Following a tumultuous period for UnitedHealth Group, new CEO and board chair Stephen Hemsley addressed investors on June 2, acknowledging the company’s recent shortcomings and detailing his plan to restore the high performance that investors and customers expect moving forward.
Mr. Hemsley expressed a deep commitment to regaining trust through increased transparency, improved pricing strategies, and a renewed focus on internal operations, particularly at Optum Health and UnitedHealthcare.
“We are well aware we have not fulfilled your expectations or our own,” he said. “We apologize for that performance and we are humbly determined to earn back your trust and your confidence.”
Mr. Hemsley replaced former CEO Andrew Witty, who stepped down for personal reasons in May after serving as the company’s CEO since 2021.
Eight notes:
1. Earnings outlook
On July 29, UnitedHealth will release a new 2025 earnings outlook and offer its first perspective for 2026.
In its first-quarter earnings for 2025, the company was caught off guard by care utilization rates twice as high as expected among its Medicare Advantage membership, especially for outpatient and physician services, along with “unanticipated changes in the profile of Optum Health members.” The rise in costs led UnitedHealth to cut its earnings guidance for 2025.
The company did not address when MA margins would “return to normal” when asked by investors.
2. Approval of CEO pay package
Shareholders approved a $60 million stock option award for Mr. Hemsley, which is contingent upon completing three years as CEO. He will also receive a $1 million annual salary.
3. A focus on pricing
“Clearly, we have gotten things wrong,” Mr. Hemsley said. “We underestimated care activity and cost trends and generated outsized growth.”
UnitedHealth Group is refining its strategies to improve forecasting accuracy for both care and financial activities. The company has incorporated its increased care activity into Medicare Advantage bids now submitted to CMS, and it plans to apply this strategy to its commercial pricing moving forward as well.
4. Optum Health improvements
Described as “in its formative stages,” the company will focus on quickly improving operations and processes within Optum’s care delivery unit to deliver more reliable views of future performance and to provide shareholders with better clarity.
Optum Health has faced reimbursement challenges as new members from other MA plans, which had exited markets last year due to ongoing federal MA policy changes, came on board.
5. Policy reviews
UnitedHealth has introduced new initiatives to conduct a comprehensive review of all the company’s policies, risk assessment coding practices, managed care practices, and pharmacy services. Independent experts will evaluate and assess the reviews and will modify strategies if appropriate.
6. Executive changes
The company’s executives and management processes are “realigning” to ensure correct leadership moving forward. Currently, John Rex is president and CFO, and Tim Noel is CEO of UnitedHealthcare. Patrick Conway, MD, is CEO of Optum, Jon Mahrt is CEO of Optum Rx, Optum Health is led by Amar Desai, MD, and Optum Insight is led by Dhivya Suryadevara.
7. AI use for coverage decisions
Investors asked if UnitedHealth would provide specific data on the factors used by AI when making coverage decisions.
In February, a federal judge allowed a lawsuit against UnitedHealth to partially move forward, which alleges the company used an AI algorithm to wrongfully deny MA patients post-acute care. The company said it has 1,000 uses for AI technology currently in production across its insurance, care delivery and pharmacy businesses.
UnitedHealth’s chief physician, Wyatt Decker, MD, told investors that the company does not “use AI to deny care or tell our doctors or nurse practitioners how to practice.”
“We believe that there’s a terrific future for healthcare when providers are supported by smart systems that can put pressing needs and suggestions in front of them and at their fingertips, and we are on the front edge of that technology with decision support for our physicians,” he added.
8. Government investigations
Investors also asked for an update regarding government investigations into the company, several of which are reportedly ongoing.
In May, The Wall Street Journal reported that UnitedHealth is under criminal investigation by the Justice Department for alleged Medicare Advantage fraud. The company told the Journal that it stands “by the integrity of our Medicare Advantage program.”
In February, the Journal also reported that the DOJ is investigating the company’s MA billing practices amid allegations that the company inflated charges to maximize reimbursements. UnitedHealth has denied the existence of such an investigation.
The DOJ is also investigating the relationship between UnitedHealthcare and Optum from an antitrust perspective, and the agency is suing to block the company’s planned $3.3 billion acquisition of home health provider Amedisys.
In addition, the DOJ is urging a federal court to allow a decade-old lawsuit against UnitedHealth to continue, which alleges the company overcharged the federal government through Medicare Advantage claims.
“We will not typically discuss or comment or speculate on open government investigations,” UnitedHealth Chief Legal Officer Christopher Zaetta told investors. “I can tell you that matters that are material to the company will show up in our SEC filings and at this point, we have disclosed what we are required to do.”
