UnitedHealth’s Optum Makes Strategic Move with Steward’s Physician Group Acquisition

UnitedHealth Group Incorporated‘s Optum is preparing to purchase Steward Health Care’s physician group, as outlined in documents filed by the seller with the Massachusetts Health Policy Commission. Financial specifics of the transaction remain undisclosed.

This acquisition of Steward Health’s primary care providers and clinicians spanning nine states is poised to fortify Optum’s presence in Massachusetts and beyond. It offers Optum the opportunity to tap into a larger patient base and diverse revenue streams. The deal is set to be finalized in the second quarter of this year.

Optum, the health services arm of UnitedHealth, is a key player in the company’s diversification strategy, showcasing remarkable growth. Its contribution to operating earnings skyrocketed from 25% in 2014 to an impressive 49.3% in 2023. Additionally, revenues surged by 24% year-over-year in 2023.

Armed with strategic acquisitions, cutting-edge technology, and leading health analytics, Optum stands poised for sustainable growth in contemporary care delivery models and data-focused population health initiatives. The Optum platform comprises OptumHealth, OptumInsight, and OptumRx, witnessing revenue increases of 33.9%, 29.8%, and 16.4% year over year in 2023, respectively.

For Steward Health, this deal signals a strategic step toward recovering from financial hurdles. However, reports suggest potential regulatory roadblocks due to concerns over diminished competition and antitrust issues. The Health Policy Commission is expected to scrutinize the agreement’s impact on healthcare costs, quality, and accessibility.

Analyzing Price Performance

UnitedHealth shares have shown a modest 0.1% increase over the past year, contrasting with the overall 4.3% growth in the medical industry.

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Assessing Zacks Rank & Key Picks

Presently holding a Zacks Rank #3 (Hold), UnitedHealth boasts a range of healthcare options. Noteworthy stocks in the Medical sector include Universal Health Services, Inc. (UHS), The Cigna Group (CI), and Health Catalyst, Inc. (HCAT), each currently holding a Zacks Rank #2 (Buy). For a comprehensive list of today’s Zacks #1 Rank (Strong Buy) stocks, click here.

Zacks Consensus Estimate projects a 27% year-over-year bottom-line growth for Universal Health Services in 2024, supported by four upward estimate revisions in the past 30 days. Cigna anticipates a 13% year-over-year earnings increase in 2024, with a 20.4% growth in revenues. Health Catalyst’s full-year 2024 earnings are forecasted to surge by 120%, with significant revenue growth expected as well.