treasury teams in terms of deploying more and more cash balances into interest-bearing accounts and such as they've been working hard at that over the past few quarters and advancing the productivity of that cash. That's after coming off of a period of many years of a zero interest rate environment. So a lot of elements in that. In any given quarter, we can experience some gains from our -- in our investment portfolio. So that can be gained from -- anything from our regular fixed income investments to anything from our diverse venture holdings. And so those come in -- they come in at different points in time. And perhaps sometimes they're a little bit less predictable, but kind of are typically in a similar zone frankly, not outside. I don't expect those, kind of, things, I don't count on those kind of things, frankly, every quarter. That's not the thing we look at. But there are elements that we've seen over time in kind of the zones that we're experiencing even now, too. So, yes, thanks, Gary.

Dirk McMahon:

Yes. Gary, what I would say is much of the focus -- we've really been applying a lot of artificial intelligence, machine learning and natural language processing. Long-term, we think there's great hope for those. And some of the short-term things that we're working on in those areas, like using generative AI to help more efficiently write medical appeal letters, things like optimizing our provider search and all of our digital properties with natural language processing and AI, doing a lot of work, improving our payment integrity models, using AI to detect waste, fraud, and abuse. And then a lot in the G&A world to answer basic questions in our call centers, like leveraging our benefit bots to reduce the number of calls and the labor associated with that, for simple questions like is x, y, or z disease covered or have I met my deductible. From a long range perspective, however, I'm really optimistic about our significant data sets. Our ability to take advantage of whatever new technology comes down the pipe to improve health care, I'm really excited about it. So thanks for the question.

Operator:

We'll go next to George Hill with Deutsche Bank.

Andrew Witty:

Hey George, thanks for the question. I'm actually going to ask Tim Noel, who leads the Medicare business to respond to that, Tim?

Andrew Witty:

Tim, thanks so much. Jenifer, we have time for one last question. So, let’s take the last question. Thank you.

Scott Fidel:

Hi, all. Thanks. I was hoping maybe you could drill a little bit just into the announcement of the Amedisys acquisition. And maybe in particular, just talk about, sort of, strategy for ramping up the exposure here given the tough near-term reimbursement environment for home health? And then maybe some early thoughts around some of the integrations or synergies that you could generate from integrating Amedisys in LHCG together? Thanks.

Operator:

This does concludes today's conference. We thank you for your participation.

Operator:

Good morning and welcome to the UnitedHealth Group First Quarter 2023 Earnings Conference Call. A question-and-answer session will follow UnitedHealth Group’s prepared remarks. As a reminder, this call is being recorded. Here is some important introductory information. This call contains forward-looking statements under U.S. federal securities laws. These statements are subject to risks and uncertainties that could cause actual results to differ materially from historical experience or present expectations. A description of some of the risks and uncertainties can be found in the reports that we file with the Securities and Exchange Commission, including the cautionary statements included in our current and periodic filings. This call will also reference non-GAAP amounts. A reconciliation of the non-GAAP to GAAP amounts is available on the financial and earning reports section of the company’s Investor Relations page at www.unitedhealthgroup.com. Information presented on this call is contained in the earnings release we issued this morning and Form 8-K dated April 14, 2023, which maybe accessed from the Investor Relations page of the company’s website. I will now turn the conference over to the Chief Executive Officer of UnitedHealth Group, Andrew Witty.

Dirk McMahon:

Thanks, Andrew. Picking up on redeterminations, for many months, we have been preparing to help people when this activity resumes as it now has in over 20 states. We are working closely with Medicaid members to navigate eligibility guidelines and help find alternative coverage options if they are no longer Medicaid-eligible. This effort includes live outreach calls to educate and assist members with renewal process to ensure they retain their existing coverage or can transition to other plans. We are also engaged with employers to extend annual enrollment periods and drive awareness for employees who are eligible for coverage. With extended eligibility and increased subsidies, many people will qualify for other plans, some with no monthly premium. UnitedHealthcare is executing our detailed plans to ensure as many people as possible have uninterrupted access to coverage and care if they are no longer eligible for Medicaid. Let me now turn to the opportunity we have to more deeply and effectively serve people in their homes. Nearly all of the patients we will add this year in fully accountable value-based relationships will have access to support through our home-based platform. Consumers value and benefit from services delivered in the home and we have expanded our capabilities to serve that need. I will highlight four of our key capabilities in this important area. First, patient assessments, in-home clinical visits designed to identify care needs and help patients with other physical and social needs. This year, we expect to make more than 2.5 million visits to patients’ homes and we continue to expand the scope of the clinical services offered in that setting. Next, care transitions. This entails supporting patients into and through post-acute settings, helping people to avoid hospital readmissions after an inpatient stay. This year, we will manage nearly 12 million care transitions, about twice as many as just 3 years ago. This plays an important role in helping people return safely home and in connecting patients with additional in-home support. Third area, senior community care. This is clinical care for seniors who live in skilled nursing and assisted living facilities and dedicated senior housing. Our clinical teams provide additional layers of care and on-call resources, and they coordinate among patients in their primary care provider, facility staff and caregivers, all contributing to strong quality of care and outcomes. And the fourth area of clinical capability is individual care and coordination for Medicare dual and chronic special needs patients. These patients frequently require a more individualized approach to care. On average, these patients are managing nine different chronic conditions and taking multiple medications. Our high-touch approach leads to better outcomes, including an over 15% reduction in hospitalizations, high patient satisfaction with an NPS of nearly 80 with 99% of our patients in a four-star or higher plan. Our recent combination with LHC Group expands in-home capabilities. LHC provides high-quality, compassionate home health, hospice and post-acute care services with over 12 million patient encounters each year. We will learn from and build upon LHC’s capabilities, expanding the scope and acuity of the care we can provide in a patient’s health. And finally, shifting to pharmacy care services. OptumRx just completed another strong growth season. We are winning new relationships by offering the lowest cost and strong service across a wide variety of customers from health plans to labor and governments and to commercial employers. We help customers obtain the best net cost, and we use our clinical expertise to help treat conditions that call for specialty medications. In addition, consumers are benefiting from efforts such as Price Edge, which gives them the best-price option whether on or off benefit; UnitedHealthcare’s introduction last year of zero-cost life-saving drugs; and our ability to manage the introduction of biosimilars on equal footing with the existing branded product. In short, we have consumers’ backs. With that, let me hand it over to Chief Financial Officer, John Rex.

Andrew Witty:

Thanks, John. Our comments on this call gives us a flavor of why we’re confident in our outlook for the year and our long-term 13% to 16% earnings per share growth target. Our growth is broad-based and it’s driven within and increasingly across our businesses bolstered, as always, by an enterprise focus on execution on behalf of those we serve. With that, operator, let’s open it up for questions. One per caller please.

A.J. Rice:

Thanks so much. And thanks for all the comments. Maybe just because it’s been in the news as well the whole review of PBMs and some of the approaches the industry has had historically, maybe I’ll just ask you guys to remind us what your approach is relative to rebates, spread pricing and so forth. And then I know OptumRx does a lot more than a traditional PBM. Maybe give people some perspective on the breadth of OptumRx relative to some of the things that are specifically being discussed in Washington today, if possible.

Heather Cianfrocco:

Sure. Thank you. And maybe I would just supplement and just say, A.J., thank you. We are – certainly, it is in the news. We’re mindful of the interest in this essential service. But I guess I’d also point you to the client need for these essential services. Our PBM services not just negotiate with pharmaceutical manufacturers to drive that lowest net cost for drugs available, as Andrew mentioned, but the clinical supports and services through the pharmacy and therapeutics committees and pipeline reviews, that network administration and all of the benefit administration and consultation that we provide to clients of all sizes and types from government to employer to large sophisticated health plans. And I take validation in the fact that, that business model is needed by our clients, and it’s appreciated. The transparent business model of OptumRx, together with the innovative capabilities, some of our differentiated strategies like the biosimilar strategy that Andrew mentioned that not just brought competition into the market by bringing up to three biosimilars at parity with the originator on the formulary, accepting the high list price and the list price and putting those together and offering them to the clients from our consumer tools like our latest Price Edge that does scan across the market and compares the cash pricing with the members’ real-time out-of-pocket cost to make sure they get the best price. Those are innovative offerings that I’m really proud that our clients find valuable. And we evolve with those needs. So I think I’d point us to the fact that we had a very strong selling season, one of the highest over the last years, in terms of retention and new client shows that the services are needed. We will continue to evolve our business models to our clients’ needs while we continue to engage policymakers and others to make sure that everybody understands the essential value of that PBM service, the distinctive capabilities and transparent business model of OptumRx and in addition, make sure that we ensure client choice and we preserve that function. But I guess that also – just take the opportunity to say you’re right. OptumRx is so much more than just our PBM, which is incredibly important to our clients. We are so proud of them and I’m so proud of the team. You saw the growth in our pharmacies. But from our community pharmacies that it just celebrated a 700th opening of our behavioral health pharmacy, a very distinctive offering in the market to our specialty with not just high NPS but a 24/7 clinical model and distinctive capabilities for those members that really benefit from specialty drugs but in oftentimes, need our patient support and assistance, including financial. And then, of course, our infusion business, which is very intimate in providing services in the home, and we rely on over 1,100 nurses to do that every day. So incredibly proud of the breadth of service across OptumRx but very mindful that our job in the PBM is to serve our clients and preserve their choice.

Operator:

We will take our next question from Lisa Gill with JPMorgan. Please go ahead.

Andrew Witty:

Yes. Lisa, it’s a great question. I think, actually, it would be super interesting to hear from the UnitedHealthcare perspective on that. So I may just ask Brian Thompson, the CEO of UHC, to comment there, please.

Andrew Witty:

Yes. No, listen, Brian puts it super well, Lisa. I think I think from where we sit, as we roll forward – listen, first of all, it’s good news that we’re seeing innovation in areas like weight management. That obviously is going to be an important aspect of consideration for people, particularly with comorbidities. Diabetes is an obvious example of that, number one. Number two, I think as time plays out, what’s going to be super critical here is some of the – we need to get focused on the facts and reality of this marketplace. We need to really be clear about which patients really do benefit from these medicines and make sure we properly understand how they’re going to use those medicines. So there’s a lot still to learn, I think, as these things progress through their final phases. And then finally, of course, we got to see the prices be affordable, and that’s going to be a key element of how this evolves. And obviously, we keep a close eye on the prices we see in Europe. And just as – you heard a little bit our focus on the pharmacy side of the business, of course, encouraged by our insurance side of the business. We’re going to be looking for the very best pricing on these medicines, and we’re going to advocate on behalf of members and consumers to get that. So still plenty to come here. I think early days, nothing particularly out of expectations, still very much in the range that Brian just described. Lisa, thanks for the question. Lisa, thanks for the question. Next question?

Stephen Baxter:

Yes. Hi, thanks. I wanted to ask about the changes the company is making to prior authorization later this year. It would be great to get some background on why you felt like these changes were necessary and how you’re going to work to manage the cost implications of the changes once they’re made. Thank you.

Brian Thompson:

Hey, Steven, thanks for the question. Yes, beginning in the third quarter of this year, we will be eliminating about 20% of our authorization volumes overall. We’re also going to be eliminating most medical authorizations altogether for provider groups and systems that have demonstrated a high-quality care and adherence to the requirements over time. I’d say that might be another 10% of our volumes overall. We will continue to evaluate with some new analytics that we have in partnership with OptumInsight and surveillance capabilities to see if there’s some additional opportunities over time. Really, though, this is a culmination of a lot of things. And first and foremost, I would say it’s our intensifying focus on the consumer experience, really a desire for us to streamline processes, get the latency out of the process and like I said, leverage new technologies to really get to speed of decisioning and really get to point of care. I will say, we are constantly reviewing our prior authorizations, but we need to balance, obviously, what we reduce with that need to guard against clinical quality and patient safety. And I would say in this really robust process that we’ve started here over the last several months that it’s really demonstrated the importance of the authorizations that we do have in place, so really encouraged by our surveillance capabilities. Don’t anticipate any pressure on trend because of it and really see this as a win and satisfier for both our customers and our provider groups alike.

Operator:

Next question comes from Justin Lake with Wolfe Research. Please go ahead.

Andrew Witty:

Yes. Justin, thanks so much. I’ll ask John Rex to comment there, please.

Andrew Witty:

Thanks so much, John. Thanks Justin. Next question please.

Nathan Rich:

Good morning. Thanks for the questions. I wanted to ask on Medicare Advantage and the phase-in of the risk model changes by CMS. I guess how might the prospects for lower rate growth over the next few years impact relative attractiveness of Medicare Advantage for seniors and the growth of that market? And do you think the risk model changes have any impact on how providers are viewing the attractiveness of full-risk arrangements? Thank you.

Operator:

And we will move on to our next question from Josh Raskin with Nephron Research. Please go ahead.

Andrew Witty:

Yes. Josh, thanks so much for the question. Let me ask Brian to give you a few thoughts. Brian?

Andrew Witty:

Great. Thanks so much, Brian. I appreciate it. Thanks Josh. Next question.

Lance Wilkes:

Thanks. Could you talk a little bit about OptumCare and the full-risk patients you have got, specifically the non-UnitedHealthcare patients? And how is the progress going as far as growing that? And how do you see this MA rate environment and high premium environment in commercial employer impacting and potentially accelerating your ability to add non-UHC risk patients?

Wyatt Decker:

Yes. Well, thank you, Lance, and thank you, Andrew. I would underscore some of Andrew’s comments. But most particularly, we have developed a comprehensive and differentiated clinical model of care for value-based care. And that is appealing to all of the large national payers who we work with closely, Lance. And so you will see us continuing to grow our book of value-based care lives with all national payers and regional payers who see the value that we are able to provide both to them and to the members and hence, patients that we serve. And you heard a little bit earlier today from Dirk McMahon on our comprehensive home and community offerings, and that’s just one of our many platforms. And we weave these together in a comprehensive fashion, and we think about not just the member, but the person or patient at the other side of this who is on a journey of healthcare. And some have multiple chronic diseases. Some want to focus on staying healthy and well, and some have catastrophic issues that we have to help them navigate effectively. And our ability to do that is unique and differentiated in the healthcare industry. So, I think you will see continued growth with multiple payers. We have enjoyed that this year and will continue to do so as the year progresses. And as Andrew touched on, we really view ourselves not as solely a senior healthcare provider, but as a provider for all walks and ages of lives and particularly commercial. So, we have commercial offerings in Texas, in California and Massachusetts today, and they are a meaningful part of our 4 million fully capitated lives already today. And you will see us continuing to grow in those established markets with commercial and multiple payers as well as going into new markets. Thank you.

Operator:

Next question comes from Kevin Fischbeck with Bank of America. Please go ahead.

Andrew Witty:

Kevin, thanks so much for the question. So, to your first point, no, you are absolutely right. We remain firmly of the view that the 13% to 16% long-term growth rate of adjusted earnings per share is very much the zone we are in. We – you see that again in this quarter. We continue to believe that is very much in our horizon as we go forward. Obviously, any given quarter might vary around that, but that very much is the zone we expect and I made that comment a little bit earlier, so for sure on that. Listen, as far as this – the phase-in come, this will all depend – different companies will behave differently, I suspect, through all of this. And we see, of course the change here, we will be making changes to some things in our costs and other areas, as Brian talked about earlier on. Other providers may choose to do things differently. How it plays out, I think is actually going to be a little bit of a competitive environment, actually. And I think not something we probably want to get too much into in terms of predicting or sharing exactly how we are going to respond to this. We are getting close to a bid cycle. It’s a super important time. We are deeply fixated on making sure that we continue to grow. To do that, we need to make sure that our bids are super competitive. And we are working on that, and we will work our way through it. And as I said earlier, the phase-in gives us confidence that we can align with where CMS wants to end up in a way which gives the best chance of beneficiaries being looked after appropriately, and that’s what we want to try and do. Thanks so much for the question. Next question.

Erin Wright:

Great. Thanks for taking my question. On your commercial risk membership, can you speak to what you are seeing there? And is there anything to glean in terms of how Surest is tracking relative to your expectations? Thanks.

Dan Kueter:

Yes. Thanks Andrew. Thanks Erin for the question. And yes, our momentum in the first quarter clearly continued the momentum we had in the back half of last year and puts us well on track, as John said in his prepared remarks, to meet our investor conference goal – investor conference targets rather, of $850 million to $1.5 billion [ph] growth. Surest was a component of that. Surest was the component, about – accounting for about 25% of our growth in the quarter as that product continues to be adopted. We have shared before that one in nine of our national accounts actually have that product today. We are continuing to see that expand down into the middle market currently as the growth of that product continues. And we also are beginning to experience take-up now on a fully insured basis for that product on a risk basis. We shared at the investor conference that Surest was available in 12 states on an insured basis with a year-end target for this year of upwards of 35 states. We currently offer that product in 25 states. So, it is a meaningful contributor to our growth, and we expect it to be so for the remainder of the year and into the future. Thanks for the question, Erin.

Operator:

Next question comes from Ben Hendrix with RBC Capital Markets. Please go ahead.

Andrew Witty:

Yes. Ben, thanks so much for the question. Yes, obviously, I can’t get into the detail of the regulatory review. But a couple of things to say. So, for a long time, many years, Optum has had a business in the UK. Obviously, the UK is a very different type of marketplace to the U.S., but it has a couple of interesting – very interesting components. One is you have got very much a primary care-dominated environment, which is obviously very akin to big pieces of Optum Health. And it’s also a marketplace which has looked to develop its abilities around data and connectivity. EMIS, which is the company we are very keen to partner with, we think could be a very important complement to Optum capabilities, particularly as it speaks to helping us connect some of our software capabilities, data analytic capabilities to primary care providers. About 40% of British primary care providers are connected into the EMIS networks. We think that gives a great opportunity to bring fantastic value to the physician practices and then ultimately to the National Health Service. And what we would like to believe if we are able to go through that transaction is that, it can really allow us to start to create another node of innovation alongside all of our other technology platforms to start to develop technology software platforms and the like, which not only could be used in a market like the UK, but in other economies around the world which perhaps have slightly different shaped healthcare systems to the U.S. healthcare system. So, we see this as good for the UK. We think it’s potentially an interesting opportunity to further enhance our investments and progress in technology and software development. And it’s why we are keen to continue the process to get the transaction done. And obviously, we will be working diligently on that. Thanks so much for the question, Ben. Next question please.

Scott Fidel:

Hi. Thanks. Was actually open just to revisit the full year revenue guidance, just given the first quarter, clearly, you were pacing better than The Street, and you have since closed LHCG. And you are now looking to eclipse the high end of your MA target for the year. So clearly, it seems like there is a lot of upside momentum relative to the initial guidance you gave at Investor Day. I know you don’t typically update the revenue guidance intra-quarter or during the quarters, but certainly interested if maybe you can give us some refined thinking around that. Thanks.

John Rex:

Hey Scott. Good morning. Yes, good strength and growth really across the businesses in the quarter. And we are through some of those areas really across both UHC and Optum in terms of the strength we are seeing in terms of membership growth, in terms of the performance of the other businesses, Optum Rx, a call-out here in terms of the strength they have seen in terms of their new customer wins and retention and Optum Health in its growth in value-based live. So, all strong contributors to that. And yes, we are a little ahead of kind of where the view was in terms of the external view on revenue guidance. So, certainly we are positively biased in terms of the type of growth that we are seeing across the enterprise. Happy to see that. You are also right, probably not doing any updates here in the first quarter in terms of that full year view at this distance, but really strong place to start the year. Thank you.

Operator:

Our last question will come from David Windley with Jefferies. Please go ahead.

Andrew Witty:

So, David, thanks so much for the question. So, you are quite right, the eliminations are a big piece of that is the Optum Health-UHC dynamic and not surprising because you see such a high risk transfer in Q1. A large fraction of that 700,000 is UHC, not obviously, others as well, but a large fraction. And of course, within that, as we have guided last year, significant proportion of dual special need patients who – most complex patients, really, I think particularly appropriate patients to benefit from a value-based care approach where you have a really integrated wraparound serve capabilities. So, it’s certainly true on all of that. I am going to slightly disagree with your premise here. We are not in the business of targeting a certain type of member or patient. We want to look after Medicare patients and members, whether they are community MA, whether they are dual special need, whether they are complex or not, whether they are early in their disease in an aging patent or advanced in their disease and an aging part. And then the job for our organization is to mix and match our capabilities to do that as efficiently as possible. And the great thing about Optum Health, David, is that we have such an interesting portfolio of capabilities, which allow us to dial up and down our activities in response to what the patient needs and the way in which they need to be looked after. So, I would say, we are going to be continuing to lean in across the board. It’s just as important to us to grow in dual special needs as well as community MA. And I would say that the progress we make in terms of impacting these folks’ lives and the reason why over 90% of members describe this as a high-satisfaction space is because they – these people need the support at this stage of their life. And we think that between the programs that UHC offer and then the backup that Optum Health brings in terms of deep clinical engagement really makes a difference, and that’s what drives us. David, appreciate the question. Thank you very much. I am afraid we are at the end of the call. I hope you leave this call with a sense of our optimism and focus on continued growth for the year ahead. We remain intent on expanding our ability to help improve healthcare at the system and individual levels and executing with excellence for all those we serve. And we look forward to sharing our progress on this journey with you again in July. In the meantime, thank you so much for your questions and your attention this morning. Thank you.

Operator:

Good morning, and welcome to the UnitedHealth Group Fourth Quarter and Full Year 2022 Earnings Conference Call. A question-and-answer session will follow UnitedHealth Group's prepared remarks. As a reminder, this call is being recorded. Here is some important introductory information. This call contains forward-looking statements under U.S. Federal securities laws. These statements are subject to risks and uncertainties that could cause actual results to differ materially from historical experience or present expectations. A description of some of the risks and uncertainties can be found in the reports that we file with the Securities and Exchange Commission, including the cautionary statements included in our current and periodic filings. This will also reference non-GAAP amounts. A reconciliation of the non-GAAP to GAAP amounts is available on the Financial & Earnings Reports section of the company's Investor Relations page at www.unitedhealthgroup.com. Information presented on this call is contained in the earnings release we issued this morning and in our Form 8-K dated January 13, 2023, which may be accessed from the Investor Relations page of the company's website. I will now turn the conference over to the Chief Executive Officer of UnitedHealth Group, Andrew Witty.

Dirk McMahon:

Thank you, Andrew. While the calendar shows we are two weeks into the New Year, our team's 2023 started many months ago; and in some cases, years ago. We have been laying the groundwork necessary to execute on our growth strategy and sustain our momentum heading into this year and beyond. To give you a sense of how this develops, I'll step through some of the work that has been longue durée to ready our organization to serve even more patients and customers in this new year and provide greater value for consumers across a broad range of initiatives. Take the many new patients we will serve under value-based care arrangements in 2023, deepening our presence in existing areas and adding new regions. Our team's preparations are extensive. That's because the transition to fully accountable care is not simply a matter of downloading a new app. The preparations include significant investments in clinical training, technology, network coordination and other activities to make certain we are ready to serve. These critical investments help us support both our current year needs and establish foundations for the growth into 2024 and beyond. Our ability to serve people effectively has expanded beyond the four-walls of the clinic with the rapid development of our in-home clinical capabilities. These services complement our clinic-based and digital offerings and bring high-quality care access to some of the most challenged and often underserved patients in this country. For instance, for value-based patients, our in-home services have reduced hospital visits by 15% versus fee-for-service, delivering comparable health outcomes and achieving an NPS of approximately 80. Within health benefits, you've heard us discuss how our innovation in commercial products is adding new growth opportunities. One of those is Surest, a unique solution to employers and employees who are looking for first dollar coverage and high transparency into quality and cost. The momentum behind Surest is strong and building. Just two years ago, one in 25 national accounts offered Surest as an option to more traditional plans. Thus far in 2023, it is one in nine, and we expect it will continue to rise. Our offerings for seniors are another area in which we plan, invest and build capabilities to provide new and valuable offerings for an extended period. For example, we continue to expand the range of clinical services we provide via our HouseCalls initiative. In 2023, we will increase the types of vaccinations offered, expand testing services and deploy even more real-time resources to address social determinants of health. Seniors place high value on being able to get care in their home. It comes with an NPS of 75 and is helping to drive improving retention levels as we head into 2023. In addition, our advocacy service solutions help members achieve better health. Our solutions led to a 42% increase in closing gaps in care, up to 15% lower ER visits and an over 10% increase in clinical program enrollment compared to customers who utilize standard offerings. Turning to health technology, let me offer a few early observations on our progress and long-term growth opportunities we see in this area. With the completed change healthcare combination, we are accelerating our investments to bring this vision of a more intelligent and simpler health system to market as rapidly as possible. We will continue to innovate in and deliver the software, data analytics, technology-enabled services, revenue cycle management and advisory services our customers expect. And we are executing on the synergies of this combination with most of the financial benefit coming from complementary growth. OptumInsight is uniquely positioned to offer integrated, end-to-end technology analytics and services across the entire healthcare value chain. Along these lines, we recently reached two new comprehensive health system partnerships, with Northern Light Health in Maine and with Owensboro Health in Kentucky. The services we provide typically feature a full breadth of our advanced solutions, including information technology, revenue cycle management, analytics and supply chain tools. The key here is that our comprehensive technology solutions are resonating in the market, and we expect to see increasing momentum across all of OptumInsight as we invest in and finalize our integration activities. With that, now I'll turn it over to Chief Financial Officer, John Rex.

Andrew Witty:

Thanks, John. As we head into 2023, we're determined to build upon the momentum we've just described this morning, further advancing our mission and delivering sustainable earnings growth of 13% to 16% over the long term. And with that, operator, let's open it up for questions. One per caller, please.

A.J. Rice :

The company seems to be taking a lot of momentum across the board into '23. I wonder when you step back and look at the swing factors that say would push the company towards the higher end of the range that you've offered in EPS or towards the lower end, what are some of the biggest swing factors in your mind, potential positives or challenges?

Operator:

Yes. The next question is from the line of Lisa Gill with JPMorgan.

Andrew Witty :

Lisa, thanks very much for the question. Yes. I mean, we're not going to get into a ton of speculation because obviously, it's very, very potentially imminent. And so not sure there's tons of value there. But I would like to ask Tim Noel looks after our M&R business to maybe share some of his perspective on that. Tim?

Andrew Witty :

Tim, thanks so much. And Lisa, thanks for the question. I mean I think as you just, again, just maybe step up a little bit in the broader position, obviously the whole MA program is unbelievably successful and popular program for seniors across the U.S. And of course, the biggest proof of that is the number of folks who every single year volunteer to sign up to be part of this program. And we're seeing another record year of enrollment coming through as we speak. It's super important that any changes, whether it's in this particular circumstance or any other circumstance, it's super important that folks are thoughtful about collateral consequences, making sure that what is really impressive program in terms of quality of care, reassurance provided to seniors, ability to deliver good value for the senior, good value for society, making sure that any changes are made thoughtfully and holistically is what we would be hoping to see. And obviously, we look forward to working with the administration when and if any further updates come forth. With that, Lisa, thanks so much for the question. And let’s go to next question, operator.

Josh Raskin :

I was wondering if you could speak to the progression of earnings when you add physicians or large physician groups in OptumCare and how that changes over time. I'm specifically looking for sort of margin ranges as you first get started in the first year. When you break even, how long that takes? And then how long it takes to get to the ultimate margins? And I'm curious if the scale that you've got now, half of this book is new in the last three years, does scale accelerate some of that opportunity?

Operator:

We'll take the next question from the line of Justin Lake with Wolfe Research.

Andrew Witty :

Yes. Justin, thanks so much. I'm going to ask Brian Thompson to respond to that, please.

Andrew Witty :

Thanks so much, Brian. And Justin, thanks for the question. Next question please?

Lance Wilkes :

Yes. Could you talk a little bit about the employer segment? And what I'm interested in is what was pricing like in 2023? If you think of the 6% commercial trend that used to be your pre-pandemic sort of levels, what was that like? And for those employer customers, how are they kind of waiting the need to get employees in the war for talent versus focus on maybe higher premium costs and how they're trying to control that?

Brian Thompson :

Yes. Maybe I'll start, and then I'll hand it off to Dan Kueter. I'll start with the conversation around trend. As you well know, we used to share trend information back in the day, and stopped doing so simply because it became less instructive as we were pacing through this COVID environment. What I can share, and I think once we get to this zone of consistency, we'll return to those metrics, we're certainly encouraged by what we're seeing on the utilization front. I think we are seeing some durable shifts. We've seen it with respect to ER moving into urgent and in-patient to outpatient. But on the flip side, as we all know, in these labor markets, we're seeing stronger unit costs. And as we all know, unit costs still comprise the majority of the overall trend. And as I had suggested earlier in the year, we did have a higher trend planning for 2023 than 2022. But in reality, that was really a function of the first half of 2022. And again, I want to give that thought and belief that we are largely back to normal levels. And I think once we pace through 2023, we'll get to that zone where we can share those pricing trends. So with that, maybe a little bit more on the competitive dynamic, Dan.

Andrew Witty:

Thanks so much, Dan. Thanks, Lance. Next question?

David Windley :

In OptumHealth as you have added or about to add behavioral and home, more substantial home care opportunities and have talked about those in the context of value-based care. I'm wondering what influence those have on the trajectory of revenue per member served? That's already rising at a pretty rapid clip due to the full cap that you're transitioning lives into. So the home and behavioral adds to that.

Wyatt Decker :

Yes. Well, thank you, David, for the question. And it's very timely. We view home health as one of the new frontiers of providing value-based healthcare because of the convenience it provides and the ability to access people, like dual special needs patients that often have very difficulty leaving their home to get care. So you will see us both developing if you will, the platform of home care increasingly in a comprehensive fashion, as well as integrating home care with our clinic-based care model. So it really creates two growth vehicles for us, if that makes sense. And similarly, with behavioral, as we've seen during the pandemic, the need for behavioral care is immense in the U.S. market. And our ability to embed behavioral healthcare services within our primary care and value-based care offerings has been differentiated and will continue to grow, as well as our utilization of virtual behavioral care solutions in both the home and clinic environments. And so we're pretty excited about how this is coming together, and we're creating a differentiated offering that helps accelerate value-based care growth and provide that comprehensive care that people made.

Operator:

The next question comes from the line of Gary Taylor with Cowen.

Andrew Witty :

Thanks so much, Gary. Let me ask John Rex to respond.

Andrew Witty:

Thanks, John. And thank you, Gary. Next question please?

Scott Fidel :

Just interested if you could summarize your key M&A priorities for 2023, and whether there's any sort of shift at all in sort of the key trends that we've seen over the last few years, which have been a big focus on adding the clinical capabilities and the scale at both OptumHealth and OptumInsight. Should we think about that continuing to be the core area of focus or any other additional elements that are worth considering?

John Rex :

Absolutely. Scott, yes, so I'd start with just echoing what Andrew mentioned there, the way we approach this very much aligned with our five growth pillars and how we evaluate, how we look for opportunities, I should say, and where we think we should be pursuing investments and relationships. I'd point out that these are certainly very long-lived in terms of the investments that we make, in terms of relational investments we make, in terms of understanding markets, particularly as we've heard us talk about before within the care delivery businesses and such as value-based care that these are. Most of the markets that we want to address are aren't established the way that we would like them to be established, so it's very greenfield in terms of our approach to M&A as we look at marketplaces and bringing together the capabilities that we would pursue. The environment itself that echo what Andrew previewed there, certainly a strong environment in terms of opportunity sets that we are seeing in the broad marketplace, in terms of the types of capabilities that are there, how they might fit within this enterprise and the potential. I think you would expect us to see like where we've been focused. Certainly, over the last number of years, you've seen us do a lot of development as it relates to components of value-based care. And you know we define that very broadly now in terms of how we think about capabilities within value-based care to bring in new capabilities also and across all the other elements. But I’d overall characterize the environment as strong and the opportunities as among some of the most interesting, I think, that we have seen as a company.

Operator:

We'll take our next question from the line of Stephen Baxter with Wells Fargo.

Andrew Witty :

Stephen, thanks so much for the question. So first off, let me just reiterate how important we see the development of the home model, the home care platform, and we've seen that grow very substantially over the last couple of years in particular. Super important though, to recognize that it kind of -- so of course, sometimes folks can be essentially managed within just the home environment or the home care platform, and that certainly happens sometimes. But of course, what always happens, what very often happens is the clinic environment, the home environment are connected together, which is really what we're building here. So it's not super instructive, I think, to think about folks who are just kind of clinic nominated or home nominated. That can happen. But not really, I think, necessarily the right way to look at it. I wouldn't look at it that way. I'd see -- I really think about it the way we've built the home capabilities as a substantial extension of what we're able to do in the clinical space. And it speaks to the reality of care. People -- a lot -- not everything happens in the 20 minutes you're in the clinic, right? A ton of things happen when you're at home, and making sure that we've got care capabilities there, especially for folks who find it difficult to get out of the home or for whatever reason, find it difficult to engage with the system. That's a super important part of the environment. What I'd say is that, that is resonating super strongly, not just with UnitedHealthcare, but with other payers as well. And there's no doubt that this side of the agenda has caught the imagination of other payers, and we're delighted to see the continued extension of the multi-payer dynamic of OptumHealth and Optum more generally. And this is one of the drivers of that. In fact, during Q4, our external growth rate -- revenue growth rate was analogous to our internal growth, or i.e. Optum was growing just as quickly with non-UHC payers as it was with UHC. And that's a super important signal for the strength of the company. So important area, you'll continue to hear more about home as we go forward. But I would look at it more as a strengthening as a whole rather than a kind of separate stream in which we would be thinking about it that way. Hopefully, that helps a little bit, Stephen. And let’s go to the next question.

Nathan Rich :

The advance rate notice for '24 will be out in the coming weeks. It's clearly been well noted that the past few years have kind of been above the historical trend, and know that at some point we could see some moderation. I'd just be curious what your expectations are around that and how you view its relative importance in the context of your overall outlook for the MA market?

Operator:

Our next question comes from the line of Erin Wright with Morgan Stanley.

Andrew Witty :

Great question, Erin. Before I ask Heather to give you a few more details, I think we're super pleased with the progress we've made, particularly on the biosimilar innovation that's coming this year in the next few weeks. And the work that's been done within Optum Rx to deliver a contracting strategy, which ensures that everybody who wants to use a HUMIRA molecule, whether that's the brand or whether it's a biosimilar, gets access to lower cost right out of the gate has been a super important innovation in terms of our contracting strategy. So without folks having to be shifted from drugs or dislocated in the marketplace, we found a way to bring lower cost to everybody in that environment. And I really want to give credit to Heather and her team for the work that she's done to lead on all of that. As you rightly say, we're passing those benefits directly back to the payers and the folks themselves. And with that, Heather, why don't you pick up and describe what else is driving the Rx growth this year?

Andrew Witty :

Heather, well said. And again, you've seen a real transformation of the Optum Rx platform. If you look at five years ago, about 1/3 of the revenues in that business came from non-PBM pharmacy services. Now it's at half. As a tremendous shift on the business' scale, really is significant. And I'd say one of the key themes, which is driving a lot of that is a relentless shift was the consumer in the way in which that business is orientated and building its product. Real focus on delivering the best possible deal for consumers, making sure they get the lowest net cost. And then you'll see through, as Heather just mentioned, partnerships like RVO Health, you'll see us to continue to innovate the way in which we engage with consumers to make that much more modern, much more as U.S. consumers should get and should expect. Heather, thank you so much. Next question please?

Steven Valiquette :

so regarding the acuity level of the elevated flu and respiratory costs in the fourth quarter, is there any sense for just how much of the elevated cost for, hate to call it, tripledemic, let's just call it that, I guess, for the quarter, how much of that was related to the hospital inpatient setting in particular? And then from your data, was there any sense that there may have been any slightly lower elective procedures or traditional non-COVID and non-flu-related care in the fourth quarter in light of the elevated flu and respiratory cost and utilization?

Operator:

Our next question comes from the line of Kevin Fischbeck with Bank of America.

Andrew Witty :

Kevin, thanks so much. I'm going to ask Tim Spilker, who looks after our Medicaid business to talk to that. And maybe Tim, as you do that, you could also maybe just allude a little bit on the degree of visibility you have for your book of business as you roll into 2023. That might also be helpful.

Andrew Witty:

Right. Thank you, Tim. I appreciate that, Kevin. Thanks for the question. Operator, we just have time for one last question, if we could go ahead, please?

George Hill :

I wanted to come back to the specialty drug and pharmacy initiatives. And I guess, can you talk about what percent of these drugs are going through the mail channel versus the retail channel now? Kind of how do you expect the share to shift away from retail to mail? And then I'd tack on kind of how should we think about what the earnings power of the shifts can look like as you capture more of the specialty drugs in owned channels versus third-party channels?

Heather Cianfrocco :

Sure, great question. As we continue to see the pipeline in specialty drugs, I hope you can feel the urgency around us driving. And you can see it in our growth, but also in our patient care and our clinical program. So our Optum Frontier Therapy, I think, is actually a good model. I know it serves only sort of rare disease and orphan drug, but we talked about the investor conference. It's got a comprehensive clinical model wrapping around it that supports not just the patients, the caregivers, the prescriber, the family, but also helps pharma to deliver the best service in those drugs. That is the model we're using to inform how we serve clients and how we serve patients in our specialty business as well. So think about that holistic support, patient advocacy, patient support, caregiver support, prescriber support, all while investing in automation. So even in our pharmacy -- in our specialty pharmacy today, our automation is up. We're actually seeing over 30% higher self-service in the specialty pharmacy. That's not just mail and maintenance, that's specialty. So we're investing in the automation. For those that have simple transactions and want to interact with us with these, but those that need more comprehensive care with complex conditions that need the value of our 24/7 pharmacist support, our team is there to help them. So we will always continue to work with our retail partners. We are -- we've got a very strong network of that. But we want to be able to serve our consumers and our clients with best-in-class specialty service.

Operator:

That concludes today's conference. Thank you for your participation and you may now disconnect.

Operator:

Good day, everyone, and welcome to the UnitedHealth Group Third Quarter 2022 Earnings Conference Call. A question-and-answer session will follow UnitedHealth Group’s prepared remarks. As a reminder, this call is being recorded. Here are some important introductory information. This call contains forward-looking statements under U.S. federal securities laws. These statements are subject to risks and uncertainties that could cause actual results to differ materially from historical experience or present expectations. A description of some of these risks and uncertainties can be followed in the reports that we file with the Securities and Exchange Commission, including the cautionary statements included in our current and periodic filings. This call will also reference non-GAAP amounts. A reconciliation of the non-GAAP to GAAP amounts is available on the financial and earnings reports section of the company’s Investor Relations page at www.unitedhealthgroup.com. Information presented on this call is contained in the earnings release we issued this morning and in our Form 8-K dated October 14, 2022, which maybe accessed from the Investor Relations page of the company’s website. I will now turn the call over to our Chief Executive Officer of UnitedHealth Group, Andrew Witty. Please go ahead.

Dirk McMahon:

Thank you, Andrew. As Andrew just mentioned, we are very excited about the recent combination of Change Healthcare and OptumInsight. With a grand total of 11 days of integration work behind us, I thought I would provide a bit more commentary on how together we can make the health system simpler and more efficient. Overall, Change brings a robust transaction network built on strong payer and provider connectivity. Together, our focus areas include

Andrew Witty:

Thanks, John. As is customary with the close of a third quarter, we will offer early observations about next year. While reserving most of this conversation for our November 29 investor conference. Our businesses are growing and operating well with strong momentum and a keen enterprise focus on executing on our strategic growth priorities. Among a few highlights. The OptumHealth care delivery businesses are rapidly advancing their value-based capacities, expanding the scope and settings of care offered and creating a long runway for growth. And we see our innovative and consistently highly valued Medicare Advantage plans as well positioned to grow strongly again next year. At this distance, we view a majority of the 2023 analyst estimates as reasonably reflecting performance levels we would expect to offer in November with the current consensus at the top end of our likely initial earnings outlook range. And as you have come to expect, we continue to strive toward our long-term 13% to 16% earnings per share growth goal. We look forward to discussing this with you in much greater detail in person at our investor conference in New York. I hope you’re getting a sense of an organization that has long been the case is focused sharply on executing with excellence in all we do, so that we can meet and exceed our commitments to our customers, clinicians, consumers and the communities we serve and, of course, to our employees and to you, our shareholders. With that, operator, let’s open it up for questions, one per caller please.

A.J. Rice:

Thanks. Hi, everybody. Thanks for the comments. As you think about ‘23 and you’re going through the process of pricing discussions with your commercial employer groups and so forth. Is the basic concept – I know, John, you said continue to return to normal utilization. Is the basic view is that we would project a medical cost trend off of this year that’s more in that traditional 4% or 5% range mid-single digits. And we’ve heard some discussion about maybe there being an unusual bump up in addition to the medical – traditional medical cost trend to allocate something for providers dealing with their labor issues. Is your discussion with employers, is that something you’re seeing getting put in place?

Brian Thompson:

Sure, Andrew. Thank you, and thank you for the question, A.J. Brian Thompson here. As we do look forward, I would say that we have planned and price for our cost trend a little higher than historical norms. And I think to some of the points that Andrew made, some of them are pretty obvious and inevitable. The first just being the reality that 2022 is a lower starting point. In addition to that, contributing is labor and inflationary costs. And just being respectful of what we don’t know, again, probably the pacing of care patterns and how they return to normal, certainly included in that. I would certainly suggest though at the same time, we’re working really hard to manage down the impact of these trends on both our consumers and employers alike. And you mentioned how we’re negotiating with our provider partners. I would say we’ve really seen emergence of value-based arrangements at a faster pace than perhaps historically. So we’re not just seeing unit costs accelerate at a higher rate. And in addition, just more product designs that are meaningfully lowering those price points for end consumers, whether it’s virtually enriched products, we mentioned that a little bit. We’ve talked a lot about surest and how that consumer choice model is really driving not only a lower price point. But first dollar coverage is really emerging as a priority for those folks that we support and serve every day. So those are some elements and dynamics not only in the product side, but how we’re looking to our forward view of costs.

Operator:

Next, we will hear from Josh Raskin of Nephron Research.

Andrew Witty:

Yes, Josh, good to hear your voice, and thanks so much for the question. So a very good, very strong quarter, continued strong performance from OptumHealth overall. I’ll pass in a second to Dr. Wyatt Decker to give you a little more flavor on that. Just let me pick out one of those aspects, which is a question you asked about the fully capitated lives within there. So if you think about OptumCare, obviously, a subset of OptumHealth has about 20 million or so folks who we look after through that platform. Probably, you’re still a little under 15% of that number in fully capitation arrangements. So that really tells you – despite the very strong impact that’s having, you can see the way that’s reflected through this sustain 34% growth in average revenue per consumer served in OptumHealth. A lot of that is influenced by the capitation shift, but it’s still a really small fraction of the total number of lives that we look after in that part of our organization. So a lot of runway there, and that’s what really underpins our long-term confidence in sustained growth, particularly in OptumCare, which is a key piece of OptumHealth and maybe now pass to Wyatt to give you a little bit more context of how it all fits together. Wyatt?

Andrew Witty:

Thank you, Wyatt. Josh thanks so much. Next question please, April.

Nathan Rich:

Hi, good morning. Thanks for the question. I think non-COVID utilization has been running a bit below baseline this year, but you mentioned kind of care pattern is continuing to normalize. How are you thinking about that concept of normalization for both the fourth quarter? And can you maybe just talk about the factors that you think could have the biggest impact on the recovery in non-COVID utilization volumes as we get into next year?

Operator:

Justin Lake, Wolfe Research.

Andrew Witty:

Thanks, Justin. So I’ll ask Tim Spilker and then Tim Noel to comment in a second. Just a couple of kind of introductory thoughts really on your questions, as I said in my prepared comments at the beginning of the call, Justin, redeterminations is a really important potential issue for next year and is something that, as an organization, we are going to – we are really leaning into. We’re very focused on, and that’s because we’re concerned that through a redetermination cycle during ‘23 and ‘24, depending on when the public health emergency comes to an end, could lead to a situation where folks get dislodged from their coverage. And that would be a huge setback in terms of the progress that’s been made over the last many years to extend cover. So we are really focused on how we can ensure that people are retained coverage. Tim will talk in a second around some of the ways in which we feel confident we can help but it is a really important area, and it’s an area where we hope the entire industry and its participants all lean in to make sure that people don’t get lost in the system as things go through a redetermination cycle. So that’s going to be a super important area. Let me ask Tim Spilker to go a little deeper on that and then pass straight to Noel to talk about open enrollment. Go ahead.

Tim Noel:

Yes, good morning. Justin thanks for the question. Tim Noel here. So first, if I may start just with kind of an end cap on 2022, John mentioned in the opening remarks that right now, we’ve grown about 800,000 Medicare lives and that’s consistent with the guidance we gave at our investor conference last year and we are on pace to end this year ‘22 with full year growth of 900,000 lives. So feel good about the way our value proposition has resonated in ‘22 and feel like that momentum will head into 2023. So, great feedback from the broker community around our product positioning, how we are investing, our emphasis on investments in the most utilized benefits like drugs and like dental benefits. So, feel very good heading into AEP tomorrow. With respect to the industry, over the long-term basis, we have kind of guided to 8% to 9% Medicare Advantage industry growth. I don’t have any reason to see it differently from this vantage point for 2023. And once again, I like my chances to outperform the industry in ‘23 and have share gaining growth.

Operator:

Stephen Baxter of Wells Fargo.

Andrew Witty:

Hi Stephen, thanks so much for the question. I am going to ask Dan Schumacher to respond to the first part of that question, and then John Rex will pick up the point on the change accretion piece. So Dan, go ahead.

Andrew Witty:

Thanks Dan. John?

Andrew Witty:

Thanks John. And I think John tees up a really important point that I just want to reemphasize, which is within the guidance we have given you today for the closeout of ‘22 and ‘23, not only are we anticipating obviously continued very strong growth in revenues and the consequential flow through the business. But you are also seeing us create the space to make sure we can make the right investments. So, whether that’s in making sure we get the integration of change done as promptly as we can, whether it’s how we invest in our consumer capabilities, which really started to get going in Q3 and will continue through Q4 and beyond or whether it’s increasing our investment in our employees to make sure that we are responsive to the cost of living pressures. So, really important that you see that and very much taken into consideration as we thought through our work going forward. The other thing I would just also add is that I don’t want to – I think you all understand how important the change integration is for OptumInsight. This is – it’s a great moment to bring together tremendous complementary skills, capabilities, technologies, perspectives on the marketplace. And so as we roll through the next two quarters or three quarters, we really anticipate a kind of new OptumInsight emerging from this integration. And we are very excited to have Neil de Crescenzo as well as Dan Schumacher working together to lead these two organizations as this work goes on. So, a lot of energy potentially being released in this space. And as John said, we have incorporated into our guidance points the space to potentially make the right investments going forward. Next question?

Scott Fidel:

Hi. Thanks. Good morning. I know that continuity of care has been a big focus here, especially with redeterminations coming back. And just interested in that context how you are thinking about potential footprint expansions in the ACA exchanges for 2023 and beyond. It looks like also there has been some favorable policy developments and then some competitive changes to that could be positive for the market. So, just interested in your thinking on exchange strategy for both next year and longer term. Thanks.

Brian Thompson:

Sure Andrew. Thanks for the question, Scott. And we agree totally. We see the exchanges is really emerging as a meaningful place and a broader coverage criteria across this country. And it’s certainly important to us to be more relevant each and every year. In fact, while we are expanding into four new states in 2023, our footprint is expanding meaningfully. I think we are going from around 40% of the addressable market here, leaving 2022 to nearly two-thirds by the end of next year and again – or by the start of next year, I should suggest. So, again, reasons aligned with yours. It’s important that we are where folks are. And as we manage through this redetermination process working not only with our employer partners or distribution partners in our states, but making sure we have product ourselves to make sure that these folks can get enrolled in. And we are encouraged by our progress. We like how we are positioned here, leaving 2022 both from a footprint and receptivity and growth and a performance perspective and looking forward to expanding again in ‘23.

Operator:

Kevin Fischbeck of Bank of America.

Andrew Witty:

Kevin, thanks so much for the question. Maybe I will ask Brian to make a couple of comments on that.

Andrew Witty:

Brian, thanks so much, and thank you for the question Kevin. Next question please.

Lisa Gill:

Thanks very much for taking my question. When we think about membership in the commercial market, I am just curious how employers are currently talking to you about that trend going into ‘23. And if you can just give us an update on your thoughts around if we move into a recessionary type of environment what that could mean for the health plan business?

Dan Keuter:

Yes. Thanks Andrew for the introduction. And Lisa thanks for the question. As you know, at this point in the year, our national accounts business for 2023 is largely resolved, but the other segments of our business are not resolved. As we look at that national accounts performance, we are very pleased with what we have seen in terms of a very strong renewal year and also a strong sales year, which leaves us I am confident in a growth year for national accounts for 2023. The other lines of the business are yet to resolve. Specifically related to your question about recessionary impacts, we are certainly well aware of those. However, I would note at this point, based on our Q3 performance, we have seen net hiring among our customers. So, we have not yet seen an emergence of recessionary impact in our commercial book of business. Looking forward to 2023, we will assess the continued evolving economic situation and provide additional guidance as that becomes more clear. Thanks for your question, Lisa.

Operator:

Absolutely. Our final question for today will come from Gary Taylor of Cowen.

Andrew Witty:

Gary, thanks so much for the questions. I mean if you kind of just think about the blend of headwinds, tailwinds for 2023, in terms of headwinds, I would probably say the external environment, the inflationary pressures, obviously, in among that mix. Question on whether or not we see any kind of economic slowdown as you just heard, we are not really seeing that yet in terms of our marketplace, but we have got to be thoughtful about that, and we want to make sure that we go into the year, not assuming anything overly optimistic. It would be great to have pleasant surprises on that dimension, of course, utilization levels, I spent a lot of time on this call talking about that as we start to see that continue to normalize. And then the investments, I mean those are really the four areas of investments in our business and you recited those very nicely. Now on the other side, you think about the tailwinds for the business. Very strong income and momentum for the organization. OptumHealth’s growth in patients served, the evolution of the at-home platform, which has got over the last 2.5 years, 3 years, has moved to a very significant scale, complementing our clinic platform, strong capabilities that we are demonstrating in Medicare Advantage. You look at those really driving tailwinds for the organization, very substantial. The scale of those organizations and what we are able to do very material. And then I would also say our ability to continue to deploy capital effectively in the marketplace is another one of the things to really think about. And it’s interesting, actually, just to pause for a second today and contrast where we are today versus where we were a year ago. So, year-to-date 2021, we have deployed about $5 billion of capital in M&A, which was about the full year number in the end. As of today, we have spent $20 billion in 2022. So, in terms of our ramp-up of capital deployment, and you heard from John Rex earlier, we have very substantial continued capacity. And obviously, the marketplace is getting interesting around that space. We have talked several times to you in the past about the diverse pipeline of opportunities that we see probably as diverse as we have ever seen. Very much opportunities we see across a number of our key growth platforms. And as we all know, the market is beginning to be very discriminating in terms of value. So, we will see how that plays out for us, but I think you have to expect that to be a tailwind for us as well going into next year. With that, Gary, thanks so much for the question. And thanks, everybody, for your time and questions today. We do hope you are taking away the impression of a company confident in its opportunities and ability to grow. Deeply aware of where and how we need to continue to build and improve and fully committed to our mission of helping people live healthier lives and helping make the health system work better for everyone. I want to thank you for your attention and we look forward to meeting many of you in person in New York later in the quarter. Thank you.

Operator:

Good morning, and welcome to the UnitedHealth Group’s Second Quarter 2022 Earnings Conference Call. A question-and-answer session will follow UnitedHealth Group's prepared remarks. As a reminder, this call is being recorded. Here are some important introductory information. This call contains forward-looking statements under the U.S. federal securities laws. These statements are subject to risks and uncertainties that could cause actual results to differ materially from historical experience or present expectations. A description of some of these risks and uncertainties can be found in the reports that we file with the Securities and Exchange Commission, including the cautionary statements included in our current and periodic filings. This call will also reference non-GAAP amounts. A reconciliation of the non-GAAP to GAAP amounts is available on the Financial and Earnings Reports section of the company's Investor Relations page at www.unitedhealthgroup.com. Information presented on this call is contained in the earnings release we issued this morning and in our Form 8-K dated July 15, 2022, which may be accessed from the Investor Relations page of the company's website. I will now turn the conference over to the Chief Executive Officer of UnitedHealth Group, Andrew Witty.

Dirk McMahon:

Thank you, Andrew. Picking up on Andrew's comments, I want to provide you with a little more color on the progress we have been making on our growth strategies. This progress is evidenced by -- is evidenced in our work to serve more people through value-based arrangements and to deliver better care. We are well along in our goals for the year. This expansion has significant implications for clinical quality and consistency. MA patients in value-based arrangements with Optum Care physicians are more engaged in their care, with adherence to wellness checks running 5 points higher than Medicare fee-for-service patients, helping to deliver a nearly 20% lower hospitalization rate. Further, Optum Care COPD patients served in our value-based arrangements have 80% higher medication adherence rates than Medicare fee-for-service patients, contributing to about 60% fewer respiratory complications, enabling people to avoid emergency room visits. Clinical results like these are a small part of the track record we have built in delivering value-based care at a substantial scale for years now, and what gives real urgency to our work to expand access to such care. We also remain committed as an organization to improving access by driving down the cost of healthcare through applied technology. For example, we are investing hundreds of millions of dollars to enhance the technology backbone of healthcare. Areas such as platform rationalization to reduce unnecessary complexities, greater end-to-end eligibility management for a more seamless customer experience, and a common platform to facilitate a consistent clinical experience for our consumers and providers. These investments will ultimately lead to an enhanced end-to-end service experience, lower overall operating cost and greater value for people we serve. A simpler experience is at the center of our work on the integrated consumer card developed by our Optum financial services team. We have seen great consumer response within our initial pilot groups. The simplicity of combining all benefits, even healthy food purchases onto a single widely-accepted card has been a differentiator with consumers. Based on this initial work, we intend to introduce the card to all our individual Medicare Advantage members in 2023. Another key element of our work to improve experience is the optimization of consumer transactions. We know members need and expect timely information at their fingertips, and I'm pleased to report they are responding well to our digital offerings for everything from understanding their coverage to completing a virtual visit. Digital engagement has jumped 170% among Medicare members during the last couple of years. Lastly, in pharmacy services, we are very focused on improving quality of care and access for consumers by driving pharmacist-led offerings. We are on track to have nearly 700 community pharmacies by the end of the year and continue to increase the integrated community pharmacy footprint in our clinical locations. With that, now I'll turn it over to Chief Financial Officer, John Rex.

Andrew Witty:

Thanks, John. Before the Q&A, let me underscore a few key points. First, the strong momentum throughout our business. The people we serve are continually seeking value, high-quality care at fair cost, and our colleagues across Optum and UnitedHealthcare are raising the bar every day. You see that manifested in our business performance and the strong growth in our core platforms, double-digit growth across the Benefits businesses, a growing revenue backlog in Optum Insight, robust growth in our pharmacy services and expansion across Optum Health. We see tremendous opportunity ahead, and we remain confident in our ability to deliver our long-term 13% to 16% earnings per share growth objective and further advance our mission to help people live healthier lives and to help make the health system work better for everyone. With that, operator, let's open it up for questions. One per caller, please.

A.J. Rice :

I wondered if maybe we could ask you to comment a little bit more on your discussions with the employer groups as we go through the selling season on the benefits business. I have 2 open questions. It seems like to me there's this sort of back and forth about need to retain employees, a tight labor market in many industries. But alternatively, concerns about the recession, and how is that coloring conversations? And then also this issue of pressure on some of the provider areas from their tight labor markets, how is that impacting discussions with employers about their benefit outlook for next year?

Brian Thompson :

Yes. Thanks for the question, A.J., and I appreciate that lead in, Andrew. Most of these conversations have been around innovation and how do we continue to drive value-based solutions in the form of product design. That has really been the central theme throughout. We have showed up to the market with some new ideas around virtual care. You've heard about that with our partnership with Optum, both in terms of product design, as well as broader access beyond medical integrated with behavioral, et cetera, and how we really enable the consumer. High deductibles have - often have been a part of the equation for a long time, but Bind really puts that consumer in the driver's seat where they're able to choose what coverage they want with pre-service guaranteed costs. And that really resonates in the marketplace. And most importantly, for employers, it not only provides great quality, but lower price points. So I would say the conversations have been less around staffing and employment levels and more around value. And these examples of products have really resonated.

Operator:

We'll go next to Justin Lake with Wolfe Research.

Andrew Witty :

Justin, thanks so much for the question. Before I ask John to maybe comment a little bit on the business cost evolution and then Brian, I think will give you a little bit of perspective of what they're seeing in terms of hospital conversation, just a couple of step back observations maybe I would offer here. First off, as we look across the overall business, we are seeing tremendous growth opportunities and tremendous potential for us to invest behind those. And you see that picked up in some of the increase in investment levels that you see in the quarter this time around. I think that's an incredibly positive sign of the forward potential of the overall organization. John will talk a little bit more to some of those in a second. I think in terms of 2023, we are not going to get into a ton of detail on how we are thinking about pricing. But as always, we are very, very respectful of the kind of underlying phenomena within the cost trends of the environment. Of course, that includes a sense of where COVID may or may not be. And I think we have all learned to be deeply respectful of something like a pandemic and the uncertainties it can present. And even in the last few months we have seen that play out a little bit. And of course, respectful of things like inflationary trends in the environment and all of that plays into how we think about these things. Maybe just to give you a little bit more depth on the first part of your question, I'll pass it to John, and then maybe John, you could pass it to Brian, just to finish off on the second part.

Brian Thompson :

Yes, John, I think you summarized that well. I might just add on inflation. Obviously, as you well know, Justin, we priced to our forward view of cost, that includes inflation. We're certainly respectful of what we're seeing in terms of labor cost with our provider partners. And as you might expect, obviously, with long-term agreements, there will be more impact in 2023 than 2022, just as a function of time and how we renew these contracts. So certainly respectful of that dynamic and environment. Thanks.

Operator:

We'll go next to Ricky Goldwasser with Morgan Stanley.

Andrew Witty :

Ricky, yes, great. Ricky, thanks so much for the question. Before I ask Heather to make a few comments on that, I think one of the overwhelming census that we see around Optum Rx is the really strong growth and the bringing on board of very significant new clients. And of course, that, as you know, brings with it a kind of front-loading investment phenomenon as you gear up for supporting that, and that's one of the reasons why you see this lag between the revenue growth and the earnings growth. And maybe to give you a little bit more of a sense of all of that and other aspects, Heather?

Andrew Witty :

Great. Thanks, Heather, and Ricky, thank you for the question. Next question, please.

Matt Borsch :

Yes. If I could ask a question about the -- I think it was about a month ago that the U.S. Supreme Court elected not to take up the case that had gone through the district and appellate courts regarding the CMS rule on risk coding, if I'm referring to it in the right way. Can you just help us understand anything you can say about implications, or at least maybe next steps in that process?

Operator:

We'll go next to Scott Fidel with Stephens.

Andrew Witty :

Scott, thanks so much for the question. And listen, let me start off by saying we really believe that enhancing and building high-quality care provision in the home is going to be a key feature of the future. And the more that that can be linked to other aspects of care, so for example, physician clinic, virtual and the rest, it's very much a central focus of our Optum Health development. And so the bringing together of LHC within the overall Optum organization is really important to us, and we're very committed to that transaction. We believe it really is going to be a significant enhancement of the quality of care that can be delivered. And we think we can really -- it can really contribute towards improved value-based delivery for patients. I think, as is always the case, making sure that the incentive system is appropriate to drive the right kind of care is really important. So I hope very much over time that CMS and others continue to see the value of home care and that, in fact, the support is given and the signals are given to continue to increase the development of high-quality care in the home environment. And so we'll see how that plays out. Honestly, we are committed to this agenda very much because we see it as a strategically critical way of extending better care to folks in homes. And you have to remember, Scott, some of these folks can't get out of their homes. I mean, this is really -- this isn't kind of elective for them. They need -- we need to find ways to get more help to them. And as you know, we've got a long history in this in areas like house calls, which have delivered amazing health assessment and preventive direction to millions of people, and this is another big step for us to extend. So we're optimistic about this. We hope very much that CMS and others will continue to send signals of support through the way in which they choose to invest in this arena, and we'll see how that plays out during the rest of the year. Thanks so much for the question. Next question, please.

Lisa Gill :

Andrew, I appreciate your comments on Optum Rx and what you're doing for 2023 around the no co-pay, $0 co-pay. But I'm wondering if you or Heather could maybe comment on 2 things. One, the 2023 selling season? And then secondly, I know you and I have talked in the past about shift towards value-based care within Rx. Are you seeing new programs for 2023 beyond what you talked about as we think about value-based care?

Heather Cianfrocco :

Absolutely. As Andrew said, strong selling season across Optum Rx is enjoying that as well. And the way I think about that, first of all, it came off a really strong '22 season. Sitting where we are today, 2 ways to think about it. The first is client retention. We're going to be in the high 90s again this year with most of the book in right now. With respect to new business activity, based on sales activity, including finalists and win rates right now, we're ahead of where we were at this time last year. And I really think that's the result of the real-time innovation. We're working again with our clients now to bring them services today. We're not waiting. We're not waiting for other market factors or the environment to make us innovate and drive down cost, and that's showing up. I think we have the best client management team and responsive client management team in the industry, and that's paying off for us. So I think we're going to be very busy again in 2023. That's going to require some investment. But we're going to be very busy with another 2023 year serving our clients. With respect to value based, I guess, I think about it in 2 respects. We're seeing better -- we're seeing definitely more interest and pressure from our clients. And we're also seeing more engagement from our clients to engage in the elements of value-based care and to incorporate pharmacy, including specialty pharmacy, into those constructs. The role for us to play is, number one, to ensure that our pharma partners are bringing the most affordable value-based and clinically appropriate drugs to drive those results. But the other thing is that we bring tools real time that integrate products, with treatment protocols. We work very closely with Optum Health, and particularly with most -- with many of our Optum Care prescribers and providers, to experiment with these tools and services that will help prescribers make the right choices. Our plans and plan sponsors to be able to have more predictability in their services and for us, to be an important piece of that value-based shift. So you'll continue to see us invest there, and I think we'll see even more -- the PBMs being a bigger piece of driving value-based care and integrating pharmacy.

Operator:

We'll go next to Josh Raskin with Nephron Research.

Andrew Witty :

Yes, Josh, great question. Really appreciate it. And we continue to see a very strong performance in our senior book of business. You see that continued progression toward 800,000 folks joining us this year for the first time. That's really important, continued market share growth. And all of that is built on the stability of the service offering that we're giving. And I think the experience that the seniors are taking. But you're totally right to ask the question about where next. And maybe Tim Noel, you could speak to that?

Andrew Witty :

Tim, thanks so much. And I think maybe there was a little glitch with Tim's mic at the beginning of his comments. So I hope very much you were able to hear him, and certainly hear the latter part of his commentary. And I think the sense of urgency and depth of thinking around innovation for our senior members and where that service can go over the next several years is really substantive, and you should continue to see us be super active in that space. Josh, I really appreciate the question. Next question, please.

Kevin Fischbeck :

Great. I was wondering if you could talk a little bit about the capitated physician growth in the quarter. How you think about the ability to continue to add doctors at this rate, the competitive landscape? And how should we think about where the margin and the capitated physician business compared to Optum Health broadly and where that segment could go over time?

Wyatt Decker:

Yes. Kevin, thanks for the question. Absolutely, we are seeing continued growth of our physicians in Optum Health and Optum Care. What we’ve found is that physicians are increasingly attracted to the value proposition that we offer them, which is less clerical burden and more focused on doing the work that they love, which is providing clinical care. Moving physicians to value-based care paradigms is especially appealing. So you're seeing us appeal to large groups like Atrius and Kelsey that have recently joined Optum Health, as well as doctors coming straight out of residency. So we're tracking nicely towards our growth agenda of adding 10,000 physicians and advanced practitioners during the year, and look forward to following up with you at the investor conference to share those numbers.

Andrew Witty :

John, thank you very much. Kevin, I appreciate the question. Next question, please.

Whit Mayo:

I would have thought that investment income would have been a little higher this quarter. Were there any write-downs on Optum Ventures, anything that would negatively impact that? Just wondering how you're marking some of those investments that you've made in recent years.

John Rex:

Good morning, Whit. Yes, within the quarter, we actually took -- we realized some losses as we reposition the portfolio a bit here, looking out to the future, try to get that all teed up for the environment we're in right now. And so when you look at that, the quarterly progression, which I believe that's what you're focusing on, I'd call it some of the realized losses we chose to take in this quarter.

Operator:

We'll go next to Gary Taylor with Cowen and Company.

Andrew Witty :

So I'll ask John to make a few comments on this in a second, but I'm glad you saw that substantial continued deployment of our capital to grow the business. As you know, a key part of our long-term growth strategy is, of course, organic and complemented by bringing on board new businesses and teams who can supplement what we have. And there's nothing more powerful to that agenda than building out the value-based care piece. Now we believe in both Atrius and Kelsey-Seybold organizations. We have amazing teams, people, organizations which have got real character, history, personality of themselves that we think is going to really add to the diversity of the company and bringing with it a tremendous amount of skills and perspective. And as you know, a number of them already -- in both cases, they have developed themselves some significant thinking around value-based care, so the fit is really good. Of course, when you bring in new organizations, there's typically a further in process before they fully contribute, and I'm sure that will be the case here as well. But really, we continue to be extremely active in how we sensibly think about deploying capital, and we remain very optimistic about our ability to do that. But maybe go a little further around valuation perspective, John?

Andrew Witty :

Absolutely. Gary, thank you so much for the question. We just have time for one last question. So final question, please, operator.

Nathan Rich :

I wanted to ask on utilization in the current inflationary environment that consumers are facing. If, given the greater consumerization of healthcare in today's market, how do you think consumers might change how they utilize the system given some of the pressures that they're facing? And have you seen any signs of changes in behavior so far?

Brian Thompson :

Sure. Thanks for that, Andrew. Maybe to put it in 2 zones. Macro, I think Andrew hit it right in that macro environment. It's really around virtual care and around emergency department use. We've seen, obviously, virtual care increase and emergency department use go down. As I think in the particular, again, back to that concept of consumer and choice, it's around product design, Bind being our best example when we can put that consumer in the driver's seat where they can choose site of service and optimize both their cost and quality, they do. And when you couple that with a high-performing network, obviously, you get the benefit both of the unit cost as well as that consumer choice. So those are the greatest examples that I can see really emerging in this environment.

Andrew Witty:

We certainly appreciate your time and attention today. And I hope what you heard is the story of growth and focused execution. As our strategy continues to generate momentum across our businesses and advance our mission on behalf of every person and every community, we're privileged to serve. Really grateful for your attention this morning. Thank you so much for your questions. We look forward to following up as usual with any further questions you might have offline. Thanks so much, and have a great day.

Operator:

Good morning, and welcome to the UnitedHealth Group First Quarter 2022 Earnings Conference Call. A question-and-answer session will follow UnitedHealth Group's prepared remarks. And as a reminder, this call is being recorded. Here are some important introductory information. This call contains forward-looking statements under US federal securities laws. These statements are subject to risks and uncertainties that could cause the actual results to differ materially from the historical experience or present expectations. A description of some of the risks and uncertainties can be found in the reports that we file with the Securities and Exchange Commission, including the cautionary statements included in our current periodic filings. This call will also reference non-GAAP amounts, a recorrelation of the non-GAAP to the GAAP amounts available on the financial and earnings report section of the company's Investor Relations page at www.unitedhealthgroup.com. Information presented on this call is contained in the earnings release we issued this morning in our Form 8-K dated April 14, 2022, which will be assessed from the Investor Relations page of the company's website. I will now turn the conference over to Chief Executive Officer of the UnitedHealth Group, Andrew Witty. Please go ahead.

Dirk McMahon:

Thank you, Andrew. There is no more important aspect of the consumer experience in health care than convenient access to quality care, not theoretical access but care when and where people need it. Testing, for instance, is an area where we see significant opportunity to improve the consumer experience. It can be a burden for people to test for conditions such as colorectal cancer. As a result, too often, people just won't deal with the hassle early-stage condition, and as a result, early-stage conditions go undiagnosed and people don't get the care they need until things get really serious, which is bad for their health and results in unnecessarily higher intensity treatments and costs in the future. Like many of you, we have observed more willingness by patients for trial and adoption of in-home testing for many types of chronic conditions. However, it can be challenging for people to first, find test and then make sure the results get back into a doctor's workflow. Patients need to call providers for a prescription, go to disparate locations to pick up the test and then somehow get the piece of paper with a test result into an already busy clinic operation. At UnitedHealthcare, we've introduced an integrated solution that addresses all of the tasks that need to occur sequentially for test results to get into a clinic system. This digitally enabled solution is resulting in nearly 10% increase in people obtaining necessary screening versus a multi-step process. We are expanding this vital capability to more people and making additional types of tests available as well. As many of you know, the first quarter tends to be the most impactful in setting us up for operational success for the remainder of the year. The ease of that initial experience for people has a lasting impact on consumer and customer perceptions and buying decisions, not just for the next three months, but often for years to come. So we thought it would be timely and helpful to provide a bit of a performance report card for the quarter. A short version, this is where we owe a great thank you to the people of Optum and UnitedHealthcare. Perhaps nowhere was this more apparent than in the onboarding of the many new people served under value based arrangements within OptumHealth. Investing in the preparation of systems and training in physicians and staff was critical in laying the groundwork to provide high quality care for these new patients and expanding into new geographies. For example, in Ohio and New York, we are observing early improvements in post-acute trends such as skilled nursing facility admits declining 25% in just the first quarter of operation. It's a testament to the deep integration of our post-acute capabilities for transitioning patients to the most appropriate setting for their needs as well as a patient-centric orientation of our local care delivery organizations and their vigilance on care continuity. At UnitedHealthcare, our digital investments are continuing to serve our care providers and helping advance our efforts to move to a paperless experience. In the first quarter, visits to our digital portal continued to increase, while provider support costs declined about 12% from historical averages. Importantly, we have driven a 38% increase in providers using digital documents instead of paper in just this first quarter compared to last year. We expect the efforts we have taken in this quarter will save 80 tonnes of paper over the next five years. Before handing off to John, let me briefly -- let me turn briefly to our pending combination with Change Healthcare. By now, it should be clear we are deeply committed to helping achieve a simpler, more intelligent an adaptive health system for patients, payers and providers. The combination of Optum and Change Healthcare will connect and simplify core clinical, administrative and payment processes, health care providers and payers depend on to serve patients. Increasing efficiency and reducing friction will benefit the entire health system, resulting in lower costs and a better experience for all stakeholders. Our extended agreement with Change Healthcare reflects our firm belief in the potential benefits of this combination to improve health care and in our ability to successfully overcome the challenge to this merger. With that, now I'll turn it over to Chief Financial Officer, John Rex.

Andrew Witty:

Thank you, John. I hope that you will recognize the consistent themes that we laid out last year as our guidepost for sustainable growth. Our focus on execution and continuous improvement across our businesses is a characteristic that we're going to sustain as we build upon this strong start to 2022. And with that, operator, let's open it up for questions. One per caller, please.

Lisa Gill:

Hi, thanks very much good morning. John, I just want to go back to your comments around utilization trends. You talked about hospitalization now down to 2,000 here in March. But baseline somewhat moderating back, but you talked about ER&Ps. But can you maybe just talk about the difference of what you're seeing in commercial versus government? And then secondly, it sounds like you are not really anticipating that there's still a lot of pent-up demand. Am I hearing that correctly? And how do I think about the trend as we move here towards the back half of the year?

John Rex:

Good morning, Lisa, it's John. Yes, so in the first quarter, still seeing similar trends in terms of utilization across the different categories you talked about. A little bit higher in commercial. A little bit lower in government programs. But everything kind of trending back more to those baseline levels, overall. And pointing out, as you appropriately noted here, we were still seeing some pockets here of differentiation, such as impedes and emergency department. That's been a trend we've seen, not to the point yet where we'd expect that to continue, but a consumer differences that we've noted. Also on your comment, and Brian will go into this much more deeply, but as it relates to the potential for acuity, this is something we talked about very early on in the pandemic, as people were missing treatments and how might they come back into the system. It's still something we're extremely watchful for across very -- a lot of categories. I spoke specifically to oncology and what we're seeing in those areas. So good to see people getting their screenings. What we haven't seen, though, is this expectation we had for the incidence rates might actually come up because of missed treatments over their earlier period. And, Brian, could you offer a little more commentary.

Andrew Witty:

Great. John and Brian, thanks so much for that. Yes, it was a very -- it was definitely a quarter of two parts in terms of January and then how February and March move forward with the shift in impacts of Omicron during this quarter. And -- but I think what you've heard from both John and Brian really reflects the kind of movement back towards kind of baseline activities with one or two exceptions. Rest assured, we are really watching like a hawk to see any evolving trend around acuity shift. Obviously, that's super important from a patient welfare perspective. But so far, we haven't seen very many signals of that at all. But it's maybe still early days. Lisa, thanks so very much for the question. Next question, please.

A.J. Rice:

Hi, everybody. Just thought I might ask, where, obviously, a lot of discussion in the broad market about inflationary pressures. And my sense is, you're pretty well matched, particularly on the insurance side, but I wonder if you might take a few minutes and just sort of think. I know there's a lot of different things going on in Optum. How do you feel as we enter a period where there may be a little more inflationary pressure that you're matched revenue versus cost? Is there any pressure points? Is there any places where it's actually helpful to you? Maybe comment on that.

Dirk McMahon:

Yes. So thanks, Andrew. Yes, hi A.J. So, first of all, yes, we're always sensitive to the challenges that people face in health care, specifically from a cost perspective. That's a big reason why we have affordability agenda that's really focused on total cost of care, lowering total cost of care for people, and also telling people in these inflationary times how they get more out of their benefits that they purchased from us. We've also done things we've talked before about getting really some good products in the marketplace, like our virtual products, which are 15% lower than other prevailing products in those markets. And as Andrew said, we're working really hard on technology to improve productivity. One of the things we're trying to do from a productivity standpoint is do that to enable us to make targeted investments in our people and to or otherwise pass that through in the form of premiums to folks. So, those are things from a productivity standpoint that on. From a labor strategy standpoint, more broadly, at the last fall as the sort of the great resonation progressed, we made some investments -- targeted investments in our people. In the first quarter, we had our normal merit review cycle with raises. So, we're trying to make from an internal perspective, the right thing to do. But as we look forward in -- for the remainder of the year, we're going to have to make -- continue to make targeted investments in areas like clinicians and in customer service folks where we see higher levels of attrition. So that's a broad brush as to what we're as to what we're doing. Brian, go ahead.

Andrew Witty:

Yes. Brian, very well said, I think. And our response to inflation is innovation. Simple as that. The way in which we're going to get the best outcome for folks who rely on us is to continue to innovate, how we work inside the company to deliver greater productivity, how we deliver efficient access to the system for members and patients, how we take advantage of things like virtual care platforms and how we truly bring to life the value of value-based care and all of the work that's going on between UnitedHealthcare and Optum, that is going to be a tremendous aid to us in ensuring that we can manage through this on behalf of the people who rely on us. So A.J., thanks so much for the question. Next question please operator.

Scott Fidel:

Hi. Thanks and good morning. I had a question just on the LHCG acquisition. And I guess, a two-parter. First, just as you've conducted a portfolio review of LHCG's assets. Just interested if you've made a decision yet on whether you plan to retain all of the key assets separate from home health, particularly thinking about hospice and personal care. And then we'll just also be interested just on some of the key synergies that you're seeing as you look out to integrate LHCG into Optum's broader clinical platform, particularly when thinking about some of the more adjacent assets such as Landmark and Navi Health that you already have in the home base care umbrella? Thanks.

Wyatt Decker:

Yeah. Thank you, Andrew. And Scott, thank you for the question. We are very excited with the combination of LHC Group. I think Andrew said it well. They have a long-standing culture since they're founding in a small community in Louisiana 1994 of commitment to serve others and help people live their healthiest lives in a home care setting. They've developed multiple capabilities, which actually really nicely complement our growing home and community platform that Andrew touched on. So very excited about that. The quality of care that they provide is remarkable. It's a full 33% higher in the stars quality ratings than the national average for home health care just as an example. And we share this commitment to quality and service. So we feel it's a really good alignment. And then building on your question and Andrew's comments, as we weave home healthcare together with the more kind of complex offerings of post-acute care and complex care in the home that we've already brought into our home community platform, we see remarkable synergies, and this will continue to grow. It also begins to address the question of why has it been so hard to have home care be delivered in a value-based construct. And our vision is with these comprehensive set of offerings stitching it together in a way that is differentiated and helps people get better healthcare outcomes. Initially, we'll help deploy them in the post-acute care setting right out of the gate. Thanks for the question.

Operator:

We will now take our next question from Justin Lake, Wolfe Research. Please go ahead.

Andrew Witty:

Justin, thanks so much for the question. I'm going to ask in a second, I’ll ask Brian just to reflect a little bit on the kind of direction of travel for value-based care. I think it's super interesting to hear the perspective from a payer perspective because Obviously, what Brian and his team are looking for is how do they deliver the very best outcome and value for the folks who rely on him. But before I go to that, a couple of things. We probably I'm not sure we need to kind of go into a ton of speculation on what the potential would be. Where I would focus on is look at the rate of growth that's going on right now. So that movement in terms of growth of Medicare Advantage that Brian is leading that growth, 600,000 folks coming into the OptumCare value-based capitated environment under Dr. Decker's organization. We're focused on knowing that we are able to sustain that level of transfer and growth over many years to come. So what the ultimate ceiling is on that. I think actually is a product of our ability to continue to deliver a fantastically innovative and high-quality capability in the marketplace. And that's going to continue to attract very large numbers of folks who want to be part of and benefit from it. So I'm a little less thoughtful about what could the ceiling be? I'm much more motivated by and excited by the way in which we're at the 500,000, 600,000 rates moving across our ability to both move and grow and win external business as part of that agenda is going to be the thing that we're focused on. So maybe with that, Brian, I'd ask you to go a little further from your perspective.

Andrew Witty:

Brian, thanks so much. And Justin, just to come back to your second question around pipeline, as you'd expect, we don't comment on transactions speculation. But let me just make a few general points. You saw during Q1, we successfully closed and announced the bringing of Refresh Health into the organization. great business built by Steve Gold and his team, helping us build out our behavioral delivery capabilities within OptumHealth complements super nicely. Our largest behavioral health network that we already have across the country from the benefit side of the business, so continue to operate there. I'd say, overall, our pipeline of opportunities, I actually think is probably as diverse as it's ever been and probably deeper than it's ever been. So, I think from a potential capital deployment capability, I think we feel pretty optimistic about that. We continue -- as you see, we continue to be extremely disciplined about ensuring of all the very many opportunities that we see, that we focus on the ones which, first and foremost nestle centrally within our core strategies, those five growth areas I touched on earlier, Refresh Mental Health is a great example of that. So it's right into that value-based proposition in terms of how we believe we need to bring behavioral health management alongside medical management. So first off, we need to sit centrally within our strategic framework. We need to believe in the culture and the capability of the leadership teams that we're welcoming into UnitedHealth Group. And of course, the economics have to fit with our demanding expectations to support our long-term growth ambitions of 13% to 16% and also the returns that our shareholders rightly expect. So that drives us forward. I feel confident about our ability to continue to deploy capital, which has always been a key element of helping us deliver long-term growth. So hope that gives you a little sense of where we stand, Justin. And maybe with that and the next question.

Gary Taylor:

Hi, good morning. I just had a question. Now that we're thinking about OptumHealth, the type of growth, Andrew, that you were just talking about and really tens of billions of dollars of capitated risk, how do we think about the reserving, if OptumHealth was a stand-alone company, how do we think about reserving against that risk its taking? I presume capitate from UHC is an elimination, has all the other payer medical expense accrual, is that just rolling through your total medical accrual, John, or is there somewhere else on the balance sheet where there's payable numbers we should be paying attention to?

John Rex:

Good morning, Gary, it's John. Yes, it'll be rolling through in the by in the same place that you'd be seeing everything else in terms of how those occur. You're right in terms of how you think about eliminations with UnitedHealthcare business versus external business, which would not be eliminated, of course. But all in the same place in terms of how we would be appropriately reserving for those arrangements.

Operator:

Thank you. We'll now take our next question from Kevin Fischbeck from Bank of America. Please, go ahead.

Andrew Witty:

Kevin, could you just repeat the second part of the quarter? I just lost you in the middle of that just. Could you just repeat that?

Andrew Witty:

Yes. Okay, great. Listen, Kevin, thanks so much. I'll hand to Dr. Decker to respond to you on the first part of where that extra $100,000 taken us up to $600,000 is coming from, and it'd be good for you to hear that from him. I think in terms of how we think about how we invest in this space, I'd say, each one is pretty much a unique situation, right? I mean, every doctor clinic, they're all different. They've all got tremendously different histories, situations, dynamics. And, obviously, we take a view within a broad piece of not just what have they achieved to date, but how alongside the rest of our capabilities can we build opportunities and value for patients and the utilizers of those environments. And that's what really drives our kind of economic assessment. Now, I think, what you can see is the way in which we understand and seek to continue to learn how to work better and better within the value-based envelope and how we can utilize the skills of these organizations, allows us be confident in being able to set very fairly, reward people who choose to join our organization, and that's what's driving our ability to be successful integrators of some phenomenal people and their teams across the country. And I'm so pleased they stay inside the organization. And it’s super nice to be able to see OptumHealth continue to strengthen itself as a physician-led organization. And I think that is really contrasting to many others out there. This is an organization led by physicians at every level of the organization, and it makes a huge difference in terms of the way the heart and soul of this place is starting to be. And, I think, that's what underpins a lot of our contribution and competitiveness. With that, Dr. Decker, as the physician leader of the organization, maybe you could just reflect a little bit on how you're successfully driving up that growth rate.

Andrew Witty:

Thank you so much. Kevin, thanks so much for the question. Much appreciated. Next question please.