OAN’s James Meyers
9:38 AM – Wednesday, April 17, 2024
UnitedHealth Group said on Tuesday it expects the hack of its Change Healthcare Unit to cost the company close to $1.6 billion this year but has maintained its 2024 earnings forecast, which suggests a smaller impact than experts had predicted.
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UnitedHealth said on Tuesday that it expects $1 billion to $1.15 billion in “direct” costs in 2024 as a result of the attack. The healthcare company said it also projected another $350 million to $450 million “business disruption” hit, which includes lost revenue.
The announced losses came after ransomware attackers took control of critical systems at the company’s Change Healthcare business earlier this year, which limited patients’ access to prescriptions and stopped payments to care providers.
The health insurer suspended, or removed, prior authorization for some claims following the hack, causing concerns of a substantial increase in medical costs for patients. However, executives said on Tuesday that these have recently been reinstated.
Additionally, there were also delays in claim submissions as medical care providers, unable to access the Change system, caused a pile up in paperwork.
The cyber attack caused a $872 million drag on earnings from operations in the first quarter.
“We’ve made substantial progress and we will not rest until care providers’ connectivity needs are met,” UnitedHealth Chief Executive Andrew Witty said on a conference call to discuss results.
Meanwhile, UnitedHealth has provided advanced funding worth over $6 billion to multiple healthcare providers.
Change’s pharmacy claims and payment management businesses are 80% functional, and the company will bring more products online in the next few weeks, according to Roger Connor, CEO of UnitedHealth’s OptumInsight unit, which runs Change.
However, Connor has said he has confidence that Change can bring back customers who had to go to rival companies because of the cyber attack.
For now, UnitedHealth backed its 2024 adjusted profit forecast of $27.50 to 28$ per share. According to the company, the outage is expected to impact profit by $1.15 to $1.35 per share this year.
“The impact of the hack is not severe as expected, especially seeing that they maintained their adjusted earnings outlook for the year despite the business disruption,” said Gerrit Smit, head of global equity management at investment firm Stonehage Fleming, which held more than 90,000 UnitedHealth shares as of the end of last year.
UnitedHealth bought Change for almost $8 billion in 2022 and the company doesn’t expect to get back to “baseline performance” until 2025, Connor said.
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