Change Healthcare continues to see business disruption from the February cyberattack as its leadership team aims to modernize the technology platform and win back customers.
In an Oct. 15 earnings call, John Rex, president and CFO of UnitedHealth Group, said the company estimates business disruption costs will be $0.10 per share higher than originally expected, hitting $0.75 per share, or $2.87 billion. The disruption includes lost revenue, lost customers, recovery efforts and the cost of keeping the company's capabilities fully functional.
"We expect to continue to build back the business to pre-attack levels over the course of '25 and estimate next year's full-year impact will be roughly half of the '24 level," said Mr. Rex, as transcribed by The Motley Fool. "As we enter the final quarter of the year, we are narrowing our '24 adjusted earnings outlook to a range of $27.50 to $27.75 to reflect business disruption impacts and the care patterns."
When the cyberattack occurred, many hospitals and health systems sought revenue cycle services elsewhere and some haven't returned. Optum Insight, Change Healthcare's parent company, is working to bring back the business. UnitedHealth Group CEO Andrew Witty said the team has made "great progress" in recovering the business and is working to bring back all the clients who worked with other vendors during the cyberattack.
"We did the right thing in terms of protecting the system and encouraging people to find alternatives. We're now bringing them back," said Mr. Witty. "We've made a huge step forward in that. That work will continue as we roll into [the] new year."
Change Healthcare has also made progress on the technical side to build a stronger and more secure platform protecting against future attacks.
"The speed at which we rebuilt a modern platform has been just extraordinary," said Mr. Witty. "I think [it] actually bodes very well for us in the future in terms of how we think about our speed of technical modernization as an organization. More broadly, I think it's also given us the stimulus to really, really reimagine what the future of Optum Insight is going to be."
The business disruption from the cyberattack continues to drop, said Roger Connor, CEO of Optum Insight, and the team continues to make "good progress" on restoring Change's systems. Now they are focused on reconnecting with customers.
"We are seeing slightly higher business disruption trend going into the end of the year, and some of that will carry over," said Mr. Connor. "From a reconnection perspective, customers are coming back. We're actually making good progress there. What we're seeing is the volume that's coming back isn't coming back to the pre-attack levels, and customers are really looking for vendor redundancy. What they're out there looking for is in another one or two sources of their software."
Mr. Connor said while the diversified vendor partnerships is a "good thing" for health systems to ensure business continuity, it's having an impact on the company's financial situation this year. He sees the trend as an opportunity to target new customers and grow Optum Insight's service base.
"That's going to take a little bit longer, a slightly more complex implementation time," he said. "So when you add those two factors together, that's why you see [the disruption] carryover impact into 2025."
Optum Insight's core business outside of change is growing, said Mr. Connor, and he has confidence that performance will improve by the end of next year.
"We continue to work with customers to bring transaction volumes back to pre-event levels and win new business with our now more modern, secure and capable offerings," said Mr. Rex.