Cyberattack could cost UnitedHealth Group up to 16B this year

pUnitedHealth Group expects the cyberattack on its Change Healthcare unit to cost the company as much as 16 billion this yearppIn a financial report released Tuesday the Minnetonkabased health care giant said it spent about 872 million during the first quarter responding to the cyberattackppThe first quarter numbers provide the fullest accounting so far of financial impacts from the hack which forced UnitedHealth Group to shut down a widely used claims processing system to contain the threatppThe majority of cyberattack expenses were excluded from the companys calculation of first quarter adjusted earnings which came in significantly better than expected Following the earnings release the companys stock price rose more than 5ppThis was an unprecedented attack by a malicious actor on the US health system chief executive Andrew Witty said during a call with investors The attack disrupted the ability of care providers to file claims and be paid for their work Weve moved quickly to fill this gapppUnitedHealth Group says it has now provided more than 6 billion in advance funding and interestfree loans to health care providers that have struggled to bill for their services due to the system outage Health care providers are among those who have filed about two dozen lawsuits against UnitedHealth Group over effects from the cyberattackppDuring the first quarter UnitedHealth Group incurred about 593 million in directresponse costs including spending to start restoring the Change Healthcare system as well as temporary suspension of some care management rules such as prior authorizations to help health care providersppThe company also posted about 279 million in expenses from business disruptions meaning lost revenue plus the expense of maintaining operations at Change Healthcare so theyre ready as systems are relaunched said John Rex the companys chief financial officerppExpenses for the direct response as well as the disruption to ongoing business are extending beyond the first quarter as UnitedHealth Group continues to report progress on restoring IT systemsppWitty told investors he thought it was important for the country that UnitedHealth Group acquired Change Healthcare in 2022ppWithout UnitedHealth Group owning Change Healthcare this attack would likely still have happened and it would have left Change Healthcare I think extremely challenged to come back Witty said Because it was part of UnitedHealth Group weve been able to bring it back were going to bring it back much stronger than it was beforeppUnitedHealth Group operates UnitedHealthcare one of the nations largest health insurers as well as a health services unit called Optum which has its headquarters in Eden Prairie On Tuesday afternoon protesters entered the Optum lobby and gathered outside the building to demand the company and its subsidiaries halt any delays and denials of careppThe protest also ran concurrently with the ongoing data hack payments scandal that has left UnitedHealth Group collecting premiums and not paying health care providers organizers said in a news releaseppThe company did not immediately comment on the protest During the Tuesday call with investors Rex said that while much of Change Healthcares functionality already has been restored we are working hard to restore moreppAdjusted earnings for the first quarter came in at 691 per share better than the 662 per share analysts expected The company maintained its adjusted net earnings outlook for the year of 2750 to 28 per shareppAdjusted earnings exclude the cost of directresponse measures related to the cyberattack but the figures include business disruption expensesppFor the threemonth period between January and March UnitedHealth Group posted a loss of 14 billion on 998 billion of revenue due primarily to the previously announced divestiture of its large hospital and clinic business in Brazil The company said in December it expected to lose about 7 billion on the sale due in part to foreign currency translation lossesppAt the outset of Tuesdays call with investors Witty said the company now employs about 400000 people a figure thats down roughly 10 from the 440000 listed as the 2023 yearend headcount in a recent regulatory filing A company spokesman said the Brazil divestiture was part of the decline but not the only factorppAt the end of March just over 49 million people in the US had coverage through UnitedHealthcareppAcross the country there have been signs over the past year of an uptick in health care costs for insurers due to higher patient use of medical services First quarter numbers on care spending fell within expectations for higher medical costs that the company set in NovemberppSeasonal costs related to respiratory illnesses at the end of last year subsided in the first quarter Kevin Fischbeck an analyst with BofA Securities wrote in a note to investorsppUnitedHealth Group expects to continue to be prudent on this for the next few quarters but largely believes that it is back to close to normal on claims submission and payment Fischbeck wrote Finally in response to the increase in trend last year UnitedHealth has heightened its vigilance on any indications that utilization is starting to change so it has confidence in its current view on trendppUnitedHealth Group shares closed Tuesday at 46889 up 2326 for the dayppppChristopher Snowbeck covers health insurers including Minnetonkabased UnitedHealth Group and the business of running hospitals and clinics pp 2024 StarTribune All rights reservedp