UnitedHealth Group ( UNH ) is managing a slower-than-expected recovery from the cyber attack on its subsidiary Change Healthcare earlier this year — and is offering new guidance about the bigger-than-expected financial impacts.
The company said it expects an additional hit of $0.30 per share for the year for a total impact of $0.60 per share related to the hack. UNH said the cyber attack cost it $1.1 billion in profits in the second quarter alone. UHG previously estimated a total impact of $1.6 billion for the full year; it has now pushed the estimate up to $2.3 billion by 2024.
CEO Andrew Witty said on UHG’s second-quarter earnings call Tuesday that the company did not correctly predict the impact of the attack.
“I think we were a little optimistic, in hindsight, at the rate at which we thought people would come back” after the system was safely reconnected, Witty said.
He added that the pace of business has recovered in recent weeks to a more normal level.
Change Healthcare is one of UHG’s payment processing systems, handling payments for providers as well as health information for patients.
A ransomware group identified as BlackCat, or ALPHV, infiltrated Change’s systems and potentially stole millions of its patient data in February – the exact figure has not been disclosed. UHG became aware of the attack a few days later and shut down the system. The company then paid a $22 million ransom to retrieve the data from the group.
The attack created a backlog of payments to providers and disrupted patient prescriptions for weeks.
Witty said the company is back on track and in a good position for the rest of the year.
Despite the impact of the attack, UHG’s revenue rose in the second quarter ended June 30 by $6 billion to $99 billion, about a 7% increase compared to the same quarter in 2023. The company reported earnings per share of $6.80, just beating the Wall Street estimate of $6.63.
UHG stock started the trading day lower, but reversed course and rose more than 4% after the earnings call, trading at $536 per share.
Meanwhile, the company is doubling down on its use of technology and said digitization is helping it become more efficient.
The company reported its operating cost ratio — the ratio of operating costs compared to revenue — came in at 13.3% in the second quarter, compared to 14.9% in the same quarter last year.
Witty said the company is now using AI in a number of ways, but did not specify in which areas.
“The first wave of them basically allows us to do things much faster, much more reliably, much more efficiently than humans can do them,” Witty said.
One such example has been allowing AI to handle patient claims in the Medicare Advantage population. (The company is already in hot water over claim denials.)
But Witty said the company wasn’t using generative AI as much as basic AI — a digitization of tasks. This includes onboarding new customers to its pharmacy benefit manager platform, OptumRx, which has seen strong year-to-date growth. Revenue for the division rose 13% in the second quarter compared to a year earlier, and the number of prescriptions filled increased to 400 million compared to 380 million in the same quarter last year, an increase of 5% .
“We actually spent 9% less this year in bringing in that record volume than we did a year ago,” Witty said. “And it’s something that we obviously expect to continue to hold for many, many quarters and years,” he added.
Anjalee Khemlani is the senior health reporter at Yahoo Finance, covering all things pharma, insurance, care services, digital health, PBMs, and health politics and policy. Follow Anjalee on all social media platforms @AnjKhem.
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