UnitedHealth Group and their two children... UHC and Optum

UnitedHealth Group and their two children... UHC and Optum

People always ask me why these two separate companies exist under UnitedHealth Group. There is a lot of varying opinions on this but I will do a brief overview (100 level) of the suite of companies that fall under UHG to provide clarity. UHC is the health benefits arm of UnitedHealth Group, while Optum is its pharmacy benefits arm. Imagine UnitedHealth Group as the torso, UHC as the left arm, and Optum as the right arm.

Recently, OptumRx, OptumInsights, and OptumHealth have added significant growth drivers to the right arm. Aside from acting as a nice ancillary business to UHC's health insurance business, these companies also provide services to regional payors, hospitals, employer groups and some of the largest payors. To gain clarity on their long-term strategy, let's examine each of these businesses to understand why the company was set up this way.

• OptumRx- Pharmacy care services company that serves over 65 million Americans and is one of the three largest PBMs in the United States. One of the great revenue generators for UHG bringing in almost 74 billion in revenue through the first nine months of 2022 and growing at almost 10% per year. That growth rate is impressive for a business unit that size so it is a staple of the UHG franchise.
• OptumInsights- Highly profitable business that uses data analytics and AI to help hospitals, physicians, health plans, governments and life sciences companies. The data can assist with revenue cycles, find patterns of fraud, help with patient care, and process large amounts of data to make healthcare more efficient. Insights is also a growth driver for UHG with revenue growth of 14% over 2021.
• OptumHealth- OptumCare sits under this business and is a provider network of over 60,000 physicians that can be used for capitation for Medicare Advantage but can also be used as an opportunity for employer groups to gain access to better medical benefit rates. This is a large growth driver in the UHG suite at 33% growth over 2021 along with being the third largest revenue producer (52 billion through Q3 of 2022) behind UHC and OptumRx.

Now that I have outlined the structure of UnitedHealth Group, it is a good idea to give you an outline of how large each business is through the first 9 months of 2022 (from their 10-Q):

UHC

• 186 billion (Growing at 12% over 2021)
• EBIT of 6.13%

Optum Total

• 135 billion (Growing at 17.85% over 2021
• EBIT of 7.48%

OptumRX

• 74 billion (Growing at 9.57% over 2021)
• EBIT of 4.15%

OptumInsights

• 10.1 billion (Growing at 13.92% over 2021)
• EBIT of 26.42%

OptumHealth

• 52.7 billion (Growing at 33.44% over 2021)
• EBIT of 8.23%

Despite being smaller on top line revenue, Optum is growing faster than UHC and will eventually eclipse UHC. In the long run, Optum has the larger growth opportunity to sell to more hospitals and health plans and add more services to bolster the business, so I expect it to become as large as UHC in the next few years. In my opinion, UHG is the Amazon of the healthcare arena as they are constantly innovating who they are. The company, which had a market cap of 30 billion a decade ago, has moved up to 517 billion today, and I expect it to continue to dominate the healthcare industry. This arrangement of companies can be confusing to many so I figured I would add some clarity around the structure.

I am a fan of learning about these large payors so always feel free to reach out with questions or additional comments.

https://www.dhirubhai.net/in/jeffreydelverne/