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Behind OptumHealth’s and OptumInsight’s Strong Revenue Growth in 1Q16

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Revenue growth

UnitedHealth Group’s (UNH) healthcare delivery business, OptumHealth, managed to earn $4 billion revenues in 1Q16, which represents a YoY (year-over-year) growth of about 22%. This performance is attributed mainly to the increase of neighbourhood care centers operated by the company. UnitedHealth Group’s technology and consulting services business, OptumInsight, reported revenues of about $1.7 billion in 1Q16, which represents a rise of 20% YoY.

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OptumHealth performance

In 1Q16, UnitedHealth Group’s OptumHealth segment managed to serve 79 million customers, which represents a YoY increase of about 11.3%. The company plans to actively pursue its strategy of adding about 30 neighbourhood care centers each year across 75 markets in the US. The company plans to control its medical costs by effectively implementing the strategy of local care delivery through these clinics. Additionally, UnitedHealth Group may also opt for acquisitions for further strengthening its care delivery in the US.

OptumInsight performance

Similar to other health insurance companies such as Aetna (AET), Cigna (CI), and Anthem (ANTM), UnitedHealth Group is also actively involved in offering innovative healthcare solutions by deploying data analytics. In 1Q16, OptumInsight held a backlog of contracts worth $11 billion, which represents a YoY increase of 20.9%.

Using analytics and predictive sciences, OptumInsight helps UnitedHealth Group and its clients to optimally utilize resources for population health management. The company develops its projections based on claims data covering 170 million lives, clinical data spanning around 80 million lives, data related to 3 million medical procedures, eight billion laboratory results, and other such diverse data points. This data enables the company to make accurate financial and clinical projections for its clients.

Boosting company profitability

If UnitedHealth Group manages to accurately project future financial risks and rewards using advanced data analytics, it should boost the company’s profitability as well as share prices. This could also prove positive for the share prices of the iShares Russell 1000 ETF (IWB). UnitedHealth Group makes up about 0.61% of IWB’s portfolio.

Continue to the next part for an analysis of the medical and operating costs of UnitedHealth Group in 1Q16.

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