UnitedHealth Group, the parent company of UnitedHealthcare and Optum Health, saw its stock price plummet over 20% Thursday morning after the healthcare giant downgraded expected performance for the year. The company’s executives explained on a call with analysts Thursday that they had been surprised by increased use of physician and outpatient services within UnitedHealthcare’s Medicare Advantage business.
UnitedHealth CEO Andrew Witty called the company’s performance “unusual and unacceptable,” while CFO John Rex said he was “extremely disappointed” to share the news of the company’s outlook with analysts.
“Within UnitedHealthcare, pressure was largely contained within the senior business where we saw a sharp increase in care activities that became apparent as we closed out the quarter,” Rex said.
Rex said the company would now expect adjusted earnings of $26 to $26.50 per share. As recently as January, the company was expecting adjusted earnings of $29.50 to $30, according to the Wall Street Journal.
The executives were asked about President Donald Trump’s tariffs, which have the potential to hit the pharmaceutical side of UnitedHealth’s business. CEO Witty said he felt “pretty good” that various price protections in place through existing contracts would help insulate the company, something that’s been pointed out by other health care experts who believe the immediate impacts won’t be felt by the health care giants themselves in the short term.
“In fact, I’d say better than pretty good in terms of the degrees of price protection mechanisms we have in preexisting contracts and also various pieces of legislation, which also limit the ability of manufacturers to pass price increases down through the system,” said Witty.
UnitedHealth said that new technologies would allow the company to become more efficient and help deliver better financial results in the future.
“Looking ahead, we see a long runway for further technology advances that will translate to more and sustained operating efficiency, which in turn drives opportunity for further innovation and advancements in the company and across the industry,” said Rex.
President Trump’s administration recently announced a 5.06% rate increase for Medicare Advantage plans next year, much higher than the 2.23% that the Biden administration had proposed. That bump is expected to raise $25 billion in additional revenue for health care companies, according to the Journal. That sent health insurer stocks soaring earlier this month.
UnitedHealth reported net income of $6.47 billion for the first quarter, according to the Journal. UnitedHealth’s stock price is down over 22% on the day at the time of this writing, trading at just over $453 per share. The stock currently sits down 10% from where it was a year ago.
