UnitedHealth cyberattack: Things won't be back to normal until 2025
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UnitedHealth Group said it could suffer a blow of up to $1.6 billion this year from the far-reaching cyberattack on its payment processing subsidiary, but the health insurer managed to exceed expectations with first quarter earnings.
Why it matters: Ransomware attackers seized control of critical systems at the company's Change Healthcare business earlier this year, hurting patients' access to prescriptions and throttling payments to care providers.
Between the lines: UnitedHealth said Tuesday that it expects $1 billion to $1.15 billion in "direct" costs in 2024 as a result of the attack. It projected another $350 million to $450 million "business disruption" hit, which includes lost revenue.
- The incident caused a $872 million drag on earnings from operations in the first quarter.
The exact full-year tally is uncertain in part because the company is still recovering from the attack, which led to hackers gaining access to a trove of sensitive information, including patients' hospital bills, financial documents and company contracts.
- "We've still got work to do," Roger Connor, CEO of UnitedHealth's Optum Insight, said Tuesday on a conference call, adding that "we're up to 80% functionality."
The big picture: The report came the same day as a congressional hearing on the attack, where members expressed concern about malicious cyber actors stealing patients' personal information.
- "There are still many unanswered questions and lessons to be learned from this attack," House Energy and Commerce Committee Chair Cathy McMorris Rodgers (R-Washington) said in prepared remarks. "How did this attack gain entry to the Change system? How can hospitals, doctors, and others best protect themselves?"
The intrigue: Despite the costs associated with the cyber recovery, UnitedHealth reported better-than-expected revenue growth and adjusted earnings.
- And the company reported an encouraging medical cost ratio — the amount of premium dollars that went toward medical costs — of 84.3% in Q1.
- UnitedHealth's stock was up 5.3% in early-afternoon trading, while the shares of competitors, including Humana and CVS Health, were also lifted.
Flashback: Disclosed on Feb. 21, the attack on the Change Healthcare business caused nationwide disruptions for hospitals, providers, and pharmacies. Some providers are still unable to access medical claims and payments processing, per an April survey from the American Medical Association.
- On Tuesday morning, hackers started to leak stolen information.
Context: UnitedHealth bought Change, a financial clearing house that links companies that manage drug benefits with pharmacies, for nearly $8 billion in 2022.
- The subsidiary of UnitedHealth's sprawling Optum division includes 90,000 doctors under Optum Care.
The bottom line: The company doesn't expect to get back to "baseline performance" until 2025, Connor said.
