Bloom is out of the rose in Unitedhealth Group – The Health Care Blog

By Jeff Goldsmith

A forty -year growth saga is coming to an end

After the closing of the market on Wednesday, April 16, Unitedhealth Group declared its results in the first quarter of 2025. UNH missed their expected profit of 1 C of 9 cents per share, but the company also fell its estimate of the profits of the year 2025 by 12%. Thursday opening, investors reacted with a frantic fury and stripped one and more than a hundred billion market capitalization in a few hours. In the brilliance of the hindsight, UNH was at the cost of perfection at a 38, six higher points higher than Amazon and eight points higher than Microsoft price ratio, which could explain the savagery of the correction.

Definitive answers to the question – what happens to the sprawling mass of United Businesses – is impossible because the company is a black box of $ 400 billion. The main United -Health Insurance, health insurance, health insurance, benefits, benefits and trade / services – are so intertwined with each other that only the financial director of United John Rex and a few other senior executives really know, hence the revenues of United is really taking place. The following is speculation on the deep causes of the problem of the profits of United.

First, a major engine of the past two decades of the growth of United United has used a large part of its astonishing monthly cash flow (which approached $ 3 billion per month) to buy other companies. This part could be finished. United has historically spent about half of their wealth accumulated in dividends and share buybacks, that is to say by reimbursing the shareholders to remain shareholders.

However, an important and not disclosed contributor to the growth of UNH profits has been acquisitions, which have occurred in an almost uninterrupted channel for forty years. From 2019 to 2023, United spent $ 118 billion to buy other companies, which found themselves in Optum. Thanks to the major discipline of the UNH executive president, Stephen Hemsley, and the president of the CFO-Now, John Rex, United almost invariably bought profitable companies in accredit transactions to profits.

United seems to be lacking in accretive transactions. With the shortage of new major transactions, the Horde of $ 81 billion in $ 81 in liquidity and short -term investments (larger than Exxon Mobil) is likely to grow more. This will lead people to wonder why United increase its prices to employers or shake suppliers of deeper discounts when seated on a growing mountain of money.

United cannot buy more health insurers (Cigna and Humana have been for sale for years) because the federal antitrust executors will stop them. There are no longer any more accessible groups of doctors at risk. Hospitals are currently employing more than a third of practitioner physicians in the United States (a very unhappy state case for both parties). But these hospital acquisitions limited the world of doctors’ transactions available for United.

The passage of United on the acquisition of the group of doctors from Steward Healthcare in bankruptcy (stewardship) showed us that it was to buy groups belonging to the hospital, most of which lose money. The UNH has also moved away from groups of doctors belonging to investors as in Envision or Team Health This service, that is to say vampire-election hospitals. The FTC / Justice has increased the red flag about UNH to buy home health companies after their two dollars agreements during the pandemic group – LHC and Amedisys.

When Optumhealth was a quarter of its current size, only seven years ago, it was a margin company of 10%. Since then, Optumhealth’s margins have decreased by more than 25%. While cost reduction and multiple leadership changes to decimate Optumhealth’s business culture, expect a wave of resignations and union activities to browse OH doctors, further damage to the overall margins of Optum Health and UNH.

Optuminsight – Business Intelligence and Corporate Services of the United United – was near a 28% margin company before the hasty and reckless acquisitions of Equian, Change and Navihealth during the Pandemic. It is now a margin company of 16.5%. Optuminsight and United were seriously damaged by the Change Health Care Hack in February 2024.

The change, which was used to treat 1.5 billion of amazing dollars, or a third of all American medical complaints, has lost a lot of angry customers after discovering that the change was in fact a smoking mass of badly kept and barely integrated roll-ups whose security failures damaged their own flow of cash and the operating costs of their own companies. UNH would be stupid to buy more data companies, because the change episode has proven in a conclusive manner that they cannot execute them safely.

Thus, the two largest companies, health insurance and health services, both of which have found a decrease in operational margins in the past five years, cannot be rescued by more accreative transactions. United remains firmly disinterested in having hospitals. The UNH rather worked with diligence to surround and cannibalize hospitals.

Second, the kindness of foreigners took its course. A strategic challenge posed by Optumhealth’s growth was that when United bought significant risk groups like Healthcare Partners, Atrius and Kelsey Seybold, he also bought profitable risk contracts with competitors of United Health Insurance companies. Nearly $ 23 billion in Optumhealth income (more than a fifth), and probably a higher percentage of its profits, came from major medicare contracts with Blue Shield of California, Blue Cross Blue Shield of Massachusetts, etc.

From the pandemic, Optumhealth has encountered the same cost problems as all these hospitals – expenses of nursing and doctors from turnover and temperature agencies, supply costs, etc., it is likely that many of their “partners” finally said that “Nyet” in contract increases that would allow Optumhealth to recover these costs.

Optumhealth cannot terminate contracts with competing health insurers without raising worse advertising and possibly triggering anti-trust confidence requests. UNH therefore has serious leverage problems in negotiations with their competitors. Almost certainly, the rates of renewal of inadequate medicare contracts for its detained medical groups have reduced the Optumhealth MA margins. It is unlikely that these competing health plans will make a priority to maintain the United / Optum margins.

And as the rest of the industry, United awaits new reductions in the registration of medical care care and almost certain payment reductions in the new administration. The prospects for profits for optum as a whole are dark. The long -term deterioration of the margins of optum, which increased from 8.1% in 2018 to 6.1% at the 1T25, did real damage to the overall profits of United. Optum growth was the main contributor to the remarkable growth in United’s profits. This exceptional growth sequence is probably over.

Third, the cold heart care strategy of remote care through algorithms piloted by AI has reached a decreasing point of return. In the aftermath of the appalling assassination of Brian Thompson and brutal exhibitions in Stat and the Wall Street Journal on the Enthusiates of UNH and Coding Practices, some analysts have hypothesized that UNH could have composed the denial machine which was fattening their margins by health insurance.

By monthly to this speculation, the PUn health insurance margins in fact increased to 1T25, to 6.1% against 5.2% for all 2024. However, the refusal of care providers kill a political pain. They will directly lead to many more contracts canceled by providers, the proceedings and the poor consumer satisfaction ratings. United has a less than 12 less promoter score, suggesting that UNH does not delight its tens of millions of customers.

We should expect Sir Andrew Witty to stop pretending to be CEO of UNH and return to England to take care of his herd and the fly. It was a desolate and unconvincing performance. And the loss of market capitalization of 25% after the appeal of the profits of the first quarter damaged the chances of the coasts of the president / director of John Rex to succeed him. The brilliant and reclusive executive president of United, Stephen Hemsley, who did remarkable work by increasing this company since he succeeded Bill McGuire in 2006, has a challenge to the Devil de Succession.
The biggest history of growth in the history of the American corporate health company seems to end. I have been a shareholder in this remarkable company on several occasions, but I am no longer, having lost confidence in this ambitious managed care project. While we are waiting for the bleeding of Trump47 Medicaid and the unlucky republican congress, it is difficult to discern a reason to invest in Unitedhealth Group. In fact, transforming United of a gigantic stack of health assets acquired into a real company can prove to be an impossible management challenge.

Jeff Goldsmith is a fantoist veteran of health care, president of Health Futures Inc and a regular THCB contributor. It comes from his personal substitution