UnitedHealth Group (UNH) is currently still recovering from the Change Healthcare cyberattack this February and has responded with new guidance pertaining to larger-than-expected financial impacts.
The health provider stated it foresees another hit of $0.30 per share for 2024 with a total report of $0.60 per share in consideration to the security breach. UHG has recently updated the estimated financial impact for the year from $1.6 billion to $2.3 billion. In the second quarter alone, the attack appeared to cost the company $1.1 billion in earnings.
During UHG’s second-quarter earnings call on July 16, CEO Andrew Witty remarked that the company had failed to predict the attack’s full effects, stating, “I think we were a little optimistic, in hindsight, at the pace at which we thought people would come back” after the system was securely reconnected.
He also noted the relative speed of recovery for the business over the past several weeks.
Change Healthcare, one of UHG’s several payment processing systems mobilizes payments for providers while handling patients’ health information.
Change’s systems were infiltrated by ransomware group BlackCat, otherwise known as ALPHV, which stole upward of millions of patients’ health data in February, though a precise number has yet to come out. UHG identified the attack and shut down the system a couple of days later, only getting the data back from BlackCat after paying a $22 million ransom.
The attack resulted in weeks-long stalled prescriptions for patients and a sizable backlog of payments for providers. Witty has since said UHG has largely recovered and is in a reasonable state for the remainder of the year.
Despite the severity of the security breach, UHG’s second-quarter revenue grew by $6 billion to $9 billion, an increase of 7% compared to 2023’s second quarter. Company earnings per share were reported at $6.80, outpacing Wall Street’s estimates of $6.63.
During the earnings call, the company’s stock started trading down but soon was back up over 4% after the call, with each share trading at $536.
Regarding security measures, UHG has chosen to increase digitization efforts, citing benefits largely involving efficiency. The company’s operational cost ratio, or the ratio of operating costs compared to revenue, climbed to 13.3% in the second quarter compared to 14.9% in last year’s second quarter.
CEO Witty stated the company now uses AI for various operations, though he did not specify which. He commented, “The first wave of those are essentially allowing us to do things much more quickly, much more reliably, much more efficiently than humans can do them.”
One use case involves having AI take care of patient claims in the Medicare Advantage population, though UHG is currently dealing with AI-related claims denials as a result.
Witty did clarify that the company uses basic AI more so than generative AI, choosing to simply digitize basic tasks. For example, new clients are onboarded onto UHG’s pharmacy benefit manager platform OptumRx through AI, resulting in noticeable growth year to date. The division’s revenue grew 13% in the second quarter compared to 2023, and the number of drug prescriptions processed grew 5%, expanding from 380 million prescriptions to 400 million.
“We actually spent 9% less this year in the onboarding of that record volume than we did the prior year,” Witty noted. “And it’s something we obviously expect to continue to sustain over many, many quarters and years.”
