Unidentified Analyst: Hi, everybody. Thanks for the question. You know, it’s similar to last quarter, the trend in margin and OptumHealth and OptumInsight has been down year-to-year, you know, you’ve called out change, particularly with OptumInsight, but I wondered if there’s any ability to discuss unusual items, non-recurring items. I know you said you had some cost reduction programs you were implementing this quarter in OptumHealth. Did those impact the results? And is there any change as you look ahead to ‘24 in your margin expectations or targets for those two businesses?
Andrew Witty: A.J., thanks so much for the question, appreciate it. So let me just make a few comments, particularly as it speaks to the OptumHealth part of the question that you raised. So as you look at 2023, essentially what we’ve seen, and we refer to this in Q2, greater growth in the number of people, patients, that we’ve been privileged to serve this year, particularly the more complex patients. So very strong, and you heard in our opening commentary, very strong growth in the number of fully accountable lives running at about 900,000, substantial fraction of that coming in the more complex cases. As I said back in the last call, we’re very, very pleased to have that growth. We believe that is really foundational or key foundation for future long-term growth of the business.
However, within that, the mix of that population is a little different to what we expected. That takes time to then build the engagement capabilities that we need to be able to work with those people and their care providers to ensure the very best care is delivered in the most efficient and effective way. And that’s really the bulk of the investment that we’re talking about. It’s really taking the time, looking after those folks in the way they need to be looked after right now in advance of those being able to engage with them fully and deliver then the various interventions and advices that we can provide that we’re really building throughout Optum to ensure that not just in one year, but over multiple years, those folks get increasingly better care delivery and better outcomes.
And recall that these patients in many cases have really been somewhat, you know, not necessarily looked after, as well as they could have been by the system, because of their very complexity. In some cases, they’re not able to get to clinics, which is why we’ve been building up our home care capabilities and other wraparound services to the classic clinic approach. That’s really the driving force. Now, as that speaks to the future, two things really, A.J., one is we’re super confident around our ability to continue to grow the number of patients, who are able to look after. Number two, as those capabilities that have been accelerated during this year begin to affect both the quality positively and the cost of how these patients’ care is delivered, you’re going to see that shine through an improved economic performance of OptumHealth.
And as we look forward, we’re very confident about continued strengthening of that business. Make no mistake, OptumHealth is having a very strong growth year and we’re taking the opportunity this year to really ready ourselves and build strength for the next many years of that business. AJ, thanks so much for the question. Next question?
Operator: Yes, we’ll go next to Josh Raskin with Nephron Research.
Josh Raskin: Hi, thanks. Good morning. Understanding that you expect Medicare Advantage to grow at a healthy pace, I think you said above market again in 2024. Could you speak to that progress expected at OptumHealth? I know we’ll get details at the Investor Day, but how are you thinking about the transition of patients from sort of fee for service to these fully risk engagements and then maybe general levels of investment for growth in light of the risk model and reimbursement model changes?
Andrew Witty: So Josh, thanks so much for the question. I mean, obviously we’ll leave very much the detail of the elements of the growth model for when we meet with you all in November. Having said that, we would no reason not to expect a continued healthy momentum in our move toward value-based care next year with continued high expectations for our ability to deliver that. To your broader question, maybe just reflect a little bit again on 2023. So this has been a year which essentially has been obviously very heavily influenced by the change in the funding environment that was announced earlier in the year for Medicare Advantage. And we’re very appreciative of the three-year phasing of the changes, which CMS ultimately decided to make.
But obviously, those changes are essentially the equivalent to a price cut phased in over three years for the Medicare Advantage program. We are appreciative of the fact that we have had essentially seven, eight, nine months warning of that in terms of when that was announced before we go into the ‘24 year. And that’s allowed us and we have taken full advantage of it to really focus on how we ready ourselves, not just for 2024, but for the next 36 months. So 2023 has all for us been about ensuring that we re-engineer our cost base, that we refocused our benefit strategies to those things that matter most to patients, that we strengthen and invest in our ability to manage affordability of care going forward into the system, and that we’re taking full advantage of building the capabilities we have already begun to construct around our consumer engagement, our technology, digital first capabilities, and ultimately doubling down on our commitment to value-based care.
That has really been the story behind the investments of 2023 in response to the changes that have been signaled by CMS, so that we go into ‘24, ‘25, ‘26, ‘27 feeling strong, feeling that we’ve taken advantage of these last several months to ensure that we’ve adjusted and adapted our strategy and business in readiness for the change in the funding environment, which gives us strong confidence for next year and underpins our commitment to the signal I just gave you in terms of our potential for 2024. Next question, please?
Operator: We’ll go next to Justin Lake with Wolf Research.
Justin Lake: Thanks. Good morning. Wanted to ask about UHC performance. First, your MLR was better than our expectations, but curious how it compared to your internal estimates? And maybe you could share how that might have come across — come in across the three main business segments? And then quickly, on the third quarter UHC margins, I found it interesting that while the MLR deteriorated by 50 basis points year-over-year in the quarter, overall UHC margins actually improved by 50 basis points. So, curious what might have grown with that? Thanks.
Andrew Witty: Justin, thanks so much for the question. Let me ask John Rex to respond to the first part and then Brian Thompson, the second.
John Rex: Good morning, Justin. So, overall, I’d call it broadly consistent with our expectations in terms of the third quarter. So a few things I’d like to highlight though. So care patterns were, as we discussed, focused again on outpatients, outpatient activity with seniors, those continue at the levels we described during the second quarter. And that’s what really drove a lot of kind of the activity throughout the quarter. It’s still in those categories that we have been focused on. The sequential move that you see from second quarter to third quarter is largely a seasonal factor. As you know well, there’s always less care activity in a third quarter, that has to do just with vacations, a lot of the elements that go in there in terms of certain types of discretionary care, seasonal illnesses, so typical patterns, and also Part-D patterns that you see on a regular basis.
In fact, if you go back to the years prior to 2020, 3Q would typically be the lowest care ratio quarter. So I’d say it’s probably more typical than not, just getting back to periods that were more normalized in terms of the activities that we saw going on there. We continue to expect our full-year medical care ratio to be toward the upper end of our initial 82.6 plus minus 50 basis point range. So very consistent with the level that we set out there back again in the two quarter that would be toward the upper end of that outlook. So — and then the seasonal factors in the 3Q, that some of those things influencing where you’d expect to be in that fourth quarter, the final quarter of the calendar year. Certainly utilization, Part-D impacts, they move the other direction in a fourth quarter.
