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UnitedHealth's (UNH) Payment System Disrupted by Cyberattack
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UnitedHealth Group’s (UNH - Free Report) revenue and payment cycle management subsidiary, Change Healthcare, was rocked by a cyberattack last month. The healthcare industry has been facing a formidable challenge following the incident.
The attack on UnitedHealth brought a critical component of the healthcare payment processing infrastructure to a halt, affecting the flow of billions of dollars for healthcare providers, insurers and pharmacies. This paralysis has plunged numerous clinics into financial distress, with some facing the grim prospect of turning patients away or securing loans to continue operations.
Shares of UNH have lost 7.3% year to date compared with the industry’s 4.5% decline. The S&P 500 gained 8% in the same time frame.
Image Source: Zacks Investment Research
Impact on the Healthcare Sector
The impact of the cyberattack has been particularly severe on smaller healthcare providers, including those offering vital services like chemotherapy. These practices rely on a steady flow of insurance payments to fund their operations and purchase necessary drugs.
The disruption has forced them to seek extended payment terms from pharmaceutical wholesalers or delay payments altogether, indicating the attack's extensive reach beyond immediate victims to broader segments of the $4.5-trillion U.S. healthcare industry. For instance, the Pontchartrain Cancer Center reported a drastic reduction to 40% of its typical payments, highlighting the severe financial crisis of these clinics.
Response and Remedial Actions
In response to the crisis, UnitedHealth has been collaborating with U.S. health authorities and working on restoring its affected services. The company has made progress in resuming pharmacy services and is testing its medical claims network, aiming to alleviate the backlog of payments. However, the full recovery timeline remains uncertain, underscoring the challenges in overcoming such a substantial disruption.
The Biden administration has also stepped in, urging UnitedHealth and other insurers to provide emergency funding to affected healthcare providers. Efforts include easing regulations that may prevent patients from receiving care and allowing cash-strapped providers to seek advance payments from Medicare. Additionally, UnitedHealth has introduced programs to offer financial support to providers, acting on a case-by-case basis.
Recognizing the urgent need, drug distributors like Cencora (COR - Free Report) and McKesson (MCK - Free Report) , traditionally rigid in their payment terms, began to adapt their practices, offering lifelines to these vulnerable providers.
Cencora, for instance, responded to the crisis by extending payment deadlines and allowing providers to order more drugs than usual, albeit the extension was less than some had hoped for. Similarly, McKesson showed flexibility, adjusting its payment demands in recognition of the extraordinary circumstances facing healthcare providers. This adaptability from national distributors like Cencora and McKesson was critical in ensuring that clinics could continue to purchase necessary medications, thereby maintaining patient care during times of financial instability.
Furthermore, the pharmaceutical giant Bristol Myers Squibb also stepped in, offering temporary adjustments in payment terms for crucial cancer and blood disorder medications. These concerted efforts by drug distributors and pharmaceutical companies highlight a collective response to an unprecedented challenge, underscoring the importance of collaboration and support within the healthcare ecosystem to sustain patient care in times of crisis.
This cyberattack underscores the vulnerability of critical infrastructure within the healthcare sector to digital threats. It highlights the need for enhanced cybersecurity measures and the identification of potential single points of failure within the healthcare system. As the healthcare sector grapples with the aftermath of this cyberattack, it is evident that a coordinated and comprehensive approach involving all stakeholders is crucial to safeguard against future threats.
UnitedHealth currently carries a Zacks Rank #3 (Hold).
A better-ranked stock from the medical sector is Cardinal Health (CAH - Free Report) , holding a Zacks Rank #2 (Buy) at present. The company has an estimated long-term growth rate of 14.2%. Its earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 15.6%.
CAH’s shares have risen 51.6% compared with the industry’s 14% growth in the past year.
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UnitedHealth's (UNH) Payment System Disrupted by Cyberattack
UnitedHealth Group’s (UNH - Free Report) revenue and payment cycle management subsidiary, Change Healthcare, was rocked by a cyberattack last month. The healthcare industry has been facing a formidable challenge following the incident.
The attack on UnitedHealth brought a critical component of the healthcare payment processing infrastructure to a halt, affecting the flow of billions of dollars for healthcare providers, insurers and pharmacies. This paralysis has plunged numerous clinics into financial distress, with some facing the grim prospect of turning patients away or securing loans to continue operations.
Shares of UNH have lost 7.3% year to date compared with the industry’s 4.5% decline. The S&P 500 gained 8% in the same time frame.
Image Source: Zacks Investment Research
Impact on the Healthcare Sector
The impact of the cyberattack has been particularly severe on smaller healthcare providers, including those offering vital services like chemotherapy. These practices rely on a steady flow of insurance payments to fund their operations and purchase necessary drugs.
The disruption has forced them to seek extended payment terms from pharmaceutical wholesalers or delay payments altogether, indicating the attack's extensive reach beyond immediate victims to broader segments of the $4.5-trillion U.S. healthcare industry. For instance, the Pontchartrain Cancer Center reported a drastic reduction to 40% of its typical payments, highlighting the severe financial crisis of these clinics.
Response and Remedial Actions
In response to the crisis, UnitedHealth has been collaborating with U.S. health authorities and working on restoring its affected services. The company has made progress in resuming pharmacy services and is testing its medical claims network, aiming to alleviate the backlog of payments. However, the full recovery timeline remains uncertain, underscoring the challenges in overcoming such a substantial disruption.
The Biden administration has also stepped in, urging UnitedHealth and other insurers to provide emergency funding to affected healthcare providers. Efforts include easing regulations that may prevent patients from receiving care and allowing cash-strapped providers to seek advance payments from Medicare. Additionally, UnitedHealth has introduced programs to offer financial support to providers, acting on a case-by-case basis.
Recognizing the urgent need, drug distributors like Cencora (COR - Free Report) and McKesson (MCK - Free Report) , traditionally rigid in their payment terms, began to adapt their practices, offering lifelines to these vulnerable providers.
Cencora, for instance, responded to the crisis by extending payment deadlines and allowing providers to order more drugs than usual, albeit the extension was less than some had hoped for. Similarly, McKesson showed flexibility, adjusting its payment demands in recognition of the extraordinary circumstances facing healthcare providers. This adaptability from national distributors like Cencora and McKesson was critical in ensuring that clinics could continue to purchase necessary medications, thereby maintaining patient care during times of financial instability.
Furthermore, the pharmaceutical giant Bristol Myers Squibb also stepped in, offering temporary adjustments in payment terms for crucial cancer and blood disorder medications. These concerted efforts by drug distributors and pharmaceutical companies highlight a collective response to an unprecedented challenge, underscoring the importance of collaboration and support within the healthcare ecosystem to sustain patient care in times of crisis.
This cyberattack underscores the vulnerability of critical infrastructure within the healthcare sector to digital threats. It highlights the need for enhanced cybersecurity measures and the identification of potential single points of failure within the healthcare system. As the healthcare sector grapples with the aftermath of this cyberattack, it is evident that a coordinated and comprehensive approach involving all stakeholders is crucial to safeguard against future threats.
UnitedHealth Group Incorporated Price
UnitedHealth Group Incorporated price | UnitedHealth Group Incorporated Quote
Zacks Rank & Stock to Consider
UnitedHealth currently carries a Zacks Rank #3 (Hold).
A better-ranked stock from the medical sector is Cardinal Health (CAH - Free Report) , holding a Zacks Rank #2 (Buy) at present. The company has an estimated long-term growth rate of 14.2%. Its earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 15.6%.
CAH’s shares have risen 51.6% compared with the industry’s 14% growth in the past year.