Every aspect of the U.S. healthcare system was hit hard by the COVID-19 pandemic, a reality illustrated by UnitedHealth Group’s latest earnings report published Wednesday (Jan. 20).
The company managed to beat Q4 profit expectations despite COVID-19 taking a significant bite out of its business. UnitedHealth reported that the cost of caring for pandemic patients accounted for roughly 11 percent of care activity in Q4, a 6 percent jump from July to September, CFO John Rex told investors. According to Rex, UnitedHealthcare’s health insurance division paid for 65,000 inpatient admissions related to COVID-19; about 20 percent of those admissions happened in October and 50 percent in December. UnitedHealth reports it is also looking for a delayed cost impact as those who put off care early on in the pandemic are now coming back to seek service.
“During the fourth quarter, we saw overall average care activity return to seasonal baselines, compared to the just over 95 percent [of baseline] we cited for the third quarter,” Rex said. The company previously reported that demand for healthcare services fell to two-thirds of baseline levels at its low point this spring.
But the earnings report, for all the difficulties it highlighted, also pointed at the evolving healthcare future that is shaping up to be quite different from its past. While earnings and operations at UnitedHealthcare were considerably set back when compared to the same time period last year, the company’s Optum division for healthcare services posted a profit margin of nearly 9 percent, compared with just under 1 percent at UnitedHealthcare.
Optum includes a pharmacy benefits management division, a data and analytics consulting service called OptumInsight and a network of clinics across the country called OptumHealth. In the next year, UnitedHealth noted, Optum is set to expand its physician base by about 20 percent.
“We are grateful for the human spirit and resolve of our people, including our 125,000 clinicians who, with other frontline health care workers, demonstrated extraordinary collaboration, compassion and innovation,” David S. Wichmann, chief executive officer of UnitedHealth Group, noted in a press release.
And Optum will be changing this year, as UnitedHealth has recently announced Optum will buy Change Healthcare for $8 billion. The companies project this combination will ease clinicians’ workflows and healthcare data exchange, reduce administrative waste and streamline payment processes.
Optum has a highly automated payment network that can be enhanced by Change Healthcare’s payment capacities which may make it possible for the combined entity to leverage real-time payment to deliver providers’ reimbursements more efficiently.
The combined firm will reportedly engage over 200 million individuals annually.
“This opportunity is about advancing connectivity and accelerating innovations and efficiencies essential to a simpler, more intelligent and adaptive health system. We share with Optum a common mission and values and importantly, a sense of urgency to provide our customers and those they serve with the more robust capacities this union makes possible,” said Neil de Crescenzo, president and chief executive officer of Change Healthcare.
UnitedHealth, the nation’s largest healthcare provider, is bulking up its efforts to build a more intelligent and adaptable healthcare system. In fact, Health Affairs reports, the pressures of the pandemic, and the systematic inequalities in weakness it has exposed has created an incentive for “rapid investment and modernization across the health care sector.”
An assertion seemingly backed up by the rapid explosion of healthcare investments of late. Global investments in healthcare startups set a new record in 2020, reaching $80.6 billion in equity funding. A new report from research firm CB Insights said the 2020 funding was raised in at least 5,500 deals, with growth seen in North America, Asia and Europe.
Digital health funding globally went up by 45 percent year on year, while equity funding to digital health companies hit an all-time high, reaching $26.5 billion in 2020. The pandemic, said Murray Brozinsky, CEO of the virtual care platform Conversa Health, has also created the perfect storm of conditions that make actual change in the healthcare system possible.
“What telehealth likely required was a catalyst, [and] COVID-19 has now been that catalyst,” Brozinksy said, noting that healthcare as an industry has been exposed as broken and in need of innovation.
In an interview with PYMNTS, Alan Cohen, chief product officer of Centivo, noted that long acknowledged and persistent state of brokenness is what drove his firm into the market — to give employers a self-insuring option that is both more effective and less expensive than their typical market options.
“We decided to start a company that would compete with the health plans out there,” Cohen said. “Their deductible is so high and their cost share is so significant that they simply can’t afford to access the healthcare system. And there’s great research out there that shows people in these high deductible plans, especially people who are lower-income brackets, avoid care. In some cases, they don’t stick to their medication regimens. And they really feel like they don’t even have health insurance.”
What 2020 and the pandemic period most efficiently did, experts across the industry seem to agree, was expose the pre-existing conditions within the system itself, and turned up the pain so much that the market is standing at a crossroads where it knows it needs to change. But how that change will play out, and whether traditional or up-and-coming entities will lead it, remains to be seen.
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