There is justice; UnitedHealthcare gets hammered
In yet another blow to the big health plans, giant UHC will be cutting 4000 positions as part of a restructuring plan. The plan involves ditching the Uniprise brand and putting all commercial products under the UnitedHealthcare banner.
The announcement comes at a time when UHC's stock has been battered by bad news throughout the sector, with UHC recently announcing it is projecting weaker earnings. On the heels of Coventry's missed forecast and following the CalPers settlement (see below), the bad news has driven UHC's stock price to less than half its 52 week high.
The company also will be paying a fine of just under $900 million to settle CalPers' lawsuit stemming from UHC's stock option manipulation - while admitting no wrongdoing. Got to love that last phrase - if there was no wrongdoing I kind of doubt UHC would have agreed to pony up $895 million.
Apparently United has decided to fix its finances by cleaning out its book of business by dumping less-profitable business and tightening underwriting. These moves, coupled with increased premiums, will cut the medical loss ratio, but at the cost of membership. Expect UHC's trend-neutral revenues to decline in 2008 and possibly 2009 (remember that all health plans have a built-in annual growth rate equivalent to medical trend; to accurately calculate growth one has to correct for that trend).
Over the long term, I don't like UHC's chances. This is not a company that invests in medical management - despite its trove of data, analytical expertise, participation in NCQA accreditation and inhouse capabilities, UHC has always been about managing reimbursement, not care. Their latest move to increase premiums is the way United has always reacted to bad financial results. And it may work for a while, but over the long term the winners in the health plan business will be those who actually understand how to manage care.
And United doesn't.
Comments
I think we've seen the end of the line for premium rate hikes. UHC is losing members faster than rats abandoning a sinking ship. Mostly to blame for that is rising premiums. UHC will not be able to sell what is too expensive to purchase. That said, oddly UHC doesn't seem to realize that yet.
To your point, UHC doesn't manage care, it manages the numbers, and it's core competency (if I may be permitted that oxymoron) seems to lie within the information spectrum - IT. The fact that they are cutting staff in IT and clinical operations only further undermines its abiliy to right the ship.
So I think you are right - I don't fancy UHC's chances over the long term either.
Posted by: Susanne Madden | July 7, 2008 10:15 AM
I echo Susanne's thoughts. UHC also tries to save money by making case management difficult on physicians, more so than many other so-called health plans.
Posted by: Yossi Faber | July 15, 2008 3:49 PM