UnitedHealth is expected to record higher medical costs in its first earnings report since a cyberattack disrupted its technology systems including those that manage prescription and medical claims, analysts said.
The attack, disclosed on Feb. 21, affected hospitals, clinicians, and pharmacies nationwide. Some providers are still unable to access medical claims and payments processing, a recent survey by the American Medical Association showed.
UnitedHealth has advanced billions of dollars in reimbursements through loans to affected healthcare providers and suspended prior authorization of medical services for some government-backed insurance plans for quicker processing.
"We are used to them delivering quite a stable double digit growth. This is clearly a very high quality company, but to use the phrase for this coming quarter - it will probably be a bit messy," said Gerrit Smit, head of global equity management at investment firm Stonehage Fleming.
Analysts on average expect the company to post an adjusted profit of $6.61 per share for the first quarter, according to LSEG data, sharply down from $6.76 earlier this month.
With some medical procedures going through without prior authorization since the last 25 days of the first quarter, Piper Sandler analyst Jessica Tassan estimates that UnitedHealth will incur an incremental $154.2 million of medical costs in Medicare.
Prior authorizations allow a health insurer a chance to review how necessary a medical treatment is and thus, help reduce its costs.
TD Cowen analyst Gary Taylor said in a research note that he expects UnitedHealth will record "extra" authorizations of medical procedures due to the suspensions as one-time costs in its medical care ratio, which measures the percentage of premiums versus medical services provided.
He estimates a first-quarter medical care ratio of 84.7%. UnitedHealth reported a ratio of 82.2% for the quarter a year earlier.
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