UnitedHealth Group's stock stumbles as it reports spike in utilization for Q4

UPDATED: 11:53 a.m. on Jan. 12

Though UnitedHealth Group beat the Street on both revenue and profit for the fourth quarter, a rise in utilization spooked investors, pushing down the company's stock price.

The insurer saw a spike in care use during Q4 that it attributed to a rise in respiratory syncytial virus (RSV) vaccinations as well as elevated costs related to COVID-19, particularly in December. This in combination with the ongoing trend of patients, namely seniors, seeking services delayed during the pandemic drove the company's medical loss ratio to 85% in the quarter.

Chief Financial Officer John Rex said that additional RSV vaccinations on their own weren't necessarily a driver, but that the interest in getting the shot, especially among the senior population, got some people into the doctor's office when they hadn't visited in a while. The insurer saw in many cases that the vaccination appointments led to primary care physicians addressing other care needs.

"Seniors really did respond strongly to RSV vaccinations," Rex said.

He added that COVID-19 hospitalizations in December were between 50% and 60% higher than in October and November. UnitedHealth is also seeing the cost related to those admissions rise, which he said tracks with the fact that hospitalizations are generally for severe infections.

Though the company's top brass aimed to soothe skittish analysts on its earnings call, its stock tumbled out of the gate and was trading down by about 4% as of 11:30 a.m. on Friday.

CEO Andrew Witty said that though the utilization spike lifted the insurer's MLR in the fourth quarter, the full year figure was within its targets at 83.2%, though certainly at the higher end as was forecast. He also said UHG does not expect the rise in utilization noted in Q4 to have a major impact on its outlook for 2024.

Industry giant UnitedHealth Group kicked off fourth-quarter earnings for major payers on Friday morning, where it reported $5.5 billion in profit.

That's up from $4.8 billion in the profit for the prior-year quarter, according to its earnings report. The company also reported $94.4 billion in revenue for Q4, up from $82.8 billion in the fourth quarter of 2022.

Both figures surpassed Wall Street's expectations, according to analysts at Zacks Investment Research. However, despite the beat, the company's stock did trend down early on Friday.

For the full year 2023, UnitedHealth Group brought in $371.6 billion in revenue and $22.4 billion in profit. By comparison, it earned $20.1 billion in profit and $324.2 billion in revenue during 2022.

The company said in the report that the revenue increase was backed by double-digit growth at both UnitedHealthcare and Optum. Its insurance arm posted $281.4 billion in revenue for 2023, up by 12.7% year-over-year. That includes an additional 800,000 members in UnitedHealthcare's commercial plans as well as growth in Medicare Advantage.

However, about 700,000 people fell off of its Medicaid rolls due to the ongoing redetermination process, according to the report. UnitedHealthcare boasts 47.2 million medical members in the United States, and 52.8 million globally, according to the report.

At Optum, full-year revenues were $226.6 billion, growing by a whopping 24% from 2022. Revenues for Optum Health, the company's care delivery segment, were up by 33.9%, and it grew the number of patients served in value-based care arrangements by 900,000, reaching 4.1 million in total.

Optum Insight's revenue increased by 29.8% year-over-year thanks in part to UnitedHealth's acquisition of Change Healthcare, according to the report.

And at Optum Rx, revenues grew by 16.4% in 2023 as it expanded its clientele and grew relationships with existing clients. The pharmacy benefit manager processed 1.54 billion adjusted scripts, according to the report.

Alongside the results, the company affirmed its 2024 guidance, which was first announced at its investor day. UnitedHealth expects to bring in between $27.50 and $28 in earnings per share, and between $400 billion and $403 billion in revenue.