May 2015: Optum Branches Out – Acquisition of MedExpress Raises Many Questions

The news came suddenly on April 8. And it wasn’t so much that MedExpress was going to be acquired, news that had been anticipated for a couple of years.  It was the name of the buyer, Optum, that took many in the walk-in medicine industry by surprise. Among the most typical reactions:

“Health insurance companies are taking over urgent care.”

“They’re going to rig the system to try to push out the smaller players.”

Many people have heard of Optum.  But fewer people know much about what the company does.  

Optum is one of two main divisions of UnitedHealth Group (NYSE: UNH), the most well-known of which is UnitedHealthcare, the health insurance arm of the company, and by far the largest in terms of revenue and employees.  

Optum is characterized by UnitedHealth Group as its services business, which is an outgrowth of the many business processes the company has developed or acquired to make itself more efficient over the years.  A good comparison is, which is now one of the largest providers of cloud storage services in the country.  Amazon needed to develop cloud services to become the largest online store in the world. But cloud services has become a very large side business at Amazon, one that has brought down the cost of development for scores of startup companies.

“Optum is Steve Hemsley’s vision of creating a platform that on an integrated basis can help manage medical cost trends better,” says Ana Gupte, managing director and senior research analyst covering healthcare services for Leerink Partners. “He wants to use it not just for the UnitedHealthcare (insurance) book of business, but to make it broadly available to third-party health plans, employers, hospital systems, or anyone who is taking on health risk.” Gupte says that the business not only offers unique services, but that it diversifies the company’s revenues and profits. “It’s a hedge against various uncertainties and moves to valuebased care,” she says. “And it’s also unregulated to a large degree, which gives them flexibility on profitability and margins.” What gets confusing about Optum is how broad ranging its different services are, and the diversity of their customer base. In this article, we’ll try to break down and explain these services along with the different types of clients that use them.  We’ll also put their financial performance in perspective with the insurance business.  And we’ll cover in more detail what this all means to the urgent care sector...