UnitedHealth Group Inc. shares jumped after the company beat Wall Street’s profit expectations and affirmed its outlook for the year, despite the costs associated with a cyberattack on one of its subsidiaries that has roiled the health-care industry.
Adjusted earnings of $6.91 a share exceeded analysts’ average estimate of $6.59 a share, the health-care giant said in a statement Tuesday. UnitedHealth affirmed its outlook for adjusted net earnings of $27.50 to $28.00 a share in 2024. Revenue of $99.8 billion also topped analyst estimates.
Shares in the company rose 5.2% on the day of the news. The shares of rival health insurers including Humana Inc. and CVS Health Corp. gained too, as investors read UnitedHealth’s comments on medical costs as a good sign for the sector. UnitedHealth’s shares had dropped 15% so far this year through Monday, compared to a 6% rise in the S&P 500.
Analysts had cautioned that the results could be unpredictable in the wake of the February cyberattack that’s impeded the flow of data and payments across the health-care industry. The incident left investors — already spooked by rising care costs — wondering whether insurers would have a clear view of their medical expenses.
Yet UnitedHealth said medical expenses were as expected, a relief to investors fearing worse. While the cyberattack reduced earnings by $872 million in the quarter, more than two-thirds of that was excluded from adjusted results. The company also repurchased more than $3 billion of its own shares during the first quarter, the largest value on record, according to data compiled by Bloomberg.
Despite the immediate stock surge, some analysts warned the results should be taken with caution. The disruption from the hack “clouds an already murky utilization backdrop” and it will take until next quarter’s results to get a “clean” view of underlying medical costs, RBC Capital Markets’ Ben Hendrix wrote in a note to clients.
Hack Fallout
The cyberattack on the company’s Change Healthcare unit knocked out crucial networks for payments and data used by entities across the health-care system, hindering the ability of patients to get prescriptions and medical offices to get paid. The repair is still underway, and UnitedHealth says it has sent $6 billion in advanced payments and loans to providers affected.
Earlier: Health Hack Will Burden US With Hundreds of Millions in Costs
UnitedHealth “continues to make significant progress in restoring the affected Change Healthcare services while providing financial support to impacted health care providers,” the company said in the statement.
UnitedHealth also excluded the impact of a previously disclosed $7 billion charge on the sale of its Brazil unit.
The company said the cyberattack would have a small effect on its adjusted profit. While it will reduce earnings by $1.15 to $1.35 a share in 2024, much of the costs of directly responding to the incident will be excluded from its adjusted results. In the first quarter, the adjusted results included just a 25 cent per share disruption from the hack, according to the statement.
A closely watched gauge of medical expenses was higher than analysts were looking for in the first quarter, as the company’s response to the hack drove up costs. UnitedHealth reported a medical-loss ratio — a key measure of medical expenses as a proportion of premiums — of 84.3% in the first quarter, worse than the 83.9% average analyst estimate.
The metric was 40 basis points higher due to “accommodations to support care providers,” according to the statement. The company said it waived some restrictions on care while systems to process requests for treatment approvals were down because of the hack.
The patterns of people getting medical care in the quarter were as expected, the company said. Wall Street analysts had been concerned about the risk of rising care expenses after they came in higher than anticipated at the end of 2023.
Lawmakers are trying to pump the brakes on a state plan to close SUNY Downstate Medical Center as final budget negotiations ensue.
Members of the state Senate and Assembly are pressing Gov. Kathy Hochul to halt her decision to shutter the financially struggling teaching hospital until a government-appointed panel of experts makes formal recommendations. The proposal is a last-ditch effort to avoid a plan to tear down the East Flatbush hospital and move inpatient services to surrounding facilities included in Hochul’s executive budget, and comes as the governor announced a "conceptual" budget agreement earlier this week.
Under the legislators’ proposals, the state budget would still allocate $300 million to fund hospital construction and renovations, an investment consistent with the governor’s original plan, but the money would be allocated into a fund without clear parameters for use until a commission of government-appointed experts forms recommendations on how to improve the hospital’s finances and ensure access to care.
The budget is also likely to include an additional $100 million in operating aid to cover Downstate’s losses while the commission devises a path forward, said Assemblyman Brian Cunningham, who represents Central Brooklyn neighborhoods that Downstate serves including East Flatbush, Prospect Lefferts Gardens and Crown Heights.
Cunningham said the proposed budget language would do more than just postpone a closure and would allow the state to gather more input to ensure Downstate continues to serve residents of Central Brooklyn in the years to come.
“Downstate is going nowhere,” Cunningham told Crain’s. He said that once Downstate’s future is secured, the next step is finding funding from state or federal sources to sustain the hospital in the long-term.
Cunningham and Sen. Zellnor Myrie, a Central Brooklyn lawmaker and vocal opponent of closing Downstate, both sponsored bills in their respective houses to appoint an advisory body and gather community input before deciding to close the hospital. The bills were included in the legislatures’ one-house budget proposals, signaling clear pushback to the state’s plans to shutter the hospital without a say from the community.
The Assembly’s version of the bill includes a plan to appoint a commission of at least 15 union leaders, government officials and experts appointed by legislators, the governor, the Brooklyn borough president and community board members to convene on next steps for Downstate. The Senate’s proposal also outlines plans to appoint an 11-person commission. In addition, it includes language to ensure that the hospital preserves “core” services including trauma and emergency care, an organ transplant unit and maternal services.
Myrie told Crain’s that “it appears as though the governor and chancellor have heard our community’s cries” around the closure of Downstate, adding that lawmakers are on their way to finding a solution for the hospital’s future but that details still need to be worked out.
It is still unclear how many members would be appointed to the commission and when they would be required to come up with a plan for the future of Downstate.
Kara Fesolovich, a spokeswoman for the governor, said that details on the future of SUNY Downstate will be included in the final budget bills. She did not answer a question about whether or not Gov. Kathy Hochul supported the plan to appoint a commission to guide the transformation process.
Hochul first proposed to close Downstate in her executive budget released in January – although she never said the word “closure” outright. Instead, the governor and SUNY leaders billed the proposal as a “transformation” that would include shuttering the main hospital and moving inpatient services to surrounding facilities, including New York City Health + Hospitals/Kings County. Preliminary plans also included building an ambulatory care facility and center for health equity on SUNY’s campus.
Hochul allocated $300 million in her executive budget to build a new center on Downstate’s campus, plus an additional $100 million to cover the hospital’s annual operating deficit – allocations that are likely to end up in the final agreement.
SUNY Chancellor John King previously told Crain’s that without that funding the medical center was at risk of closing by this summer, as patient volume has dropped to less than half of the hospital’s inpatient capacity.
But early visions of the plan were met with backlash from community members, local elected officials and doctors and faculty members who work at SUNY Downstate who said that the relocation of services would result in care disruptions that would impact the local community.
Downstate is the only medical center in Brooklyn that offers organ transplant care. It’s also the borough’s only regional perinatal center, sparking concerns about disruptions in access to care for low-income communities and people of color who live in the neighborhoods surrounding the hospital.
New York City Health + Hospitals spent nearly $55 million settling 93 injury or harm claims in fiscal year 2023, a new report from city Comptroller Brad Lander has found.
That’s a 34% decrease from fiscal year 2022, when the health system paid out $83 million. However, H+H still spent the fifth-most of any city agency on the settlements, the annual claims report released Tuesday shows, after the New York City Police Department and Departments of Education, Transportation and Sanitation.
The claims filed against the 11-hospital public health system account for personal injuries sustained on hospital property, including alleged medical malpractice, “slip and fall” cases and property damage. Lander found that H+H/Jacobi in the Bronx paid out the most money of any of H+H’s acute care hospitals to settle medical malpractice claims, at nearly $15 million across nine cases. H+H/Lincoln, also located in the Bronx, paid $10 million to resolve 11 alleged instances. H+H/Queens Hospital Center was the only facility that did not pay any money to settle a case.
H+H also experienced the ninth-largest settlement of FY23, when the health system paid $7.75 million to settle a case where plaintiffs alleged that H+H failed to manage and treat a patient's cervical condition, resulting in an amniotic infection and her baby being born at 23 weeks. The infant sustained physical and cognitive injuries, the plaintiffs alleged, and needs 24-hour care. The case went to trial and was settled while the jury deliberated.
Lander noted that many medical malpractice cases typically get resolved between five and 10 years after patients file them, so the number of claims reported in any given year is a better indicator of the health system’s environment than the amount of money paid.
To that end, the report shows improvement: the number of alleged medical malpractice instances filed against the system in FY23 fell to 398 claims, a 10% decrease from FY22 when H+H recorded 441 cases. H+H Jacobi and Lincoln both experienced a decline in the number of alleged issues reported at each facility.
According to Lander, the drop in medical malpractice claims against the system’s acute care hospitals–347 filed in FY23, a 13% decline from the prior year–is a notable sign of progress. He also acknowledged that H+H has shown significant improvement in the amount of total claims filed and the amount paid out over time. Both statistics have fallen sharply since fiscal 2014, when 874 claims were recorded and H+H paid nearly $125 million to settle some.
The health system’s improvement mirrors that of the city, the report shows, which paid $1.45 billion total across more than 13,000 claims and lawsuits in FY23, a 7% dip from FY22. The New York City Police Department spent the most of any agency settling cases, at nearly $267 million.
H+H representative Christopher Miller said claims and settlement payouts have declined over time because of the city's ongoing investments in the health system. H+H encompasses 11 public hospitals across the city, five long-term care facilities and 30 Gotham Health community care facilities. The health system treats more than one million patients each year, about 70% of which are covered by Medicaid or uninsured.
Renderings released this week show off a new full-block residential development coming to Williamsburg. Designed by architecture firm ODA, the project includes the Lorimer House, a 270-unit rental, and Copper Lofts, a “boutique collection” of 66 residences, connected by an elevated bridge, creating the illusion of one cohesive development. Taking advantage of their corner location [...]
The post See ODA’s curving, connected residential buildings rising in Williamsburg first appeared on 6sqft.
A supertall office tower long planned for Midtown is finally moving forward. During a breakfast held by the Association for a Better New York, Mayor Eric Adams on Tuesday revealed new details and renderings for 350 Park Avenue, a 62-story building developed by Vornado Realty Trust, Citadel, and Rudin Management. Designed by Foster + Partners, [...]
The post Vornado reveals new renderings for 62-story office tower at 350 Park Avenue first appeared on 6sqft.
An owner behind the Upper East Side's popular Butterfield Market teased the Manhattan mainstay's arrival to a new luxury mixed-use building in Queens at a breakfast hosted by the Long Island Partnership on Tuesday morning.
"This is our first move out to another borough, we've always been an Upper East side business but we needed a larger facility," said Evan Obsatz, owner and CEO of the 109-year-old market known for its catering services and fan-favorite frozen yogurt.
The move marks the first time the company — which survived the Spanish flu, the Great Depression and most recently the Covid-19 pandemic — will venture across the East River. The 22-year lease for more than 10,000 square feet of space on the ground floor of the new Rise LIC building at 29-17 40th Ave starts at $29 per square foot, according to Obsatz. Butterfield Market’s Queens will open anywhere between October 2024 and February 2025, he said.
About 9,500 square feet of the new space will be a cooking facility. The remaining space will be used for retail shopping and include a cafe in-store, serving up staple Butterfield Market offerings, including its frozen yogurt, sandwiches and salads, said Obsatz.
The Obsatz family leases two other large retail locations on the Upper East Side, one at 1114 Lexington Ave. between 77th and 78th streets, and the other at 1150 Madison Ave. at the corner of 85th Street. They run a sushi shop at 1102 Lexington Ave. at the corner of 77th Street and a Butterfield Kitchen Commissary at 346 E. 92nd Street. Their offices are also in the neighborhood at 1449 Lexington Ave.
UnitedHealth Group Chairman Stephen Hemsley and three senior executives netted a combined $101.5 million from stock sales made over four months leading up to when the public became aware of a federal antitrust investigation.
The sales occurred between Oct. 16, a week after the nation's largest health insurer reportedly received notice of the Justice Department probe, and Feb. 26, the day before Bloomberg News and others published stories about the investigation. The stock dropped after the investigation was widely reported.
There’s no indication that the trades were executed according to scheduled trading plans in filings related to the transactions. UnitedHealth said officers and directors must get clearance to trade shares, and that trading is limited to certain windows that often open after earnings reports. The trades in question were approved, a spokesperson said. The company reported third-quarter earnings on Oct. 13.
Typically a company’s general counsel would declare a blackout period barring trading in light of a sensitive investigation, according to John C. Coffee Jr., a corporate governance expert at Columbia Law School. “Apparently, this did not happen” at UnitedHealth, he said in an email.
The DOJ is reviewing whether UnitedHealth’s acquisitions have consolidated its position in some markets in a way that violates antitrust laws, according to a person familiar with the probe who asked not to be identified discussing a nonpublic investigation. The agency has reportedly been looking at potential monopolies in the managed-care industry since at least mid-2023.
UnitedHealth hasn’t explicitly acknowledged the probe and declined to say when Hemsley and the others were informed of it. When asked about the trades, a spokesperson for the insurer said “these directors and officers followed our protocols and received approval from the company.”
UnitedHealth declined to make Hemsley, the other people involved in the trades, or its general counsel available for interviews, and a spokesperson said they had no comment beyond the company’s response.
The company says in regulatory filings that it is subject to “routine, regular and special investigations, audits and reviews” from various state and federal agencies, including the DOJ.
Disclosure question
Shares of UnitedHealth fell 5.2% in two trading sessions on Feb. 27-28, after the probe was widely reported in financial media. It was first reported Feb. 26 in the Examiner News, a local publication in New York state. The stock has fallen about 15% so far this year through Wednesday’s closing price compared with an 8% gain in the S&P 500 Index.
Whether the investigation should have been disclosed to shareholders hinges on if it’s considered material, said Charles Elson, founding director of the Weinberg Center for Corporate Governance at the University of Delaware.
The fact that shares fell after the news leaked “would suggest some materiality to investors,” he said. UnitedHealth says all material information is included in its periodic filings.
Share sales by top leaders are usually vetted by a company’s general counsel, Elson said. They evaluate whether the company must disclose any additional information to the market before the trades occur, he said.
“The question is, when they first were aware of the investigation, was it viewed as material?” Elson said.
Also weighing on the stock is a cyberattack on the company’s Change Healthcare subsidiary. The attack knocked out crucial data and payments systems, sowing chaos throughout the health-care industry.
UnitedHealth operates the largest U.S. health insurer, UnitedHealthcare, and a growing network of clinics, surgery centers, home-care providers and other services under its Optum division. Hemsley has served as chairman since he stepped down as chief executive in 2017 after more than a decade at the helm.
On Oct. 17 and Dec. 5, Hemsley exercised a portion of his stock options set to expire in 2024. He sold the shares he’d acquired the same day, netting him $84.9 million, according to filings.
Brian Thompson, CEO of the UnitedHealthcare insurance unit, on Feb. 16 exercised options and sold shares, netting him $15.1 million, according to Bloomberg calculations. Days later, Chief Accounting Officer Tom Roos sold shares worth about $450,000.
Chief People Officer Erin McSweeney on Oct. 16 exercised options and offloaded shares for a net gain of $1.09 million, filings show.
Hemsley’s options were set to expire in February and November 2024, the filings show. The options held by Thompson and McSweeney had several years left until expiration.
While it’s not unusual for executives to periodically sell shares, Hemsley rarely sold stock while he served as CEO. Starting in 2020, he began offloading at irregular intervals: three times that year and again in 2021, then once in 2022, filings show. His net proceeds from each transaction have ranged from around $13 million to as much as $70 million. The Oct. 17 transaction, which netted him $55.7 million, is among the biggest he’s done in recent years.
Hemsley remains a significant UnitedHealth shareholder with more than 1 million shares valued at more than $450 million, held directly and in trusts, according to data compiled by Bloomberg. Each of the three executives also still hold shares in the company.
McSweeney and Roos have occasionally sold shares in recent years. This is the first year that Thompson has sold shares since he became CEO of the insurance division in 2021, at which point he had to start reporting his transactions.
An upstart synagogue is poised to take over a former health services site on the Upper East Side for its first permanent home.
The three-year-old Altneu congregation has purchased 107 E. 70th St. for $34.5 million, according to a deed that appeared in the city register on Monday.
Signing the deed for the Altneu was the synagogue’s president, Alexander Tsigutkin, the founder of AxiomSL, a tech firm known for its risk-management software for bank transactions that’s now owned by Nasdaq.
Tsigutkin went into contract on the building, a five-story edifice with leaded-glass bay windows near Park Avenue, on Feb. 14 and completed the acquisition on March 29, the deed says.
The seller was VNS Health, a nonprofit care group with roots in the 19th century with a rocky recent history. In 2020, the organization settled a years-old case over alleged billing fraud by shelling out a hefty $57 million fine, though VNS refused to admit any wrongdoing in the process.
Dan Savitt, who has served as VNS’s chief executive officer since 2021, handled the transaction for VNS, according to the register.
A VNS spokeswoman did not return an email seeking comment, and an email sent to the synagogue was also not returned. Also an effort to reach Tsigutkin through his former company was unsuccessful.
The Orthodox-focused Altneu, which translates to “old-new” in Yiddish, is led by Rabbi Benjamin Goldschmidt, who was fired in 2021 from a different shul, the nearby Park East Synagogue, after high-profile clashes with its longtime chief rabbi, Arthur Schneier.
Dozens of congregants signed a letter protesting Goldschmidt’s firing, and a year later, Goldschmidt announced that he and his wife, journalist Avital Chizhik-Goldschmidt, had co-founded the Altneu, which has so far been holding services at the Explorers Club on East 70th Street and other borrowed Upper East Side sites.
With its purchase of 107 E. 70th St., the Altneu has acquired a building completed in 1922 as the five-story home of Thomas Lamont, who served as chairman of Wall Street bank J.P. Morgan in the mid-20th century.
After the death of Lamont’s wife, Florence, 177,000-square-foot property was donated in 1954 to the Visiting Nurse Service of New York, the predecessor of VNS Health. (The Lamonts were also the great-grandparents of current Connecticut governor Ned Lamont.)
VNS Health, which offers home-care and hospice services, appears to have used the Tudor Revival brick-and-terracotta building for its offices and also to host fundraisers.
For his part, Tsigutkin, who immigrated to the U.S. from Ukraine in 1980, founded AxiomSL in 1991 and helmed the company until tech buyout group Thoma Bravo snapped it up in 2020 for undisclosed terms.
A year later, Thoma Bravo, which declined to comment, merged the firm with Calypso Technology and gave the combined software company a new name, Adenza Group. Nasdaq bought Adenza in 2023 in a $10.5 billion deal.