As providers seek resolution of continuing Change Healthcare issues, UnitedHealth Group reports strong financials

The aftermath of the Change Healthcare cyberattack affected the second-quarter financials of parent company UnitedHealth Group (UHG), but not to the point of hindering the company’s continued “diversified and durable growth,” CEO Andrew Witty said during a recent investor call.

Q2 revenues increased by 6% year-over-year, while profits dropped by 5.5% amid costs stemming from the Feb. 21 attack. But the $4.2 billion profit was way up from a $1.4 billion loss in Q1.

The attack’s impact was 92 cents per share for Q2. About 70% of the impact stemmed from the direct costs incurred through efforts to restore the Change Healthcare platform and from other responses, such as a $9 billion loan program for affected providers and a hiatus in prior authorization and other care management activities at UnitedHealthcare.

That pause, which lasted through mid-April as an accommodation during the attack’s immediate aftermath, affected the insurer’s medical-loss ratio (MLR) by about $290 million, according to the Q2 financials. MLR also was impacted by an upshift in provider coding intensity, UHG leaders said.

The company attributes the coding trend to the relaxation of care management protocols.

“We have reinforced our utilization management protocols and believe that these impacts will dampen as we pace through the remainder of the year,” Brian Thompson, CEO of UnitedHealthcare, said during the investor call.

The full-year outlook

For the year, UHG projects a direct-cost impact of between $1.30 and $1.35 per share from the cyberattack, an increase of about 40 cents from prior estimates. That impact corresponds to a cost of between $2.3 billion and $2.45 billion, an increase of more than $1 billion.

The jump is “primarily related to care-provider financial support and [to] costs for producing and mailing the consumer notifications,” said John Rex, UHG president and CFO.

The indirect impact, referring to the revenue loss amid the effort to maintain full operations, was 28 cents per share and is projected at between 60 and 70 cents per share for the year, up by about 30 cents from an earlier estimate.

For 2025, UHG projects that its Change Healthcare business will be back to baseline.

“In all honesty, we were a little optimistic, in hindsight, at the pace at which we thought [customers] would come back in terms of putting their flow through the system once it was reconnected,” Witty said. “As we’ve looked at the last several weeks, that momentum and pace, and particularly as we look at new clients coming in, as well as returning clients, we feel good about where we are now.”

Providers have dealt with financial reverberations of their own, including an estimated revenue shortfall of more than 20% for many hospitals in March.

A new lawsuit filed by nearly 40 physician practices and the National Community Pharmacists Association refers to ongoing impacts: “Many providers are still having trouble verifying patient eligibility and coverage, filing claims and billing patients. This leaves small and mid-sized practices especially vulnerable without normal cash flow to sustain operations.”

Lingering unresolved issues

During a July 17 call of HFMA’s Change Healthcare Business Continuity Workgroup, representatives of provider organizations had their latest opportunity to speak with Optum leaders about the situation (Change Healthcare’s operations were merged with Optum, another UHG subsidiary, following UHG’s acquisition of Change in October 2022).

Claims transmission should be fully restored, with the exception of a few very small payers, according to news conveyed during the call. But there are remaining gaps in the ability of a handful of payers, including Medicaid agencies in states such as Illinois, to transmit electronic remittance advice (ERA) files to providers via Change Healthcare.

In some cases, payers have successfully reconnected but nonetheless are having scattered issues with transmission. In other instances, such as Illinois Medicaid and Cigna, reenrollment may be required for providers to receive new ERAs, while Change Healthcare is working to resolve technical complexities that have arisen with attempts to access historical ERAs.

For example, Cigna’s recent move to a new payment vendor has complicated Change Healthcare’s efforts to establish access to the insurer’s Medicare Advantage and Medigap historical remits. For providers, one alternative is to look into downloading ERAs from the payer’s website.

“Payment and claims for most care providers are back to normal,” Rex said during the UHG investor call. “But we know that is not the case for some, so we continue to work with those who are not there yet.”

The latest on notifications

HFMA members on the workgroup call also sought clarification on whether they should have received the breach notice sent out in June by Change Healthcare for organizations to link to on their websites. There is uncertainty over whether organizations should have received the notice even if Change Healthcare’s online forensic investigation has not established that their customers were exposed in the breach.

One health system representative said her organization’s business partners received the notice but without enough detail to pinpoint which of their provider-clients had patients whose data was exposed.

In another development related to notifications, mailings to individuals whose data was exposed were scheduled to begin July 20.

During May 1 testimony to Congress, Witty said a third of all Americans could be affected. If that rough estimate has proven accurate, mailings will go out to more than 100 million individuals, or at least all those for whom contact information is available.