UnitedHealth to take up to $1.6 billion hit from Change Healthcare hack this year

[April 16, 2024]  (Reuters) - UnitedHealth Group expects to take a hit of as much as $1.6 billion this year from disruptions caused by the February cyberattack at its Change Healthcare unit.

Despite the disruptions, UnitedHealth still beat estimates for first-quarter adjusted profit, sending its shares up 6.4% in premarket trading. It has already booked $872 million in costs related to the data breach in the quarter, most of it as one-time items.

This is the healthcare conglomerate's first full public disclosure on the financial impact of the data breach, which disrupted services at pharmacies, hospitals, doctors' offices and other providers as well as at community health centers in the United States.

The health insurer had to relax or remove prior authorization processes for some claims following the hack, stoking concerns of an increase in costs. At the same time, there were delays in claim submissions as medical care providers struggled with paperwork.

UnitedHealth reported a rise in medical care ratio - the percentage of premiums spent on medical care - to 84.3% from 82.2% a year earlier.

The disruptions from the hack are expected to impact profit by as much as $1.35 per share this year, the company said in a statement.

UnitedHealth is yet to disclose the amount of personal data that was breached in the hack. It must report that information within 60 days as required by federal law.

UnitedHealth Group's headquarters building is seen in Minnetonka, Minnesota, U.S. in this handout picture taken in 2019. UnitedHealth Group/Handout via REUTERS/File Photo

For the quarter, UnitedHealth reported an adjusted profit of $7.16 per share, excluding a 25-cent hit from business disruptions caused by the data breach, versus estimates of $6.61 per share, according to LSEG.

The healthcare conglomerate recorded a net loss of $1.53 per share due also to a $7 billion charge related to the sale of its Brazil unit, Amil.

(Reporting by Leroy Leo and Sriparna Roy in Bengaluru; Editing by Anil D'Silva)

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