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UnitedHealth's Unit to Expand Outpatient Surgical Procedures
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In yet another step to speed up growth in its health services segment named Optum, UnitedHealth Group Inc. (UNH - Free Report) has announced that it will acquire Surgical Care Affiliates, Inc. .
Having faced with stringent regulatory restrictions over its health benefits business which deals with providing health insurance products, UnitedHealth has been working aggressively to reap growth from Optum. Since 2011, Optum has compounded revenues at 23% per year and operating earnings at 34% per year. In 2015, Optum grew its revenue by 42% (including the acquisition of Catamaran in July) and its contract backlog by more than 20%. We expect Optum’s businesses to continue to produce strong, sustainable growth across the board in 2016 and beyond, as a leader in the U.S. and international health services markets estimated at $1.0 trillion in the aggregate.
The segment has provided significant upside to the company’s growth over the past several quarters. This is also evident by the stock’s share price which has gained 36.04% in 2016, handsomely outperforming the Zacks categorized Medical Health Maintenance Organization industry's gain of 21.02%.
Coming back, the acquisition will be made by OptumCare, a subsegment of Optum, which provides primary and urgent care delivery services business. The company has targeted Surgical Care by virtue of its leadership in outpatient surgery industry, serving approximately 1 million patients per year in more than 30 states.
The purchase, which will be funded by a combination of stock and cash, will likely be completed by the first half of 2017. It will also expand OptumCare’s capabilities in outpatient surgical procedures.
Ambulatory surgery centers are health care facilities that offer patients the convenience of having surgeries and procedures performed safely outside the hospital setting. The company is keen on growing in this space since ASCs are fast gaining prominence as they provide care at significant cost savings.
During the third quarter earnings conference call, the company’s CEO announced that OptumCare is expected to see continued build out market by market and emerge as a national platform for primary care-driven ambulatory care services. The company aims to expand its care delivery through owned or affiliated clinics to more than 75 local markets, where more than 200 million people reside.
Optum accounts for approximately 46% of consolidated revenue and nearly 42% of consolidated earnings. It was formed as a result of the unification of its health services business under one segment back in 2011.
This fast growing health services business will fuel the company’s long-term growth and be a key differentiator in the industry.
The company has grown this segment via a number of acquisitions. Some of the significant deals are the acquisitions of Audax Health Solutions, Inc. in 2014; and Irvine-based Monarch HealthCare and Inspiris, a provider of care and care management services, in 2011.
In 2015, Optum joined MedExpress, a leader in high quality, affordable walk-in care, to expand access to lower-cost services in communities nationwide. It also acquired AxelaCare Health Solutions, a leading provider of home infusion solutions.
One of the biggest acquisitions made by the company under his segment was that of Catamaan Corp. for $12.8 billion last year. It bolstered Optum’s pharmacy business.
Management is considering the expansion of the health service business to generate 30–40% of operating income over the longer term and has been making acquisitions in the field. Management thinks that the company is under-penetrated in the health service area and investment in this field will reap benefits over the long term.
UnitedHealth carries a Zacks Rank #2 (Buy). Other stocks worth considering in the same space are Magellan Health, Inc. and WellCare Health Plans, Inc. .
WellCare delivered positive surprises in each of the last four quarters with an average beat of 40.01%. The company has a Zacks Rank #2.
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UnitedHealth's Unit to Expand Outpatient Surgical Procedures
In yet another step to speed up growth in its health services segment named Optum, UnitedHealth Group Inc. (UNH - Free Report) has announced that it will acquire Surgical Care Affiliates, Inc. .
Having faced with stringent regulatory restrictions over its health benefits business which deals with providing health insurance products, UnitedHealth has been working aggressively to reap growth from Optum. Since 2011, Optum has compounded revenues at 23% per year and operating earnings at 34% per year. In 2015, Optum grew its revenue by 42% (including the acquisition of Catamaran in July) and its contract backlog by more than 20%. We expect Optum’s businesses to continue to produce strong, sustainable growth across the board in 2016 and beyond, as a leader in the U.S. and international health services markets estimated at $1.0 trillion in the aggregate.
The segment has provided significant upside to the company’s growth over the past several quarters. This is also evident by the stock’s share price which has gained 36.04% in 2016, handsomely outperforming the Zacks categorized Medical Health Maintenance Organization industry's gain of 21.02%.
Coming back, the acquisition will be made by OptumCare, a subsegment of Optum, which provides primary and urgent care delivery services business. The company has targeted Surgical Care by virtue of its leadership in outpatient surgery industry, serving approximately 1 million patients per year in more than 30 states.
The purchase, which will be funded by a combination of stock and cash, will likely be completed by the first half of 2017. It will also expand OptumCare’s capabilities in outpatient surgical procedures.
Ambulatory surgery centers are health care facilities that offer patients the convenience of having surgeries and procedures performed safely outside the hospital setting. The company is keen on growing in this space since ASCs are fast gaining prominence as they provide care at significant cost savings.
During the third quarter earnings conference call, the company’s CEO announced that OptumCare is expected to see continued build out market by market and emerge as a national platform for primary care-driven ambulatory care services. The company aims to expand its care delivery through owned or affiliated clinics to more than 75 local markets, where more than 200 million people reside.
Optum accounts for approximately 46% of consolidated revenue and nearly 42% of consolidated earnings. It was formed as a result of the unification of its health services business under one segment back in 2011.
This fast growing health services business will fuel the company’s long-term growth and be a key differentiator in the industry.
The company has grown this segment via a number of acquisitions. Some of the significant deals are the acquisitions of Audax Health Solutions, Inc. in 2014; and Irvine-based Monarch HealthCare and Inspiris, a provider of care and care management services, in 2011.
In 2015, Optum joined MedExpress, a leader in high quality, affordable walk-in care, to expand access to lower-cost services in communities nationwide. It also acquired AxelaCare Health Solutions, a leading provider of home infusion solutions.
One of the biggest acquisitions made by the company under his segment was that of Catamaan Corp. for $12.8 billion last year. It bolstered Optum’s pharmacy business.
Management is considering the expansion of the health service business to generate 30–40% of operating income over the longer term and has been making acquisitions in the field. Management thinks that the company is under-penetrated in the health service area and investment in this field will reap benefits over the long term.
UnitedHealth carries a Zacks Rank #2 (Buy). Other stocks worth considering in the same space are Magellan Health, Inc. and WellCare Health Plans, Inc. .
Magellan delivered a positive surprise in three of the last four quarters with an average beat of 42.58%. The company sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here
WellCare delivered positive surprises in each of the last four quarters with an average beat of 40.01%. The company has a Zacks Rank #2.
Zacks' Top 10 Stocks for 2017
In addition to the stocks discussed above, would you like to know about our 10 finest tickers for the entirety of 2017?
Who wouldn't? These 10 are painstakingly hand-picked from 4,400 companies covered by the Zacks Rank. They are our primary picks to buy and hold. Be among the very first to see them >>