UnitedHealth to take up to $1.6 bln hit from Change Healthcare hack this year

UnitedHealth Group said on Tuesday it was expecting to take a hit of up to $1.6 billion this year related to a data breach at its Change Healthcare unit, in its first full public disclosure of the financial impact of the cyberattack.

UnitedHealth Group said on Tuesday it was expecting to take a hit of up to $1.6 billion this year related to a data breach at its Change Healthcare unit, in its first full public disclosure of the financial impact of the cyberattack. Despite the disruptions, the healthcare conglomerate beat estimates for first-quarter adjusted profit and maintained its 2024 forecast, sending its shares up 7.3% in premarket trading. Its shares have fallen nearly 15% since it disclosed the ransomware attack on Feb. 21.

The hack at Change, which operates one of the largest financial clearing houses in the U.S., disrupted payments to doctors and healthcare facilities nationwide for a month while taking a harsh toll on community health centers

that serve more than 30 million poor and uninsured patients. The health insurer relaxed, or removed, prior authorization processes for some claims following the hack, stoking concerns of an increase in medical costs. At the same time, there were delays in claim submissions as medical care providers struggled with paperwork.

On Tuesday, the company said it had already booked $872 million in costs related to the data breach in the quarter, most of it as one-time items. Still, UnitedHealth backed its 2024 adjusted profit forecast at $27.50 to $28 per share.

Morningstar analyst Julie Utterback said the results indicate that the strong first-quarter earnings performance likely offset a hit from the hack on an adjusted basis. It looked like demand for medical care trends were in line with management's expectations, so that could be a relief to industry investors who have been concerned about those elevated costs, Utterback added.

UnitedHealth reported a rise in medical care ratio - the percentage of premiums spent on medical care - to 84.3% from 82.2% a year earlier. The disruptions from the hack are expected to impact profit by $1.15-$1.35 per share this year, the company said.

Shares of other health insurers Elevance, CVS Health , Cigna, Centene and Humana were up between 2-5.5% in premarket trading. UnitedHealth has yet to disclose the amount of personal data that was breached in the hack. It must report that information within 60 days as required by federal law.

For the quarter, UnitedHealth reported an adjusted profit of $7.16 per share, excluding a 25-cent hit from business disruptions caused by the data breach, compared with the estimates of $6.61 per share, according to LSEG. The healthcare conglomerate recorded a net loss of $1.53 per share due also to a $7 billion charge related to the sale of its Brazil unit, Amil.

 

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