UnitedHealth Group’s Optum segment: Earnings rose in 2014

Analyzing UnitedHealth Group’s strong 4Q14 earnings (Part 5 of 10)

(Continued from Part 4)

Optum

UnitedHealth Group (UNH) operates Optum. It provides health services like health technology, health and well-being, and pharmacy services.

Optum’s revenue rose at an annual rate of about 16.9%. Earnings rose by 30% from 2011 to 2014. This performance can be mainly attributed to its integrated delivery, innovative offerings, and market strategy.

Collaborative care

Optum contracts with physicians, clinics, and other health plans. It uses technology, analytics, and risk management practices to aggregate data about patients. Based on the data, healthcare providers are able to better understand complex medical conditions. As a result, they can provide services in a cost-optimal fashion. Read UnitedHealth Group’s OptumHealth – what does it provide? to learn more about collaborative care.

Innovative offerings

Health insurance companies—like Humana (HUM), Aetna (AET), Cigna (CI), and UnitedHealth Group—provide prescription drugs at discounts through a contracted network of retail pharmacies and self-owned mail-order pharmacies to their members. Optum synchronizes the company’s pharmacy services with its medical records for treating complex conditions. This helps the segment recognize gaps in patient treatments. It’s able to avoid future expenses from untreated ailments.

Optum also provides an array of cutting-edge healthcare technologies. It offers data-based consulting services to major health systems, governments, and other health plans.

Market selection

In the US, the private health insurance industry (XLV) has been expanding in the international markets to take advantage of unmet demand—especially in emerging economies. Optum is focused on delivering data analytics, health technology, and consumer engagement tools in international markets to help them balance their budgets, control healthcare costs, and improve services.

In 2014, Optum’s healthcare spending in the United Kingdom, Canada, Brazil, and Australia amounted to $240 billion, $200 billion, $230 billion, and $130 billion, respectively. Optum also provides services like data analytics and technology solutions to 17 federal agencies, 36 state government agencies, and the District of Columbia.

Continue to Part 6

Browse this series on Market Realist:

• Part 1 - UnitedHealth Group reported growth in its 4Q14 earnings

• Part 2 - UnitedHealth’s diversification strategy improved its performance

• Part 3 - UnitedHealth’s government-sponsored enrollment rose in 4Q14