{"id":25789,"date":"2017-11-15T20:54:51","date_gmt":"2017-11-16T01:54:51","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-rctom\/submission\/unitedhealth-losing-ground-to-new-entrants\/"},"modified":"2017-11-15T20:54:51","modified_gmt":"2017-11-16T01:54:51","slug":"unitedhealth-losing-ground-to-new-entrants","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/unitedhealth-losing-ground-to-new-entrants\/","title":{"rendered":"UnitedHealth: Losing Ground to New Entrants"},"content":{"rendered":"

Health insurance value chain in the US has been in flux for the past decade, partly thanks to the political instability (think Obamacare vs. \u201cTrumpcare\u201d), and more importantly, due to significant technological advancements. Impact of digitization has been tremendous in closing the information gap between payers and providers as well as providers and patients – Electronic Medical Records (EMRs) systems facilitate information sharing amongst providers, digitalized billing platforms streamline processes and enable population health analytics, and telemedicine and other direct-to-consumer technologies empower patients to be more engaged in their care and expect higher levels of service, quality, and affordability1<\/sup>.<\/p>\n

Oscar Health and Bright Health, two new entrants in the market have each raised $727M and $240M respectively, on the premise of disrupting health insurance by building a direct relationship with customers2,3<\/sup>. At the core, these new business models and others in the category leverage clinically integrated physician organizations to offer health insurance that is simple, friendly and affordable \u2013 shifting consumer mindset and their perspective of insurers from \u201ca necessary evil\u201d to a service they love4<\/sup>.<\/p>\n

The emergence of these new business models is expected to have significant implications for traditional payers like UnitedHealth, shifting customer demand to lower cost, higher quality payers like Oscar Health and Bright Health while negatively impacting the bottom line due to the increased cost required to match the competitor\u2019s service.<\/p>\n

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Source: CBInsight<\/em><\/p>\n

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UnitedHealth\u2019s [marginal] digitization efforts<\/strong><\/p>\n

As the market leader and largest insurance provider in the US, UnitedHealth Group has sustained its dominance and \u201cdata supremacy\u201d through significant investments and multiple acquisitions \u2013 forming a new subsidiary Optum, the largest healthcare IT company in the world by revenue5<\/sup>. Optum\u2019s health data analytics, payment integrity, risk assessment and medical billing capabilities have proved effective and its performance was the highlight of 2016 for UnitedHealth, with earnings reaching over 50% of total operating earnings6<\/sup>.<\/p>\n

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Source: Bloomberg<\/em><\/p>\n

Importantly UnitedHealth has been ahead of its other large, traditional competitors in adapting to the new paradigm shift, mainly through acquiring health data analytics companies to bridge some of the existing information gap \u2013 A few good examples of this are UnitedHealth\u2019s acquisition of Axolotl, a Health Information Exchange (HIE) software and services provider, and Picis, a developer of Electronic Medical Records (EMR) for hospital emergency units. Later in 2013 UnitedHealth also acquired Humedica, a clinical data analytics vendor that enables providers to instantly access and compare medical record data changes across time and provider group \u2013 a true prize catch for UnitedHealth in its efforts to build on its profitable data empire and differentiate itself amongst other traditional, large competitors.<\/p>\n

Despite Optum\u2019s financial success, however, UnitedHealth has failed in leveraging its data empire to improve quality of care or affordability in meaningful ways \u2013 providing fertile ground for new entrants like Oscar Health and Bright Health to grow exponentially4<\/sup>.<\/p>\n

Looking forward to [a bright] future<\/strong><\/p>\n

In 2016 alone, UnitedHealth\u2019s revenues grew by $17B and reached $144B7<\/sup>. The company is growing at incredible pace, and investors remain optimistic about its growth path, as evidenced by its sustained share price increase despite overall industry turmoil. Moving forward to effectively maintain its market leadership, UnitedHealth should implement a long-term strategy that ensures the following:<\/p>\n