UnitedHealth Group - Earnings Call - Q2 2011
July 19, 2011
Transcript
Speaker 6
Good morning. I will be your conference facilitator today. At this time, I would like to welcome everyone to the UnitedHealth Group second quarter 2011 earnings conference call. After the speaker's remarks, there will be a question and answer period. As a reminder, this conference is being recorded. This call and its contents are the property of UnitedHealth Group. Any use, copying, or distribution without written permission from UnitedHealth Group is strictly prohibited. Here is some important introductory information. This call contains forward-looking statements under U.S. federal securities laws. Such statements are subject to risks and uncertainties that could cause actual results to differ materially from historical experience or present expectations. A description of some of the risks and uncertainties can be found in the reports that we filed with the Securities and Exchange Commission from time to time, including the cautionary statements included in our current and periodic filings.
Information presented on this call is in the earnings release we issued this morning and in our Form 8-K dated July 19, 2011, which may be accessed from the investors' page of the company's website at www.unitedhealthgroup.com. I would now like to turn the conference over to the President and Chief Executive Officer of UnitedHealth Group, Stephen Hemsley.
Speaker 2
Good morning, and thank you for joining us to review second quarter results. Across this company, we continue to focus on fundamental execution. For us, this means consistently serving customers and other stakeholders with excellence and with practical solutions-focused innovation. Improving fundamental execution is far from glamorous. It's blocking and tackling that takes years to accomplish in incremental steps, and it's never really fully finished. Today, market and customer satisfaction and other reputational measures for both our UnitedHealthcare and Optum businesses are at strong levels. In many instances, market leading based on credible independent sources. While we are grateful for any and all market-based recognitions, we also know we are not yet where we want or need to be.
Society is looking for innovative organizations that can be trusted to provide consistent, reliable, and modern approaches to solving the challenges of healthcare, whether that means a constructive approach to participating in health benefit or information exchanges, developing accountable care models, or providing innovative consumer-centric benefit offerings. In any context, we understand a positive reputation will become increasingly valuable. Our commitments to practical innovation, deeper relationships with people we serve, and strong follow-through on our brand and reputational promises are strengthening our businesses. The work required to accomplish this brought growth and market share gains to the first half of 2011. Second quarter revenues again exceeded $25 billion, increasing $2 billion or 8.5% year over year. Growth was led by service revenues, which increased 17% from last year's second quarter, driven by growth in health services products and strong and consistent gains in fee offerings in the health benefit businesses.
Operating margins of 8.3% were stable year over year, improving 10 basis points despite the impact of health performance, including significant costs for readiness and compliance and the advent of minimum care ratio thresholds. Overall revenue growth in higher margin service offerings was offset by investments within the Optum services businesses as we continue to rebaseline that platform for higher growth and earnings contributions going forward. In total, second quarter net earnings grew 17% year over year to $1.16 per share. These earnings were supported by strong cash flows from operations of $1.2 billion. UnitedHealthcare's three businesses added more than 180,000 people using its medical benefit products in the second quarter. It grew in every major product category, despite the fact that the benefits marketplace typically has fewer new business opportunities in the second quarter.
In the first half of 2011, the number of people UnitedHealthcare serves with medical benefits grew by 1.2 million, on top of nearly 1 million people added over the course of 2010. This six-quarter addition of 2.2 million more people, almost entirely through organic means, places this among the strongest growth periods for our company. Growth was led by the employer & individual business, which grew by 100,000 people in the quarter and contributed nicely to the nearly 900,000-person increase in the past six months and growth of 1.1 million people year over year. Customer retention rates improved in 2011 in both the fully insured and commercial self-funded offerings. We performed well in national account open enrollment this past January when employees who have multiple health plans available to them chose UnitedHealthcare more often this year.
Based on first half 2011 results, we're increasing our full-year guidance for fee-based commercial growth by 100,000 people to a range of 650,000 to 750,000 people for the year. Both UnitedHealthcare Community & State and UnitedHealthcare Medicare & Retirement have had strong growth as well. These businesses increased by 80,000 people this quarter and 315,000 people in the past six months, plus another 250,000 people in standalone Part D plan in the past six months. We grew by 20,000 people in Medicare Advantage products this quarter and have added 115,000 people to the first half of the year, even after absorbing the first quarter decrease of 225,000 people from market and product exits in programs that were not sufficiently funded or were fully discontinued by federal regulation.
Our Medicaid business grew by 40,000 people in the quarter and is tracking toward a sizable year-over-year increase of 225,000 people in 2011, despite states tightening eligibility criteria in the wake of decreases in federal matching dollars for their programs. Overall medical cost trends through the first half of 2011 remain moderated in part due to lower growth in consumption across the system and in part because of our effective targeted efforts to manage the total cost of health benefits. Though it is important to note that unit cost increases continue to be significant, in fact, the single most important cost driver. We expect a return toward somewhat more normal utilization trends in the second half of this year and into 2012. Our second half 2011 outlook factors in more challenging year-over-year comparisons in both utilization and reserve development.
Our consolidated medical care ratio of 81.4% decreased 10 basis points from last year's second quarter as the commercial medical care ratio decreased 120 basis points year over year. Second quarter 2011 reflects $180 million in overall reserve development, down from $270 million in the second quarter of 2010. In summary, diversified growth performance across our health benefits platform, coupled with effective cost management, helps UnitedHealthcare grow earnings from operations by nearly $200 million year over year to $1.76 billion. This came despite a lower level of reserve development than in 2010 second quarter and the implementation of medical care ratio regulations this year. We expect pressure on UnitedHealthcare's gross margin percentage in the second half of 2011 and into 2012 due to increasing rate pressure from government customers and more normal overall utilization trends.
UnitedHealthcare Community & State is now receiving annual rate adjustments for the majority of its members. Those rate increases are proving to be lower than we had expected and in some situations even negative. While states will typically adjust care provider fee schedules to reduce unit costs as well, the low reimbursement rates still impact the medical care ratio. UnitedHealthcare has some long-standing levers to use in mitigating these overall pressures. These include stronger clinical engagement and medical cost management efforts, disciplined operating expense management, process and technological modernization, and related productivity and scale efficiencies. In our Optum businesses, we continue to develop and strengthen our position in areas of rising importance to the health system, largely themed around comprehensive population health management as well as modernizing and better integrating healthcare delivery and financing.
As I'm sure you noted earlier this month, Larry Renfro now leads Optum as Chief Executive Officer. Larry Renfro's experience in healthcare, technology services, and financial services across all ranges of business development and scale will be invaluable as we advance our Optum services platform. Our strategy and direction at Optum remain consistent, and Larry has hit the ground running. In the second quarter, Optum's total revenues of $7 billion increased 19% year over year, bringing first half 2011 revenues to $13.8 billion, up 20%. Second quarter revenues increased 12% at Optum Rx, 24% at Optum Insight, and 46% at Optum Health. Optum Rx increased revenues by growing the number of customers served by 1.8 million people year over year, including more than 850,000 from new external business. Optum Rx revenue growth also reflects a greater mix in specialty drugs, which carry much higher revenue per script.
Optum Insight had a strong sales quarter with momentum in serving both payer and provider markets. Many of the growth drivers emerged from the market changes created by health legislation. They include customer needs in the areas of advanced computer-assisted coding, ACO development, quality star ratings, and compliance-related services. Optum Insight sales bookings growth of 106% and backlog increases 60% year over year in the second quarter further improved revenue visibility and confidence. Optum Health's second quarter revenue performance was driven by strong and diverse growth. This includes growth in services for payers and expansion of clinical care services. Optum's earnings from operations were just slightly stronger than we expected, increasing $4 million year over year in the quarter. These results continue to reflect 2011 efforts to align and rebaseline these businesses and position them for further earnings growth.
Optum Insight provided strong earnings again this quarter with year-over-year growth and operating earnings of 45%. Optum Insight expanded its operating margin by nearly two percentage points through improvements in the mix of product line and customers. Optum Rx earnings decreased by $16 million year over year, and Optum Health's earnings decreased $7 million. However, Optum Health's performance was better than expected due to a combination of results from performance-based contracts and the earnings contributions from stronger than expected top line performance. Optum Health earnings are expected to step down from here to a lower level for the second half of the year, consistent with the rebaselining and reinvestment themes set forth in our previous 2011 full-year outlook for the business.
In total, the Optum results show increasing business momentum that is indicative of the traction our capabilities are gaining in the market across care providers, payers, including the government, employers, and other participants in the healthcare system. As we look to 2012 and beyond, our businesses broadly address the expanding needs of the health system, from healthcare coverage to services that improve the overall health of populations to services that modernize and integrate across the system. As a single company with two independently managed business platforms, we draw on core competencies in data, technology, and clinical expertise. We are uniquely positioned to help resolve vital issues such as care quality, affordability, access, the effective application of health data and information, connectivity, better consumer and care provider decision-making at the point of care, incentives for a better performing health system and healthier lifestyles, and compliance with evidence-based medical treatment.
We take a total systems view of the health economy and pursue solutions through all logical channels with the goal of improving the way the system performs for people and how effectively people use that system. UnitedHealthcare serves benefit customers, and Optum serves the broader health marketplace, including care providers and payers. UnitedHealthcare provides tremendous scale, size, and market diversity that cannot be found elsewhere, and in turn allows Optum to quickly pilot, perfect, scale up, and more rapidly commercialize new offerings across a broad client base and population. For example, in post-acute care delivery, Optum Health arranges for nurses and nurse practitioners to support primary care physicians in serving the needs of chronically ill patients with complex medical conditions. Optum Health's post-acute care services are deployed nationally, but more important, by more than 20 health plan customers, including UnitedHealthcare.
In Maricopa County, there is a competitive set of hospital systems and primary care resources, as well as specialized physician practices. UnitedHealthcare has significant Medicare Advantage business in this market and asked Optum Health to develop a delegated care model that would improve quality and cost for its Medicare members. Optum Health responded with the LifePrint Clinic and the LifePrint Contracted Care Network, which includes over 500 primary care physicians and more than 200 physician practices. UnitedHealthcare's membership and community presence, coupled with Optum's data, technology, and care delivery experience, were all critical to the launch of this model this past January. More significantly, LifePrint's overall market goal is to serve the broader Maricopa County population to populations with other health plans in that market. Across the state, the Tucson Medical Center was looking to reconsider its infrastructure and processes so it can deliver more effective services to its community.
They selected Optum to help them build a market-based accountable care structure. Our resources will serve the Tucson Medical Center, benefit UnitedHealthcare customers through UnitedHealthcare's participation in that market, and become available to other health plans in that market. This arrangement will help make healthcare more sustainable across the Tucson community. Each of these examples draws on our experience in coordinating clinical resources and services, our leading technology, and access to actionable data and information. Together, they illustrate our comprehensive health system strategy with our capabilities leveraged for the benefit of all the constituencies in the health system: patients, physicians, hospitals, employers, and other payers, including government payers. While we expect UnitedHealthcare to perform as the leader in the payer community, the multi-payer nature of the system means that our health system solutions from Optum are much broader than the needs of UnitedHealthcare alone.
Looking into the future, we believe the healthcare market will evolve from fee for service to fee for value or pay for performance in a multitude of ways, shapes, and forms. To do that, modern benefit designs and related services will become more connected and integrated. They will ultimately flow more closely together from the consumers, providers, payers, and systems perspectives. Our two platforms are ideally positioned to help lead the way. Now, returning to financial and operating performance, today we are increasing our outlook for full-year 2011 financial results based on continued momentum and solid performance in the first half of the year. We expect revenue growth of more than 7% year over year, which brings revenues to $101 billion in 2011.
With a higher revenue outlook, solid margins in the first half of the year, and a projected two percentage point reduction in tax rates in the second half of 2011, we estimate full-year earnings in a range of $4.15 to $4.25 per share. We project cash flows from operations to more than $6 billion. This view reflects our caution about gross margin in the second half of 2011. It also includes our estimate of our pro-rata share of the policyholder claims of the potentially insolvent PEN treaty, a long-term care insurance concern with which we have no affiliation. While we forecast these expenses in the fourth quarter, we, of course, have no ability to control the court's timing or process. In conclusion, we're delivering solid fundamental execution for our customers, both within each of our business platforms and on a cross-platform basis. We are gaining market share.
We continue to invest in practical innovation and distinctive branding. From our shareholders' perspective, the result of these efforts is strong and sustainable revenue growth, solid margins, and consistent cash flows. At the same time, we're fulfilling our broader mission to help to both help people live healthier lives and make the healthcare system work better for everyone. We'll offer more discussion and examples at our annual investor conference, which will be held in New York City on Tuesday, November 29th. We also expect to provide color on our expectations for 2012 at that time. We're interested in your questions this morning. As usual, there will be one question per person so we can speak with as many of you as possible. I'll now turn this call back to our moderator for your questions. Again, thank you for joining us this morning.
Speaker 6
At this time, we will proceed with the question and answer period. We ask those with questions to limit one question per person so we can get to as many participants as possible. In order to ask a question, please press star followed by the number one on your telephone keypad. If you would like to withdraw your question, please press the pound key. We request that you do not utilize a speakerphone or headset when asking a question. We'll pause for just a moment to compile the Q&A roster. Your first question comes from the line of Josh Raskin with Barclays.
Speaker 1
Hi, thanks. Good morning. I guess I just want to talk a little bit. I know you're going to sort of stay away. It sounds like you're going to stay away from 2012 guidance, but maybe you could tell us sort of a two-parter. Are there any changes to your long-term expectations, anything that we should think about in terms of big deviations from your long-term guidance? More specifically, I guess we're getting into the national account selling season, and maybe you could give us a little color as to expectations for 1/1/2012 and maybe relative to how well you did this year.
Speaker 0
Sure. I'll kind of thematically respond to your first question, Josh, and then I'll ask Gail to turn off comments on the national accounts outlook. I would say there really isn't anything that I would offer as being a radical departure from our approach to our business or our markets. I actually think that the steps we've taken over the course of the last, let's say, more than a year, coming into the focus on fundamental execution, the commitment to innovation, a stronger and more expansive view of our culture, are all elements that are going to continue to mature and grow within our enterprise. We remain very focused and disciplined with respect to our businesses and like the balance we're striking relative to the orientation to local market engagement. We're positive about 2012 in terms of our outlook.
We expect to grow in terms of the number of people we serve, and we expect to grow in terms of the performance improvement of our performance serving customers. I believe that a lot of the approaches that we've taken for 2010 and 2011 will apply again in 2012 to what I will consider to be a continuing challenging environment from an economic point of view, from a rate pressure point of view in terms of Medicare and Medicaid rates, regulatory pressures. I think you all can appreciate the challenges in the marketplace, and we continue to, I think, approach those challenges and have been successful to date and expect to continue to be.
Speaker 1
Is that key?
Speaker 0
Can I comment on national business?
Speaker 1
Sure. Good morning, Josh. This is Gail Boudreaux. As you know, we had a very strong selling season in national accounts this year, and we are pleased with what's happening as we expect 2012 to also grow. It's still early. We're still in the middle of the process. We've got a very strong value proposition as we think about our service results. We're going into this year with really good service results. I think offering clients a very good clinical proposition as well as our consumer engagement strategies are taking hold. As we look at our current results and we think about 2012, one of the positive signs is that customer retention has been strong this year, and we expect that to continue, and we expect to continue to expand our footprint in the accounts that we do have.
As we look at new business opportunities, as has been the case in the past, many of those are staying with their incumbents, although a very good sign for us is that we're expanding our footprint. Early, but a sign of what we will see growth in 2012.
Speaker 0
Just to follow up, Steve, just so I make sure I understood, you guys have talked about a low teens earnings per share growth rate long term. There was nothing in your commentary that made me think that 2012 was different than the long term. Am I reading too much into that?
Speaker 1
No, I think you read it correct, Jeff.
Speaker 0
Okay, perfect. Thanks.
Speaker 1
Next question, please.
Speaker 6
Your next question comes from the line of John Rex with JPMorgan.
Speaker 1
Thanks. I just want to get a little more color on what you're seeing in med utilization. I mean, I think your commentary was it's much the same, but I guess what I was looking for is looking across your different lines, the major lines, commercial, Medicare Advantage, Medicaid. Are you seeing any divergence in the utilization patterns from what you've been seeing over the last six months, or are those all running similarly?
Speaker 0
I think Dan Schumacher can respond pretty well to this.
Speaker 4
Good morning, John. Thanks for the question.
Speaker 1
Good morning.
Speaker 4
Let me talk about commercial first, and then I'll compare and contrast that to the government businesses. I think it's important to remind everyone, as Steve made in his prepared remark, that as we look at our overall cost trend, the unit cost component is by far the greatest driver of our cost increases year in and year out. We continue to see significant pressure there, and it's an area of intense focus for us. In terms of the overall cost trend, it's really the unit cost. Stepping into the utilization specifically, in the first half of the year, we did see in the commercial business an increase in our utilization trend, and that was higher than what we saw in 2010, but still lower than what we have seen historically.
As we look at the second half of the year, our expectation is that we're going to see an increase again in that utilization trend, in part due to the lower comparison period in 2010. As you look at 2010, the most restrained and moderate utilization came in the second half. On top of that, we expect consumption levels to increase on a more normal seasonal pattern as well as the wear-off of our deductible. As you look at the commercial space, overall, we still expect our trend to be in the 6.5% plus or minus 50 basis points range that we guided to last quarter, although we would expect to be trending towards the lower end of that range.
As you compare that to the government businesses, similarly, in those businesses in the first half of the year, we did see an increase in the utilization trend over 2010, and it was actually a little bit higher than what we saw in the commercial business. Again, as you look across UnitedHealthcare, it was lower than the historical pattern.
Speaker 1
Okay. Your utilization overall, you've commented before, at least on the bed day component, you're still running flat to slightly down on that. Is that correct?
Speaker 4
Yes, that's fair. If you think about the components around utilization, I would suggest that the places where we've seen more increase is really in the outpatient and physician settings, and our inpatient has remained relatively restrained.
Speaker 1
Thank you.
Speaker 0
Thanks.
Speaker 6
Your next question comes from the line of Scott Fidel with Deutsche Bank.
Speaker 1
Thanks. Wondering if you can provide an initial assessment on the exchange regulations that were recently released by CMS, and how now, after having a chance to review those regs, how you're viewing the overall market opportunity for the exchanges.
Speaker 0
Maybe I'll start out just by setting some guidelines. Given the fact that they've just come out and there is a comment period, we're not going to comment at very specific levels with respect to those regs. We will offer a restatement of the things that we're looking for that I think would be important as that original guidance is ultimately formed into regulations. Gail, do you want to pick that up?
Speaker 1
Sure. Hi, Scott. As Steve said, we've been very engaged, constructively engaged in both the state and the federal level in providing input around the exchanges, and we are planning to provide comments as part of this process, as part of the proposed rulemaking. I think you know that there are also more regulations still to come out, so we're sort of in the middle of that process. What's important, though, in terms of the guidelines as we think about the development of the exchanges is one that we think they should be set up in a manner that recognizes healthcare as local and provides the states with some significant flexibility on how to structure them based on the market dynamics. We also think that it's important that they provide opportunity in the market so that there's competition, choice, and innovation that's incentive as part of the design.
Finally, I think having a level playing field is a critical part of the exchange. We see, we've said this a few times, that we see opportunity in the exchanges, but the level playing field component is important as the states begin to adapt their rules around exchanges.
Speaker 4
On the risk adjustment proposals that they've laid out, do you think those will be sufficient? Do you think a reasonable way to think about this is that they're essentially leveraging some of the structures that they've used in Part D or in Medicare Advantage, or do you see differences in the approach around risk adjustment and some of the risk corridors they're proposing?
Speaker 1
In terms of the risk adjustment, clearly they're looking at how they've structured that in the Medicare space. There's a lot of different opportunities to look at that across the commercial space as well, and we would want to ensure that they're fair and actually sound practices, also providing guidance on that. Again, we're in the process of comments, and we'll be providing comments on that as well.
Speaker 4
Okay, thanks.
Speaker 1
Next question, please.
Speaker 6
Your next question comes from the line of Justin Lake with UBS.
Speaker 7
Thanks. Good morning. My question is on the Optum Health business. Obviously, you've talked about making a fair amount of investments here that have depressed margins a bit. At last year's Investor Day, you laid out a case for margin improvement over time and getting back to target margins would be significantly accretive to earnings. I'm just curious if you can give us an update there in terms of we're now six to nine months past that. You've made these investments. In terms of how you see that performance kind of trending over the next couple of years and when you expect to get to those target margins you laid out at the Investor Day.
Speaker 4
Sure. I'll lay out overall themes and then ask the team to pick it up. If you stand back and look at Optum, we are committed to advancing that as a more integrated platform. At the beginning of this year, we've taken steps such as the divestiture of the CRO. We have realigned portions of our business between UnitedHealthcare and Optum and made adjustments accordingly for that. We said that we would be making investments not only in new businesses that we think have value, but also in strengthening and performing the businesses that we have. I think those things have gone exceptionally well. The emergence of this platform, I think, is very positive, and we are very positive about the margin performance. We said this was going to be a baseline year, and we're going to execute through that.
We think we'll be through the majority of it this year. There'll be some activity, particularly with respect to Optum Rx, that will pull into next year. John, you want to pick that up?
Speaker 3
Sure. It's John Prince. I just wanted to add on to what Steve was saying. I think we're seeing very good market response to our business platform. We're seeing very good growth. As Steve mentioned, we continue to invest in our platforms. That investment is affecting our short-term operating margin. As we said at Investor Day, 2011 is a baseline year. We expect strong operating earnings in 2012 with operating margin expansion. We're very comfortable with our long-term operating outlook that we said fall through businesses.
Speaker 7
What is the definition of longer term? If you could just throw us in any commentary you might have on the PBM and the Medicare relationship specifically, I know people would be interested in that. Thanks.
Speaker 4
Okay. That's a slightly different subject, but I'll respond. We expect to obviously see comp improvements in 2012, and we expect to build from there. We meant 2011 to be a baseline year, and I think you'll see 2012 will prove that out. In terms of the PBM, our positioning there has really not changed. Optum Rx continues to serve us very well, all of our government programs, our specialty pharma, and increasingly external commercial customers. Medco also continues to serve us well. As we've said consistently, we are assessing our options and our opportunities, knowing that we can serve our customers as well as our shareholders well, really in either direction. We are really addressing the nature of that Medco relationship, and that really won't occur until later this year. You know the contract doesn't expire until January of 2013. Our position with respect to our PBM is unchanged.
Speaker 7
Great. Thanks.
Speaker 6
Your next question comes from the line of Kevin Fischbeck with Bank of America.
Speaker 1
Okay, thanks. I wanted to ask you about rebates. You commented a couple of times about gross margin compression in the second half on a higher trend and government rate pressure. I guess I didn't hear anything about rebates, how those impact numbers, seasonality. How should we think about that? Also, any color on how rebates are impacting your thoughts about pricing or how your competitors are thinking about repricing their books? Any indication there?
Speaker 4
Dan, you want to?
Speaker 0
Sure.
Speaker 4
Okay.
Speaker 0
Kevin, let me take the seasonality piece and how we think about rebates. At the end of the day, our rebates are based on a full-year earnings outlook, and then it's staged in by quarter based on the percentage of revenue that falls into each quarter. It's essentially pretty close to linear. There's no seasonal impact on our results related to our rebate determinations. In terms of pricing, I might turn that to Jeff Alter to talk about what we're seeing in the market.
Speaker 5
Thanks, Kevin. This is Jeff Alter. We're not seeing a lot of widespread evidence of people making pricing adjustments through their rebates. There are pockets here and there of fully insured pricing that I say are a little bit more competitive than other years, which could be competitors adjusting through their loss ratio. If it is, we believe it'll be sort of short-lived in duration. As we've said before, there's a lot of investments ahead, ICD-10 and other regulatory compliance. We believe that our competitors are taking a rational approach to their reserves and to their pricing. We continue to remain disciplined in our pricing, pricing to our trend.
Speaker 1
Okay. Just to clarify, when you talk about the gross margin compression, it sounds like on the commercial side, it's more normal return to normal utilization than real pricing pressure. On the government side, there's some equal trend and pricing pressure. Is that the way to think about it?
Speaker 5
That's fair. Yes, that's fair.
Speaker 1
Okay, thank you.
Speaker 6
Our next question comes from the line of Tom Carroll with Siegel Nicholas.
Speaker 1
Hey, good morning. Just a bit more clarification on the 2012 pricing comments. I guess how should we think about 2012 premium pricing given the prolonged lower utilization that we've been seeing here over the last several quarters in particular? Do you expect more, I guess what I would call coordinated pushback from states on commercial premium increases into next year?
Speaker 4
Yeah, Gail.
Speaker 1
Hi, this is Gail Boudreaux. I think to get sort of round off the conversation we're having on our own pricing, our approach, our fundamental approach and discipline of pricing hasn't changed. We are always pricing to what we believe our forward view of costs are. Just taking us to sort of walk through the components, we start with what we believe the forward view of a trend is, adjust for product changes, geography, as well as market segments. We essentially take a look at using our local market knowledge, the medical loss ratio threshold where we believe that prices should be. In terms of your second part of your question around the states, what we're seeing at the states really varies by state to state. I think what's fundamentally important is we build up our rates based on a naturally sound process. That's how we file our rates.
When we go to the states to talk about those rates, making sure that it's based on that process as well as a forward view of cost is what's important. That's the discussion that we've been having with the states as part of this process now.
Speaker 4
Thank you.
Speaker 6
Your next question comes from the line of Christine Arnold with Cowen and Company.
Speaker 8
Hi there. A couple of questions. You're recognizing this is a year of investment spending, and your long-term target has been kind of 20 to 40 basis points of SG&A improvement. Is it reasonable to think that we start to see that next year? Is it possible to put parameters around kind of what you're thinking on the commercial MLR? I think you were saying 82 plus or minus 50 basis points last quarter. Is that still reasonable?
Speaker 4
I'll have Dave respond to the cost question and Dan to the care ratio.
Speaker 5
Thank you, Christine. It's Dave. What you're seeing in our numbers, Christine, is a pretty significant shift in the mix of our business towards the services business as well as self-funded. That mix shift is what's contributing to the increase in the operating cost ratio in the period. In fact, if you look at the benefits business independently, you'd find that there's a 50 basis point reduction in the operating cost ratio for that business. That is largely contributed to by virtue of the things that we've been discussing in the past, which is the significant improvements that we've made in the quality of our service, which I believe is reflected both internally with much lower defect rates on our claims, much higher satisfaction levels on our calls, but also now I think validated through several sources over the course of the last 30 days or so externally.
All of that I think is contributing to that. We've also seen significant increases in our levels of automation. We've been very focused on advancing EDI and auto adjudication as examples, but more broadly working to try to automate all of our business processes more effectively. Also, as I believe you recognize, we've done a lot of work on our integration activities, and we've decommissioned several of our adjudication engines. I believe we've lined these out before, but Mamzee's, two of Pacificare's, several instances of Facets, and many other adjudication engines. We've made great progress with respect to that. We've also really advanced our efforts around sourcing and procurement broadly and have been realizing the benefits of our substantial scale over time. I believe those are all manifested in the realization of very significant run rate benefits. We believe they're in the $300 to $400 million range recognized in 2011.
What you're seeing, though, is the offset of the kind of the dilutive effect, if you will, of the mix shift towards a fee-based business and the higher percentage of our business that's with Optum.
Speaker 8
Right. Just speaking specifically to Optum, it feels like this is a big investment year, and we've also got some good growth. It's hard to see ex-acquisitions, kind of what's going on, and exactly how much you're investing there. Is it safe to say this is kind of a peak investment year? I mean, you said rebasing with respect to some of those investments' spendings. We could expect improvement on that SG&A load into next year.
Speaker 4
Yeah, Christine, I think that's right. With the exception of the Optum Rx business, that business is going to continue to take some investment into next year as we really bring the scale and the attributes to it that we're really looking for so that it can actually be a more integrated and kind of remote, more robust platform serving that marketplace. While there'll be some in that, I think the majority of our investments in the Optum business, the rest of them will pretty much run their course in 2011.
Speaker 8
Right. The commercial medical care ratio, sir?
Speaker 4
The commercial medical care ratio, our expectation, similar to what we're seeing on the trend side, is that we would expect our loss ratio to be in that 82% plus or minus 50 basis points, but trending toward the lower end of that range.
Speaker 8
Perfect. Thank you.
Speaker 4
Next question, please.
Speaker 6
Your next question comes from the line of Chris Rigg with Susquehanna.
Speaker 4
Thank you. Just following back up on some of your comments on the Medicaid business, clearly there was a more cautious tone there. I guess I'm trying to get a sense for if without utilization sort of staying below the trend that you're expecting, are you guys anticipating sort of margin compression on an operating basis over the second half of the year, or do you think you can still squeeze out some increases even in a more difficult rate environment?
Speaker 1
Jack, you want to react to that?
Speaker 5
Sure. Hi, Chris. Jack Larsen.
Speaker 1
Sure.
Speaker 5
I guess just to maybe put a finer point on what we have seen in our second and third quarter rate negotiations and then how it will affect our second half performance. I think the pressure we have all been talking about now for multiple quarters, we really saw in most of our rate discussions, about two-thirds of our member months have some type of a rate negotiation associated with it, sort of late Q2 and into Q3. As Steve said in his opening remarks, we expect about a 1% average annual 2011 rate increase, which is slightly lower than what we had been guiding to last quarter. I think the important point is the more recent negotiations have been for the second half of calendar and first half of calendar 2012 have really been flat to negative.
We are going to see margin compression at the gross margin line, probably even in spite of the lower utilization environment that we're seeing ourselves in. To your question about whether we can, I think you said, eek something out, I think we've done a pretty good job in the meantime making sure we're crisp on our clinical management protocols as well as our operating costs. I'm actually, in spite of the rate environment, quite pleased with our operating performance for the balance of the year.
Speaker 1
Okay, thanks. That's all I have.
Speaker 5
Thank you.
Speaker 6
Your next question comes from the line of Charles Berati with Credit Suisse.
Speaker 1
Hi, thanks. Good morning. First question, just since most state fiscal years end in June, I'm wondering what you're seeing in terms of expected rate increases in your Medicaid book and what you're building in for second half rates.
Speaker 4
Yeah, I thought we had addressed that in the comments, but Jack, do you want to just hit that again?
Speaker 5
Sure. For second half rates for state fiscal years 2011-2012, what we're seeing is for about two-thirds of our member months flat to mostly flat, and in some cases slightly negative.
Speaker 1
Got it. Okay, I apologize if I missed that in your prepared remarks. The other thing, maybe you said this too, and I missed it exactly in response to John Rex's questions, but basically was if you look excluding the flu at adjusted inpatient bed days per 1,000, were they up, down, or flat for commercial, Medicare, and Medicaid?
Speaker 4
Flat to slightly down.
Speaker 1
In all three?
Speaker 4
Yes.
Speaker 1
Okay, great. You're assuming they're going to come back up towards the back half of the year in your guidance, if I understood your prepared remarks?
Speaker 4
We're expecting overall utilization to go up, most notably in the outpatient and physician categories, and to a lesser extent in inpatient.
Speaker 3
Which is where it's been consistently.
Speaker 4
Yeah.
Speaker 3
We do expect it to recover.
Speaker 4
I think.
Speaker 3
It recovered in the areas that it's been strongest to date, which has been outpatient and physician.
Speaker 4
Right. In inpatient, as we've mentioned over time, you know we're seeing the results of our clinical agenda continue to take hold there. There are areas where we're able to observe, you know, outside of economic impacts or broader macro impacts, where we're making a difference. Readmission rates is an example, and there are other examples underneath that that are a key area of focus for us inside our business.
Speaker 3
I know that everyone focuses on the utilization, but the unit cost pressures are really the elements that are driving cost.
Speaker 1
Yeah, and you've had some successes there in terms of unit costs. I guess in that regard, do you see a rebound in terms of cost shift as providers are concerned about Medicare and Medicaid cuts to them? Or have you been able to preserve some leverage against higher unit cost increases than what you've been seeing?
Speaker 4
I wouldn't say that there's necessarily any profound change in the environment from that perspective. Gail, do you have a view of that?
Speaker 1
The only thing I'd add to it, I don't think the cost shift for Medicare and Medicaid is anything new. Clearly, the hospitals are under significant pressure. We have, I think, obviously been negotiating to find the best economic value, but the unit cost pressure is intense. The area that we've been very much focused on in collaboration with our Optum partners is trying to move more to pay-for-performance and alignment of incentives across both the hospital agenda as well as with physicians and in our clinical agenda as well. I think that is really where we think we have to go to. As Steve said in his opening remarks, we have to get away from straight pay-for-fee and unit cost increases to actual pay-for-value and to a more risk-sharing environment.
Speaker 4
Okay, thanks.
Speaker 6
Your next question comes from the line of Matt Borsch with Goldman Sachs.
Speaker 4
Yes, thank you. One more on the utilization front. You didn't mention pharmacy, and I'm just curious, did you see any uplift in pharmacy trend in the second quarter? Matt, it's Dan. We did see a very modest increase on the pharmacy side. I would go back to pointing out as a category of the outpatient and physician settings. Yeah, overall for pharmacy, we're still, you know, expecting a trend in that mid to lower single digit. Got it. On a separate topic, can you comment on the Medicaid RFP environment? In terms of the recently concluded Kentucky Medicaid contract awards and also those that are still outstanding, do the requests for proposal, the way they're set up in the competition, seem to set reasonable parameters on the business opportunity for you guys?
Speaker 5
Sure. Hi, Matt. Jack Larsen.
Speaker 4
Hi, Jack.
Speaker 5
Let me maybe make a general comment on the RFP environment. I think, certainly, there's lots of opportunities in this space. The numbers that we have seen are in the $40 to $60 billion on the growth side. To your question about whether they provide a, I guess, a competitive opportunity for us, the answer is that, you know, I think yes. With respect to Kentucky specifically, that was a state that was relatively new to manage Medicaid across all its regions. The components of the proposal allowed the respondents to provide both an operating cost proposal as well as a medical cost proposal. I think from our point of view, we submitted a very strong proposal to the Commonwealth. We think we hit their ask on the quality and access parameters.
We think we put a price in that was competitive and really consistent with providing them a sustainable program going into the future. I think they were looking for a three-year commitment. While we're disappointed in not being awarded a contract in Kentucky, I think it was a successful procurement for that. There are other RFPs that are lining up there. Like you were awaiting announcements on both Texas and Louisiana, and we expect those here in the next few weeks. They represent significant opportunities for us in both of those states.
Speaker 4
I think to your broader question, it's not a homogeneous market. It's a state-by-state market. Every state will take kind of its own view of this and conduct its own process. It's really hard to really establish any generalizations with respect to that. It really will be a state-by-state proposition, very driven by the situational circumstances of the state at that time. We're very dedicated to this space. We have been in this space for many, many years. It is clear the states are looking for managed care solutions as really their best and most sustainable long-term outlet. Wherever the states really have established a posture of kind of working with organizations like us to really achieve those long-term goals, we're going to be active. It really is a state-by-state proposition. Thank you. Thanks for the question.
Speaker 1
Thank you.
Speaker 6
Your next question comes from the line of Ana Gupta with Bernstein.
Speaker 8
Good morning. The first question is about the debt ceiling and the deficit reduction. One of the proposals was to introduce a deductible into Medicare supplement. Given you're leading both in Medicare Advantage and Medicare supplement, do you have any market research data that seniors might move preferentially to Medicare Advantage? How does that net out across your book of business?
Speaker 4
We had thought there might be questions about the deficit coming into this, and what we concluded is that we're going to try to stay out of that area of conversation. They have enough parties participating in that without any commentary from us. We really were not going to comment on elements that are coming out of that because they're just, at this point in time, a series of proposals. I think it would be kind of out of line for us to comment on things that are really just kind of coming from the media about what is being presented. We're not really interested in complicating that situation further.
Speaker 8
Okay. Let me ask another question. You talked about risk sharing and capitation. Are you at liberty to comment on there was a bundling proposal in addition to the ACO proposal from Medicare? In light of the CareMore acquisition by Bell Point and Highmark buying up or getting into West Bend Allegheny, has that changed your viewpoint on more backward integration into primary care clinics or even hospitals?
Speaker 4
Dawn, you want to comment?
Speaker 6
Sure. Hi, Anna. If you think about it, in Steve's opening comments, he talked about the benefit of the two business platforms of UnitedHealth Group and the size and scale of UnitedHealthcare benefits business in support of that Optum agenda. In Optum Health, we are focused on that care delivery community in combination with the broader Optum agenda. We see great opportunity to partner with the system as they prepare for the changes and requirements of payers from the government to health plans and so forth. They need better technology to connect the system. They need better intelligence to manage patient care on a population health basis. There is a desire for alignment. We're participating in that in many different forms and fashions. Consistent with Steve's comment, that participation not only benefits UnitedHealthcare, but serves the broader healthcare community with other payers participating in it and so forth.
This activity is not new to us, certainly with SMA and EverCare, a long legacy of activity in this area. You see activity in the marketplace. While I would say albeit different than the approach we're taking, certainly activities around involvement with the care delivery system.
Speaker 4
I think it's not surprising to see that others are going to be taking as well different approaches to pursue that. I would offer that I think it will vary market by market because the healthcare environment in each market is different. As a result, where they are in an evolutionary point of view, what the supply-demand dynamics are in that marketplace, and what the history of protocols in a marketplace vary. I think it'll be dictated largely by local market dynamics as people pursue different approaches to the broad theme of more integrated care efforts. I would offer that going as far as going totally to the hospital is maybe understandable in that marketplace, but I wouldn't think that it would be something that you would see a lot of.
Speaker 8
If I could just ask one follow-up on Optum, you have about $500 million a year in revenue increase. Does that already include some of the inorganic deals you've done? What can we expect for the back half of the year, with some of the transactions still closing? Are you going to do anything more?
Speaker 4
I think it reflects the acquisitions that have been made. Obviously, you know, whether we pursue other investments and whether we're successful with respect to other investments is really to come. I think Dave, you want to respond to that?
Speaker 3
Sure. The first two quarters of this year, you can probably see that we've done several small deals. I think two of them are probably more significant than the others in both Logistics Health as well as WellMed. Most of what we're doing are capability plugins, line extensions, and the Optum business to date. As Steve also indicated, you know, we're not going to comment on the kind of our forward view of M&A activity. We do continue to look for opportunities to do capability acquisitions and line extensions predominantly in the Optum business. We also seek opportunities to take advantage of our substantive scale and then also opportunities to improve our presence in markets in the benefits business as well. Hopefully, that is a response to your question.
Speaker 8
Yeah, thanks. Appreciate it.
Speaker 4
Thank you. Next question, please.
Speaker 6
Your next question comes from the line of Sheryl Skolnick with CRT Capital Group.
Speaker 1
Thank you very much for letting me squeeze in here at the end. To follow up on some of the provider questions, first of all, lovely to see, faster than expected, the integration of Optum's capabilities into UnitedHealthcare for the benefit of the entire business. I think that begins to answer the question of how do you invest in Optum and still grow profits. Thank you very much for that. I'm curious about your provider relationships. Steve, I've asked you this question before, and I'm still stuck on this question, which is United and hospitals in particular have very, very challenging, perhaps natural adversarial relationships. I don't, and I see the improvements in claim submission and the more friendly approach to the physician.
How do you achieve this end goal of building this crucially important integrated system that fundamentally changes the way we get our healthcare paid for, etc., and manage it without addressing the issue of this highly adversarial provider relationship with the hospitals? Thank you.
Speaker 5
I think Gail may have something to offer on this, but I'll frame some of it. Your terms in terms of highly adversarial, there are understandable interests across the spectrum of healthcare. If you really stand back and look at what a more optimal healthcare environment would be, it would be one that is a much more inclusive paradigm in terms of including the interests of all the participants in the healthcare marketplace, the fact that we need hospitals, specialists, more primary care. We need them to be all more effective. We need to use those resources more effectively if we are ever going to have a more sustainable health environment, better outcomes, and more sustainable cost structure.
If there isn't a broader, more inclusive view of engagement, including bringing capabilities that I think we have to offer around the use of technology, the use of information, the use of care resources, and bring them into those venues, that's where I think you'll find the opportunities to kind of change the healthcare environment from a systems point of view. I believe that there is an opening way of thinking about that. That's why I think you're seeing response in the marketplace and the engagement that we are having with hospitals that are far from adversarial in their relationships.
Speaker 4
Thanks, Steve. Cheryl, a couple of things to your point around our relationships with both physicians and hospitals. Over the last couple of years, we've made a significant investment in really turning around that relationship. I just want to point to a couple of things because we are seeing the impacts of that in our satisfaction results. We're also seeing it in the recent AMA survey that came out that showed that we have not only made process improvements, but I also think made improvements in the relationship with them. A couple of the things on the physician side, we invested in physician advocates so that we could work more effectively with them in the local community. We onshored our calls so that we could have a much more responsive service model for physicians.
On the hospital side, we actually instituted a hospital advisory council led by Michael Boyle and our Head of Contracting. That's been incredibly productive. We're working on 6 to 12 accountable care pilots. Part of our goal on sharing risk and also working closely with the delivery system is to ensure that we have a different partnership relationship. I think we recognize that. That's been a very significant investment. On the back end, we deploy a team of Six Sigma experts actually working in the hospital to help them improve their processes. I'd sum it up on the UnitedHealthcare side as we recognize that that's a critical partnership. As we move from just paying per fee for service and negotiating unit cost rates, we've got to ultimately find a way to partner on shared risk. That's the philosophy change as well as an approach change within UnitedHealthcare.
Clearly, in Optum's businesses and Optum Insight, they work directly with the delivery system. We often partner with them when it makes sense at the delivery system. I think there's both an attitude change within UnitedHealthcare as well as a very specific program and investment going in and improving that relationship.
Speaker 1
Gail, are you on Slide, and can you hear that?
Speaker 4
Cheryl, I think an interesting live example is the Tucson Medical Center. Maybe Andy could comment on that.
Speaker 3
Yeah. Hi, Sheryl. This is Andy Slavitt.
Speaker 4
Thanks.
Speaker 3
I think picking up on what Gail said, the tone in the market has changed, I think, and has evolved over the last year in particular. Providers are asking us much more frequently questions about how do I manage risk? How do I manage to help the population? How do I use data better? How do I partner with my payers? How do I use technology? I think you're seeing a natural point where both providers and payers are really seeking to work more collaboratively together. As Steve pointed out, the partnership we've built in Tucson, both with the hospital Tucson Medical Center as well as the independent physician, is a great example. They really want to change the way they get rewarded for taking care of patients.
They know they need both a set of tools that can be provided from Optum as well as the expertise on the risk side and the attraction of members that can come from UnitedHealthcare. I think that is not just a one-off. I think that is thematic of what we're seeing across the marketplace.
Speaker 1
Thank you. I was hoping that you would say all of that because it was a key component of the strategy that I believe did need that philosophical change. It's nice to see it happening sooner than expected. Thank you very much for that insight.
Speaker 4
Next, please.
Speaker 6
Your next question comes from the line of Michael Baker with Raymond James.
Speaker 4
Yes, I was wondering if you could update us on the Medicare side of the business as it relates to timing of the RADV audit results. Any sense of dynamics around that would be helpful.
Speaker 5
Sure. Good morning. This is Tom Paul. We're continuing our dialogue with CMS around this topic. As you may know, they received a volume of responses from the industry and at charge.
Speaker 6
In regard to the proposed change in the audit methodology, we understand they're still working on their response to that volume. At this time, we're really unaware of the timing associated with their next release around the audit methodology.
Speaker 2
Thanks for the update.
Speaker 6
Thanks, please.
Speaker 1
Your next question comes from the line of Dave Windley with Jefferies.
Speaker 0
Hi, thanks for taking the question. Steve, I understand that you're very much affirming the strategy in Optum on the heels of leadership change in Optum. I wondered if there's any change in the application or execution of that strategy, and perhaps as a corollary to that, any reacceleration in acquisition plans there, things along those lines. Again, the base question, is there any change in the underlying application of the strategy in Optum with the leadership change?
Speaker 6
I think the baseline is, like the direction that the business is going. I think great progress has been made, particularly, let's say, in the last nine months or so in terms of establishing that platform, making it a more integrated, stronger, operational platform and one that we're building upon. I'm really reaffirming that. I think that Larry will bring exceptional dimensions with respect to building that platform and in terms of the operating discipline, his experiences across a broad spectrum of the elements that Optum is using, as well as, as you can appreciate, Optum has businesses that are pretty mature and at the scale level, other businesses that are more in the earlier stages of that. There's really a diversity of the businesses across that platform, and that diversity needs to be attended to. I think Larry's background and experience just plays splendidly into that environment.
We're going to continue to build, and we're going to continue to invest in that platform. There's no change in terms of that direction whatsoever.
Speaker 0
If I could ask a quick follow-up on the evolution of your capabilities in clinical in Optum, are you looking at ways and emphasizing ways to move from more population health management to individual management techniques, and is that important as you move toward an exchange environment and individual environment?
Speaker 6
Actually, in many ways, they're one and the same. To be able to manage large populations, what you have to do is be able to manage individuals and do it efficiently at an enormous scale and with levels of intimacy that's relevant. To me, they're one; one capability begets the outcome of the other. Dawn, do you have anything else to add?
Speaker 4
I would echo what Steve said. We have invested heavily in consumer-based platforms that allow us to understand consumer segments, understand both their clinical needs and their behavioral needs, what motivates them to change. We're deploying those capabilities in many different ways in partnership with many different constituents within healthcare, from payers to employers to now, most recently, in partnership with the delivery system, as we've spoken about some of these other activities that we have been engaged in, across Optum. We do see those two things coming together hand in hand. It's the benefit of serving 60 million consumers, and something we'll continue to cultivate and advance within this platform.
Speaker 6
Thank you. If I get back to the first part of your question, you know, Larry's here, and maybe it'd be interesting to get a few themes from him.
Speaker 7
David, maybe I can tell you that it's been a whirlwind two weeks of running around and talking to various folks. The senior management team at Optum is a very, very outstanding team, and as a result, we've been able to hit the ground running. I don't think we're going to miss a beat on this. We've looked at the strategy. The strategy is very, very solid, and we don't plan on making any change with that strategy. The end result of a couple of weeks here is that the strategy is sound, and we're moving forward.
Speaker 6
Great. Thank you.
Speaker 2
Next question, please.
Speaker 1
Your next question comes from the line of Doug Simpson with Morgan Stanley.
Speaker 0
Hey, good morning, everyone. Appreciate letting me sneak one in. Most of my questions have been asked, but if you could just, just to sort of put all the discussion together, maybe in thinking about EPS seasonality in the back half of the year, last two years, Q3's been north of Q4. Is that roughly the seasonality we should be looking for? Secondly, maybe comments on Medicaid utilization. I guess just having the experience of the last two years and seeing how trend has moderated across the different payer classes, would just be curious on how you think about, you know, on the commercial side, obviously, you've got the cost-share dynamic, which one could assume in this economy would maybe keep people, or cause them to be a little more prudent in their purchasing of healthcare.
Just curious your view of what's driving the similar downtrend in the CAID and, to a lesser extent, the Medicare side.
Speaker 6
going to address seasonality, and then Jack will take on CAID.
Speaker 0
Okay.
Speaker 6
Doug, I think our seasonality patterns remain intact in terms of deductible warehouse and the things that are specific to our business and, frankly, specific to the industry. You'll see things like the operating costs lift in the fourth quarter related to our open enrollment efforts on Medicare and our staffing of nurses and things of that nature in order to get to effective 1/1 dates. When you compare the second half of 2011 to the second half of 2010, there are some differences that I think are unique to this year in particular. I just wanted to point them out. As kind of a backdrop to that, I just want to reiterate that it's been a very strong enrollment year, so you're going to see that growth effect come through in the back half of the year.
As Steve indicated, that's one of the reasons why we've looked at our guidance to $4.15 to $4.25 per share, despite the significant headwinds of healthcare reform. As you may recall, that number compares favorably, or that range compares favorably, to the $4.10 we recorded for all of fiscal 2010. As for the back half of 2011 as compared to 2010, the net EPS performance, if you were to look at it, is almost entirely explained by the payroll development we experienced in the last half of 2010.
Speaker 0
Okay.
Speaker 6
Quite extensive versus the absence of future development in our 2011 guidance.
Speaker 0
Okay.
Speaker 6
As you know, we think we do a best estimate of our claim reserves, and we don't forecast any future development, whether it be positive or negative. The other thing I just wanted to note, however, is that we, as Dan indicated, we experienced unexpected flat utilization in the back half of 2010.
Speaker 0
Mm-hmm.
Speaker 6
That's compared to our current FAS forecast of a more normal utilization trend in the back half of 2011. Also affecting the comparisons would be the minimum medical loss ratio requirements for 2011, where no such requirement was there for 2010. If our guidance is achieved, we will see that in the end, we will have significantly offset those significant headwinds through broad-based growth, margin expansion, diversification of our business, as well as capital management. Great. Jack?
Speaker 3
Sure. This is Jack Larsen. To answer your question specifically on in-year seasonality with respect to Medicaid, there really aren't any demonstrable inter-seasonal patterns of utilization for Medicaid. More generally, when we're thinking about the broad trend of reduced consumption in Medicaid, I would call out perhaps two specific things. One, what we have seen is an overall reduction in birth rates.
Speaker 6
Mm-hmm.
Speaker 3
Keep in mind that in our population of about 3.5 million members or so, about 2 million are children, and a large majority are mothers. As birth rates go down, we see lower inpatient visits, lower bed days, of course, and reduced levels of consumption. I think even more generally, it's our point of view that the overall economic factors that affect people generally, whether they're in commercial populations or eligible for Medicaid, affect utilization.
Speaker 6
Mm-hmm.
Speaker 3
Things like being able to get off work, things like transportation.
Speaker 6
Mm-hmm.
Speaker 3
All of those things we think are general contributors to the reduced level of consumption we've seen lately.
Speaker 6
Okay.
Speaker 3
Thank you. I think we have to conclude this call. I think we have actually more than exceeded our time. Again, we'd like to thank you for joining us and remember that, as our two businesses, UnitedHealthcare and Optum, work together, we are really making some, I think, real meaningful inroads in terms of advancing performance within the health system, delivering solid fundamental execution, gaining market share, and producing consistent, strong financial results. We thank you for your attention, and we'll close the call. Thanks.
Speaker 1
Thank you for participating in today's conference call. You may now disconnect.
