Why UnitedHealth is betting big on South America

The acquisition of a Chilean healthcare company will put UnitedHealth in a "leading position" in four of South America’s largest economies, a company executive says. (Getty/LorenzoT81)

For UnitedHealth Group, already the largest health insurer in the U.S., the next frontier for growth is in South America. 

On the company’s quarterly earnings call on Tuesday, UnitedHealthcare CEO Steve Nelson said the expansion opportunities in South America are “reminiscent of the opportunities in healthcare markets in the U.S. two decades ago,” when both Medicare Advantage and Medicaid managed care were in their infancy.

“We expect opportunities for growth in these markets to advance, as they have in the past two decades or more in the U.S.,” he added.

UnitedHealth’s push into South America began in 2012, when it acquired Brazil’s largest healthcare company, Amil. After that and other smaller deals, UnitedHealth's Brazil division now serves 4 million people with comprehensive medical and 2 million with dental coverage, according to a presentation at the company's recent investor conference. It also owns and operates 135 hospitals and clinics in the country.

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More recently, UnitedHealth announced a $2.8 billion deal to acquire Banmédica, which offers both healthcare services and benefits in Chile, Colombia and Peru. Banmédica serves 2.1 million people and operates 13 hospitals and 143 medical centers, according to Nelson, who noted that the transaction is expected to close in the first quarter of 2018.

Acquiring Banmédica will put UnitedHealth in a "leading position" in four of South America’s largest economies, UnitedHealthcare Global CEO Molly Joseph said during Tuesday’s call.

"Collectively, these countries have a population roughly equal to that of the U.S., but [there's] perhaps more growth opportunity in these emerging private healthcare markets, as well as a broader, longer-term opportunity to serve the systems more holistically by also serving public markets," she added.

UnitedHealth Group CEO David Wichmann underscored the point, saying the company is "establishing a foundation for growth in South America for decades to come."

Amid this global expansion, UnitedHealth has also been making moves stateside. In December, its healthcare services division Optum announced a $4.9 billion deal to acquire DaVita Medical Group. And earlier in 2017, Optum acquired The Advisory Board Company’s healthcare consulting and technology business.