By Sriparna Roy and Leroy Leo
(Reuters) – UnitedHealth Group said on Tuesday it expects the attack on its Change Healthcare (NASDAQ ) unit to cost the company up to $1.6 billion this year, but maintained its profit forecast for 2024, suggesting less of an impact. severe cyberattack that many in the past had feared.
Despite massive disruptions, the healthcare conglomerate beat first-quarter profit estimates as medical costs fell from the highest rates hit late last year, sending its stock up 5.3 %. As of Monday's close, United shares had fallen nearly 15% since disclosing the ransomware attack on February 21.
Upbeat results from UnitedHealth (NYSE:) boosted Tuesday. Shares of some rival health insurers, including Elevance, CVS Health (NYSE and Humana (NYSE ) also rose, with Humana rising more than 2%.
The attack on Change, a provider of healthcare billing and data systems and a key node in the US healthcare system, disrupted payments to doctors and healthcare facilities across the country for a month and affected harshly to community health centers that serve more than 30 million poor people. and uninsured patients.
The health insurer relaxed or eliminated prior authorization processes for some claims after the attack, stoking concerns of rising medical costs. Executives said Tuesday that these have recently been reinstated.
There were also delays in submitting claims as healthcare providers, unable to access the Change system, struggled with paperwork.
“We have made substantial progress and we will not rest until the connectivity needs of care providers are met,” UnitedHealth CEO Andrew Witty said on a conference call to discuss the results.
To date, UnitedHealth has provided more than $6 billion in advance financing to certain healthcare providers. While several of its major services have resumed operations, many more continue to suffer the impact of the disruption.
Change's pharmacy claims and payment management businesses are about 80% operational and the company will bring more products online in the coming weeks, according to Roger Connor, CEO of UnitedHealth's OptumInsight unit, which runs Change. The company believes Change will return to its initial performance next year.
Connor said he is confident Change can win back customers who have had to turn to rivals because of the disruption.
'NOT SO SEVERE'
The company said it had already accounted for $872 million in costs related to the data breach in the quarter, most of them as one-time items.
Still, UnitedHealth stood by its 2024 adjusted earnings forecast of between $27.50 and $28 per share. Disruptions from the hack are expected to hit earnings by $1.15 to $1.35 per share this year, the company said.
“The impact of the hack is not as severe as expected, especially considering they maintained their adjusted earnings outlook for the year despite the business disruption,” said Gerrit Smit, head of global equity management at investment firm Stonehage. Fleming, who owned more than 90,000 UnitedHealth Shares at the end of last year.
Morningstar analyst Julie Utterback said trends in healthcare demand were in line with management's expectations, which should come as a relief to industry investors who have been concerned about those elevated costs.
UnitedHealth reported an increase in the healthcare rate (the percentage of premiums spent on healthcare) to 84.3% from 82.2% a year earlier. The company's fourth-quarter ratio was 85%, which it attributed in part to older Americans seeking respiratory syncytial virus (RSV) vaccines and receiving additional medical services.
UnitedHealth has not yet disclosed the amount of personal data that was breached in the attack. You must report that information within 60 days as required by federal law.
For the quarter, UnitedHealth reported a profit of $7.16 per share, excluding a 25-cent hit from business disruptions caused by the data breach, compared with analyst estimates of $6.61 per share, according to LSEG.
The company posted a net loss of $1.53 per share also due to a $7 billion charge related to the sale of its Brazilian unit, Amil.
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