UnitedHealth’s Profit Surges, But Medical Costs and Care Utilization Rise
The health care giant UnitedHealth has reported a better-than-expected profit for the final quarter of 2024, but the news was tempered by a surprising increase in medical costs and care utilization. This unexpected rise has left Wall Street analysts scratching their heads.
A Tragic Loss
Before diving into the financials, UnitedHealth leaders took a moment to express their gratitude for the condolences they’ve received since the tragic death of Brian Thompson, CEO of the company’s UnitedHealthcare business. Thompson’s passing on December 4 has had a profound impact on the company, and his legacy will be felt for years to come.
Medical Costs Take a Bite
In the fourth quarter, a staggering 87% of the premiums UnitedHealth collected went towards covering medical costs, exceeding analyst expectations. This surge is attributed to an increase in prescriptions for expensive specialty drugs and other cost pressures that have been building over time.
Financial Highlights
Despite the challenges, UnitedHealth’s net income rose slightly to $5.54 billion in the quarter, with adjusted results totaling $6.81 per share. Revenue climbed about 7% to $100.8 billion, although this fell short of expectations. Analysts had predicted earnings of $6.73 per share on $101.6 billion in revenue.
A Year of Challenges
UnitedHealth operates the nation’s largest health insurer, covering over 49 million people in the United States. The company also runs a large pharmacy benefit manager and a growing business that delivers care and provides technical support. However, 2024 was a tough year, with full-year profit sinking 36% to $14.4 billion due to costs tied to a massive cyberattack and other factors.
Looking Ahead
As UnitedHealth moves forward, it will be important to keep a close eye on medical costs and care utilization. The company’s stock, a component of the Dow Jones Industrial Average, has taken a hit in recent months, falling about 4% on the year. Despite this, UnitedHealth remains a major player in the health care industry, and its ability to adapt to changing circumstances will be crucial to its future success.
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