UnitedHealth continued to juice up its business outside health insurance in a better-than-expected second quarter while rivals scrambled to add enrollment in a wave of mega-mergers sweeping the sector.
The nation's largest health insurer said Thursday that operating earnings climbed about 19 percent to $864 million for its Optum business segment, which provides pharmacy benefits management and technology services. That contributed to 13 percent overall profit growth in the quarter and another earnings projection hike.
Competitors like the Blue Cross-Blue Shield carrier Anthem Inc., Aetna Inc. and Centene Corp. all have made multibillion-dollar offers for smaller companies in recent weeks as health insurers bulk up on technology try to cut costs by growing larger. They also want to stoke enrollment in areas like Medicare Advantage, the fast-growing privately run version of the federal government's coverage program for people who are over 65 or disabled.
UnitedHealth, already the nation's largest Medicare Advantage plan provider, has taken a different path on acquisitions, one that veers from its core business. The insurer is wrapping up its bid for the pharmacy benefits manager Catamaran Corp., a deal valued at more than $12 billion.
Pharmacy benefits managers, or PBMs, run prescription drug plans for employers, insurers and other customers, and they are seen as a key component in fighting rising drug costs because they can use leverage that comes from their size to help restrain prices. But UnitedHealth executives told analysts Thursday that the Catamaran acquisition will help them do more than process prescriptions.
The company wants to use technology more to help manage patient health and control overall costs. That might mean analyzing data and using other tools to spot gaps in care or areas where a customer needs help, such as connecting a rheumatoid arthritis patient with treatment for depression.
"We are committed to creating a next generation pharmacy care services company," Vice Chairman Larry Renfro said.
UnitedHealth raised its 2015 revenue forecast by $11 billion to about $154 billion with that deal pending. It also hiked its earnings forecast for the second time this year, to a range of $6.25 to $6.35 per share.
Analysts expect, on average, earnings of $6.26 per share on $143.48 billion in revenue, according to FactSet.
"Consistent with our thinking, 2015 earnings power is stronger than previously anticipated," BMO Capital Markets analyst Jennifer Lynch said.
In the second quarter, UnitedHealth's profit grew 13 percent to $1.59 billion.
Earnings per share of $1.64 topped Wall Street expectations by 7 cents, according to Zacks Investment Research.
Health insurance is still UnitedHealth's main business and operating earnings there grew 11 percent in the quarter.
Despite the performance, shares slipped more than 2 percent, or $2.60, to $123.38 in midday trading.
UnitedHealth has set a high bar for performance with recent strong quarters, and Lynch said investors may have been disappointed with the insurer's medical loss ratio, or the percentage of premiums it spent on claims and other forms of care.
Shares of the Minnetonka, Minnesota, company, a component of the Dow Jones industrial average, have climbed about 25 percent since the beginning of the year.