UnitedHealth Group to grow health services, create in-house TTO

UnitedHealth Group [1] kicked off the second-quarter earnings season for 2010 with a bang, posting net income of $1.1 billion on consolidated revenues of $23.3 billion. That represents a a 7 percent year-over-year revenue growth for the Minnetonka, Minn.-based insurer. But heady profits aren't soothing investors worried about the long-term impact of health reform, reports the New York Times. So UnitedHealth is taking several steps to position the company for survival, said company executives at last week's conference call. These include:

1. Finding opportunities to expand its health services businesses (OptumHealth, Ingenix, Prescription Solutions). "Currently health services contributes about 20 percent of our operating earnings, and we think that is underweight relative to our opportunities in that sector," said Stephen Hemsley, president and CEO. "Pursuing our natural areas of interest and competence in health services could move it up to the 30 percent to 40 percent range of operating earnings over the longer term."

A broad health service platform, led by OptumHealth, will help UnitedHealth achieve "deeper integration into direct-care settings, driven by information and systems-based processes," said Hemsley. That in turn "will enable us to improve the cost and quality of care delivery regardless of care venue or ownership structure," he pointed out.

UnitedHealth took a first step toward its expansion goal last week when Ingenix announced that it had signed a definitive merger agreement to acquire Wakefield, Mass.-based Picis, an enterprise software provider in the acute-care market.

2. Looking for additional cost-cutting measures. UnitedHealth is already working to "remove $1 billion in operating costs over roughly 4 to 5 years," said Hemsley. "We are managing medical costs ever more effectively and consistently, and we've outlined areas for further improvement in coming years." In fact, the company is moving toward its goal so quickly that "we are working on a path to exceed that amount," he stressed.

3. Setting up what amounts to an in-house technology transfer office. UnitedHealth has created the Emerging Business group to "focus on translating internal innovation for application beyond our businesses' current reach, as well as helping to drive external innovation through our venture capital relationships and investments," said Hemsley. "Sustaining and strengthening our culture of innovation--innovation that is practical and benefits customers, care providers and the health care system overall--is critical to our future." The goal of the entrepreneurial-focused group will be to "pull together resources to optimize our opportunities," he noted.

To learn more:
- read UnitedHealth's 2Q10 earnings release [2]
- read this New York Times article [3]
- read this press release [4] on the Picis acquisition
- read this Minneapolis/St. Paul Business Journal article [5]
- watch the UnitedHealth conference call replay here [6]