Good morning, and welcome to the UnitedHealth Group First Quarter 2022 Earnings Conference Call. A question-and-answer session will follow UnitedHealth Group's prepared remarks. And as a reminder, this call is being recorded. Here are some important introductory information. This call contains forward-looking statements under US federal securities laws. These statements are subject to risks and uncertainties that could cause the actual results to differ materially from the historical experience or present expectations. A description of some of the risks and uncertainties can be found in the reports that we file with the Securities and Exchange Commission, including the cautionary statements included in our current periodic filings. This call will also reference non-GAAP amounts, a reconciliation of the non-GAAP to the GAAP amounts available on the financial and earnings report section of the company's Investor Relations page at www.unitedhealthgroup.com. Information presented on this call is contained in the earnings release we issued this morning in our Form 8-K dated April 14, 2022, which will be accessible from the Investor Relations page of the company's website. I will now turn the conference over to Chief Executive Officer of the UnitedHealth Group, Andrew Witty. Please go ahead.

Thank you. Good morning and thank you all for joining us today. Coming into this quarter, we set clear objectives for the year to drive strong execution of our long-term strategy and deliver high-quality diversified growth, pursue excellence in every consumer experience and at every touchpoint, and apply technology to help all stakeholders improve access, affordability, outcomes, and experiences. As our results show, we're delivering on these objectives. I would like to start this morning's call by thanking my colleagues, the 350,000 people of Optum and UnitedHealthcare. Their dedicated work gives us the confidence today to increase our 2022 adjusted earnings per share outlook to a range of $21.20 to $21.70 per share. At our November investor conference, we described five key areas to drive our long-term 13% to 16% earnings per share growth rate. In the first area, value-based care delivery. OptumHealth continued its robust momentum into the first quarter, characterized by its integrated approach and high clinical quality. After a strong start to the year, we now expect to add 600,000 patients under value-based arrangements during 2022 compared to our initial estimate of 500,000. Our approach focuses on providing quality care in the setting that makes the most sense for the patients we serve. Our pending combination with LHC Group will reinforce our ability to deliver care and support in the home, as well as in other ambulatory locations. Within the second growth area, health benefits, we're rapidly advancing the quality, innovation, and consumer appeal of our plan offerings and bringing value-based care to scale. In Medicare Advantage, our strategic balance of benefit stability and enhancements once again helped to deliver strong growth. We remain well on track to serve an additional 800,000 people in 2022, consistent with the expectations we set last November. In the commercial benefits market, our innovative offerings such as physician-led and virtual first plans have grown to serve 350,000 more people over the past year. This underscores the consumer appeal for these high-quality primary care-based coverage options. Nearly 90% of newly enrolled people in our individual exchange offerings selected plans with significant virtual components in the most recent open enrollment period, and nearly 30% selected a virtual-first offering. You'll see us expand such offerings as we look forward to 2023. In our third growth area, Health Technology, we continue to execute on the major new health system partnerships initiated last year, including a broad relationship with SSM Health and its 11,000 providers caring for people throughout the Midwest. We are helping our health system partners alleviate administrative burdens and create an operational capacity for these organizations to focus on delivering high-quality patient care and experiences. These partnerships move far beyond traditional revenue cycle management, with both clinical and technology features becoming important. Fourth, our developing efforts in health financial services, streamlining and simplifying payments for providers, payers, and consumers while reducing friction and increasing speed and convenience. Consider our new integrated consumer card, which we introduced in January. Many people typically have separate cards for clinical care, pharmacy benefits, food assistance programs, fitness, rewards programs, and more. We've combined these benefits into a single card, vastly simplifying the experience for consumers and providers, and we plan to do even more in the future. And finally, pharmacy services. The high cost of specialty drugs is one of the most pressing issues for our health plan partners. Drawing upon all of Optum's advanced analytical capabilities, we're collaborating with health plans to provide clinicians access to real-time medical and pharmacy analytics, which are coordinated with a patient-specific benefit plan design, enabling clinicians to determine the most effective and appropriate therapies at the point of care. Our initial results are highly positive, helping to lower specialty costs by over 15%. Overall, OptumRx's performance in the quarter, with a healthy strong sales pipeline, provides a great foundation for growth. These efforts from expanding in-home and broad value-based care offerings to enhancements to Medicare Advantage to simplifying how to finance care are designed to create greater value for consumers and, more broadly, have a profound impact on the lives of families, individuals, and communities with all levels of needs across America, which is a powerful motivation for all of us at this company each and every day. Dirk McMahon, our President and Chief Operating Officer, will now share more about these efforts.

Thank you, Andrew. There is no more important aspect of the consumer experience in health care than convenient access to quality care, not theoretical access but care when and where people need it. Testing, for instance, is an area where we see significant opportunity to improve the consumer experience. It can be a burden for people to test for conditions such as colorectal cancer. As a result, too often, people just won't deal with the hassle of early-stage conditions, and as a result, early-stage conditions go undiagnosed, and people don't get the care they need until things get really serious, which is bad for their health and results in unnecessarily higher intensity treatments and costs in the future. Like many of you, we have observed more willingness by patients for trial and adoption of in-home testing for many types of chronic conditions. However, it can be challenging for people to first find tests and then make sure the results get back into a doctor's workflow. Patients need to call providers for a prescription, go to disparate locations to pick up the test, and then somehow get the piece of paper with a test result into an already busy clinic operation. At UnitedHealthcare, we've introduced an integrated solution that addresses all of the tasks that need to occur sequentially for test results to get into a clinic system. This digitally enabled solution is resulting in nearly a 10% increase in people obtaining necessary screening versus a multi-step process. We are expanding this vital capability to more people and making additional types of tests available as well. As many of you know, the first quarter tends to be the most impactful in setting us up for operational success for the remainder of the year. The ease of that initial experience for people has a lasting impact on consumer and customer perceptions and buying decisions, not just for the next three months, but often for years to come. So we thought it would be timely and helpful to provide a bit of a performance report card for the quarter. A short version, this is where we owe a great thank you to the people of Optum and UnitedHealthcare. Perhaps nowhere was this more apparent than in the onboarding of the many new people served under value-based arrangements within OptumHealth. Investing in the preparation of systems and training in physicians and staff was critical in laying the groundwork to provide high-quality care for these new patients and expanding into new geographies. For example, in Ohio and New York, we are observing early improvements in post-acute trends such as skilled nursing facility admits declining 25% in just the first quarter of operation. It's a testament to the deep integration of our post-acute capabilities for transitioning patients to the most appropriate setting for their needs as well as a patient-centric orientation of our local care delivery organizations and their vigilance on care continuity. At UnitedHealthcare, our digital investments are continuing to serve our care providers and helping advance our efforts to move to a paperless experience. In the first quarter, visits to our digital portal continued to increase, while provider support costs declined about 12% from historical averages. Importantly, we have driven a 38% increase in providers using digital documents instead of paper in just this first quarter compared to last year. We expect the efforts we have taken in this quarter will save 80 tonnes of paper over the next five years. Before handing off to John, let me briefly turn to our pending combination with Change Healthcare. By now, it should be clear we are deeply committed to helping achieve a simpler, more intelligent, and adaptive health system for patients, payers, and providers. The combination of Optum and Change Healthcare will connect and simplify core clinical, administrative, and payment processes, health care providers and payers depend on to serve patients. Increasing efficiency and reducing friction will benefit the entire health system, resulting in lower costs and a better experience for all stakeholders. Our extended agreement with Change Healthcare reflects our firm belief in the potential benefits of this combination to improve health care and in our ability to successfully overcome the challenge to this merger. With that, now I'll turn it over to Chief Financial Officer, John Rex.

Thank you, Dirk, and good morning, everyone. Our first quarter 2022 performance positions us well to deliver on our full-year financial and growth objectives. Revenues grew by $10 billion or 14% to $80 billion over the year ago first quarter, with double-digit growth at both Optum and UnitedHealthcare. This strong diversified growth was largely organic, with balanced contributions from across both our services and benefits operating platforms. Compared to a year ago, we are adding over 1 million more people to OptumHealth, supporting 30% more patients in value-based relationships, providing over 20 million more prescriptions, and serving 1.5 million more people across our health benefit offerings. I'll start by providing a little color on care patterns over the course of the quarter and then turn to our individual businesses. As you'd expect, there was considerable variation in care patterns due to the COVID incidence peak early in the quarter. For example, in January, we had about 40,000 COVID related hospitalizations, the highest of any month since the onset of the pandemic. By March, these declined to around 2,000. Overall, care in the quarter was about at baseline levels, though we observe pockets that are modestly below historical baseline, such as emergency department and pediatric visits. However, we are not assuming this is a permanent shift in consumer behavior. As it relates to potential longer-term health impacts on people due to care which was deferred during the height of the pandemic, thus far we are not seeing the increasing acuity that many expected. For example, initial oncology related diagnosis levels are consistent with historical averages. Of course, our core focus remains on getting people the care they need, and we are encouraged that critical screens are occurring at normalized levels. Moving now to business performance. OptumHealth revenue grew 34% in the first quarter, and earnings from operations rose over 40%. Revenue per consumer grew 33%. This was driven primarily by the increasing number of patients served under value-based arrangements. Continued augmentation of our value-based care offerings, such as expanding digital care and our services into the home, the opportunity to serve more people, much more broadly and deeply. And we expect to grow strongly for years to come. OptumInsight revenue grew 13% year-over-year. The revenue backlog was $22.8 billion, growth of $2 billion or 10% over the prior year. Our expanding health system partnerships are contributing to this growth, and we expect the number and breadth of these partnerships to continue to grow. OptumRx revenues grew 11% to $24 billion, reflecting the strength of new business relationships secured over the course of last year. We typically incur significant investments in the early months of these expansions to assure strong performance and value for our customers. Turning to UnitedHealthcare. Revenue growth of 14% was driven across the businesses. Our Medicare Advantage offerings remain on track to add up to 800,000 people. About three quarters will be individual and group Medicare Advantage and the remainder in dual special needs plans. New seniors aging into Medicare are increasingly selecting Medicare Advantage based on the value it offers, and the 5-star quality plan performance we achieved this year enables us to enroll people in our plan offerings through the year. People served by our Medicaid offerings grew by over 150,000 in the first quarter and is now approaching 8 million. Our growth outlook for the remainder of the year continues to incorporate an expectation that states will resume eligibility redeterminations when the public health emergency lapses, resulting in modest net attrition. First quarter commercial enrollment was in line with our expectations. The decline in people served under fee-based arrangements was driven by three previously known customer transitions, which were offset by core growth. We see the number of people served overall increasing as we progress through '22, driven by the strong market response to our more recently introduced innovative offerings, as well as the continued recovery in the total number of people covered by employer health benefits, which typically lags reported job growth. Our capital capacities remain strong. First quarter cash flows from operations of $5.3 billion or 1x net income were consistent with our expectations. And we continue to expect full year cash flows of about $24 billion or 1.2x net income. We returned nearly $4 billion to shareholders in the quarter through dividends and share repurchases and ended the quarter with a debt-to-capital ratio of 38%. And as we look toward completing both the LHC and change combinations this year, we will continue to have ample capacities to expand upon the ways we can serve people and help them to live healthier lives. As noted earlier, based on this growth outlook, today we increased our adjusted earnings outlook to a range of $21.20 to $21.70 per share. And we continue to expect the seasonal pattern to be more consistent with our historical experience with just under 50% of the full year earnings in the first half. Now I'll turn it back to Andrew.

Thank you, John. I hope that you will recognize the consistent themes that we laid out last year as our guideposts for sustainable growth. Our focus on execution and continuous improvement across our businesses is a characteristic that we're going to sustain as we build upon this strong start to 2022. And with that, operator, let's open it up for questions. One per caller, please.

We will now take our first question from Lisa Gill from JPMorgan. Please go ahead.

Hi, thanks very much. Good morning. John, I just want to go back to your comments around utilization trends. You talked about hospitalization now down to 2,000 here in March. But baseline somewhat moderating back. You talked about ER visits. But can you maybe just talk about the difference of what you're seeing in commercial versus government? And then secondly, it sounds like you're not really anticipating that there's still a lot of pent-up demand. Am I hearing that correctly? And how do I think about the trend as we move here towards the back half of the year?

Lisa, thanks so much for the question. Let me ask John to respond to the first part and then Brian Thompson, maybe you could just speak to a little bit of the demand piece and maybe Brian pick up within that any sense of acuity shifts. I think that would be helpful for the folks who are listening. John, first.

Good morning, Lisa, it's John. Yes, so in the first quarter, still seeing similar trends in terms of utilization across the different categories you talked about. A little bit higher in commercial, a little bit lower in government programs. But everything kind of trending back more to those baseline levels overall. And pointing out, as you appropriately noted here, we were still seeing some pockets here of differentiation, such as emergency department visits. That's been a trend we've seen, not to the point yet where we'd expect that to continue, but a consumer differences that we've noted. Also on your comment, and Brian will go into this much more deeply, but as it relates to the potential for acuity, this is something we talked about very early on in the pandemic, as people were missing treatments and how might they come back into the system. It's still something we're extremely watchful for across very many categories. I spoke specifically to oncology and what we're seeing in those areas. So good to see people getting their screenings. What we haven't seen, though, is this expectation we had for the incidence rates might actually come up because of missed treatments over their earlier period. And, Brian, could you offer a little more commentary.

Sure. Thanks, John, and thanks for the question, Lisa. I think John summed it up nicely. As you expected, the quarter was odd in that, obviously, there were stronger levels of hospitalizations and infections in January, and that clearly deteriorated down to a lower level in March, so kind of a tale of two stories inside the quarter. As John alluded to, commercial, a little more close to baseline, with Medicaid being the lowest and Medicare in between. When you think about service type, inpatient running slightly above baseline, but that was really a function of January and those higher hospitalizations that we saw and really encouraged as we look at physician visits, because those accelerated through the quarter, sort of offsetting and consistent with the reduction in infection levels. On strain dynamics, maybe another thing I'll point out, clearly, less severe in Omicron than what we saw in Delta. We saw hospitalizations at about half the level that we saw. But again, confirming what John said, really no signs of deferred care, and we've been watching this closely throughout the pandemic, looking at screens, diagnosis, severity, and progression. And it usually cycles through pretty quickly after we've seen large infections within two to three months to get back to baseline. And that's where we're at right now, leaving the quarter. So feel good about where we're at as we pace forward into the next quarter.

Great. John and Brian, thanks so much for that. Yes, it was definitely a quarter of two parts in terms of January and then how February and March move forward with the shift in impacts of Omicron during this quarter. But I think what you've heard from both John and Brian really reflects the kind of movement back towards baseline activities with one or two exceptions. Rest assured, we are really watching like a hawk to see any evolving trend around acuity shift. Obviously, that's super important from a patient welfare perspective. But so far, we haven't seen very many signals of that at all. But it's maybe still early days. Lisa, thanks so very much for the question. Next question, please.

We will now take our next question from A.J. Rice from Credit Suisse. Please go ahead. Your line is open.

Hi, everybody. Just thought I might ask, where, obviously, a lot of discussion in the broad market about inflationary pressures. And my sense is, you're pretty well matched, particularly on the insurance side, but I wonder if you might take a few minutes and just sort of think. I know there's a lot of different things going on in Optum. How do you feel as we enter a period where there may be a little more inflationary pressure that you're matched, revenue versus cost? Is there any pressure points? Is there any places where it's actually helpful to you? Maybe comment on that.

A.J., thanks so much for the question. I'll make a couple of comments and maybe ask Dirk a little bit to reflect on the broader perspective. And then, Brian, again, just to talk a little bit to within the UHC portfolio. I mean, generally speaking, I want to make it super clear. Our focus always is to try and get the very best value proposition for our clients, members, and patients. And I think at the time of inflation, that responsibility we carry really seriously. So, making sure that there are advocates really in the system to get the best deal possible for the folks who rely on us to continue to get good access to health care services and the care they need when they need it is something we're very focused on. So, we're fortunate to have some very long-term positions in place with a wide range of inputs that we rely on, which is obviously important. Brian may talk a little bit to that in a second from a UHC perspective. But whether you look at our OptumRx portfolio where we're going to continue to focus on getting really the lowest inflationary pressures. As an overall agenda, this is a time where UnitedHealth Group in all of its parts is going to be first and foremost, do everything it can to protect the people who rely on us from the forces of inflation. With that backdrop, maybe Dirk, you could pick up a little bit more broadly some of the things we're doing in the company and then pass to Brian.

Thank you, Andrew. Hello, A.J. We're very aware of the challenges people face in healthcare, particularly regarding costs. This awareness drives our affordability agenda, which aims to reduce the total cost of care for our members and help them maximize the benefits they have purchased from us during these inflationary times. We've introduced some competitive products, like our virtual offerings, which are priced 15% lower than similar products in the market. Additionally, we're focused on leveraging technology to enhance productivity. Our goal is to use these productivity improvements to make strategic investments in our workforce and manage premium costs effectively. Last fall, amid the great resignation, we made targeted investments in our employees, and in the first quarter, we conducted our usual merit review cycle with raises. Moving forward, we will need to continue our targeted investments, especially in areas like clinicians and customer service, where we are experiencing higher turnover. That summarizes our approach. Brian, please proceed.

Yes, thanks, Dirk. As you might expect, there are good disciplines in management inside UnitedHealthcare that I'm pleased with where we're at, pricing to our forward view of costs being one, including inflation. Obviously, we have some provider agreements that do offer multiyear predictability, but this is less about being insulated from the overall inflation environment and more about our responsibility to drive down that total cost as Dirk alluded to. And I'm more encouraged than ever on things like value-based care, consumer transparency to navigate the system to get to the appropriate side of service, having the tools digitally to ensure we can enable that virtual engagement and post-acute and home innovation to really avoid those expensive hospital stays. So, those are the elements that we can really drive to try to offset the overall cost.

Yes, Brian, very well said, I think. And our response to inflation is innovation. Simple as that. The way in which we're going to get the best outcome for folks who rely on us is to continue to innovate how we work inside the company to deliver greater productivity, how we deliver efficient access to the system for members and patients, how we take advantage of things like virtual care platforms, and how we truly bring to life the value of value-based care and all of the work that's going on between UnitedHealthcare and Optum, that is going to be a tremendous aid to us in ensuring that we can manage through this on behalf of the people who rely on us. So A.J., thanks so much for the question. Next question please, operator.

We will now take our next question from Scott Fidel from Stephens. Please go ahead.

Hi. Thanks and good morning. I had a question just on the LHCG acquisition. And I guess, a two-parter. First, just as you've conducted a portfolio review of LHCG's assets. Just interested if you've made a decision yet on whether you plan to retain all of the key assets separate from home health, particularly thinking about hospice and personal care. And then we'll just also be interested just on some of the key synergies that you're seeing as you look out to integrate LHCG into Optum's broader clinical platform, particularly when thinking about some of the more adjacent assets such as Landmark and NaviHealth that you already have in the home-based care umbrella? Thanks.

Scott, thanks so much for the question. And I'm going to ask Wyatt Decker in a second to give you a little more response on this. LHC, we're incredibly proud of coming to an agreement with the LHC Board to bring together the two organizations. Obviously, it's a transaction which hasn't closed yet, so I'm not going to go into too much detail about it. But let me say a few things. And I had the great pleasure, even on Monday, actually to spend some good time with the founders and the leadership team of LHC. Unbelievable positive culture inside the organization that's been built up by Keith and Ginger since they first founded it, really a company with a true heart and really puts patients first and their families first. Extraordinary impact in all of their lines of operations and how they can have a significant impact on the lives of people who very often are excluded from care. This is really about opening up access to a lot of people who would not otherwise find easy access to the system, which is really important. And I like very much all of the aspects I've seen of that organization and look forward very much to successfully bringing it into the UnitedHealth Group portfolio. I would also say, and this is why I'm going to ask Dr. Decker to take a little bit more detailed dive, we're really moving at speed to bring together our home and community capabilities. And if you look at what's really driving alongside our value-based strategy for the clinics, the rapid growth of our home and community offering, which has brought together the NaviHealth and Landmark will, over time, align with LHC when it joins into the organization built on our original Optima Home product. It's an extraordinary set of capabilities and it's positioning us very well to, for example, serve the D-SNP population in a way which historically would not have been possible. And that, as you've heard from John earlier, is a big piece of our growth in the first quarter. And maybe with that backdrop, I'll pass to Dr. Decker to give you a little more detail.

Yeah. Thank you, Andrew. And Scott, thank you for the question. We are very excited with the combination of LHC Group. I think Andrew said it well. They have a long-standing culture since they founded in a small community in Louisiana 1994 of commitment to serve others and help people live their healthiest lives in a home care setting. They've developed multiple capabilities, which actually really nicely complement our growing home and community platform that Andrew touched on. So very excited about that. The quality of care that they provide is remarkable. It's a full 33% higher in the stars quality ratings than the national average for home health care, just as an example. And we share this commitment to quality and service. So we feel it's a really good alignment. And then building on your question and Andrew's comments, as we weave home healthcare together with the more complex offerings of post-acute care and complex care in the home that we've already brought into our home community platform, we see remarkable synergies, and this will continue to grow. It also begins to address the question of why has it been so hard to have home care delivered in a value-based construct. And our vision is with these comprehensive set of offerings stitching it together in a way that is differentiated and helps people get better healthcare outcomes. Initially, we'll help deploy them in the post-acute care setting right out of the gate. Thanks for the question.

All right. Thanks, Dr. Decker. And A.J., thanks so much for the question. I'll maybe leave you with one thought on LHC actually, and just for your awareness, 85% of LHC providers are 4-star or better rated from a quality perspective. I mean that just tells you everything you need to know about that organization and why we wanted to be part of our family. We think it's going to bring great access, great quality to members and families across the country. A.J., thanks so much for the question. Next question, operator, please?

We will now take our next question from Justin Lake, Wolfe Research. Please go ahead.

Thanks. Good morning. Wanted to ask a question about value-based care. First, kind of with the improvement in the outlook for penetration there. I'm curious if you were to step back and look at the entire kind of value-based care operation you have and think about the penetration in terms of capitation, if you could share that number with us, meaning the total TAM there of your physicians and their patients, how many of them are already in value-based care, and what's the potential still to come? And then just given all the competition in the space. I thought it's interesting, there's been some industry chatter that you made a large acquisition or might be making a large acquisition in Houston. Can you talk about the M&A pipeline there? And given the competition, do you still see it as being as robust as it was, let's say, three to five years ago? Thanks.

Justin, thanks so much for the question. I'm going to ask in a second, I’ll ask Brian just to reflect a little bit on the kind of direction of travel for value-based care. I think it's super interesting to hear the perspective from a payer perspective, because obviously, what Brian and his team are looking for is how do they deliver the very best outcome and value for the folks who rely on him. But before I go to that, a couple of things. We probably I'm not sure we need to kind of go into a ton of speculation on what the potential would be. Where I would focus on is look at the rate of growth that's going on right now. So that movement in terms of growth of Medicare Advantage that Brian is leading that growth, 600,000 folks coming into the OptumCare value-based capitated environment under Dr. Decker's organization. We're focused on knowing that we are able to sustain that level of transfer and growth over many years to come. So what the ultimate ceiling is on that, I think actually is a product of our ability to continue to deliver a fantastically innovative and high-quality capability in the marketplace. And that's going to continue to attract very large numbers of folks who want to be part of and benefit from it. So I'm a little less thoughtful about what could the ceiling be? I'm much more motivated by and excited by the way in which we're at the 500,000, 600,000 rates moving across our ability to both move and grow and win external business as part of that agenda. So maybe with that, Brian, I'd ask you to go a little further from your perspective.

Yes. I think similar to what you said, for me, it's less about a number. I will say there's a lot of runway left. It's been about geographic expansion historically. Now it's much more than that. We've moved into duals. It's about complex care. It's about home. So, the breadth and scale are really at the core of it. And UnitedHealthcare is deeply incented to continue this journey with Optum. When you think about our best retention levels, when you think about satisfaction, when you think about where we have the lowest trend that drives the best benefits, the best quality, and the best growth, all of those outcomes come when we partner with Optum. So, we have strong incentives to continue this, and I'm encouraged because there's still a lot of runway left.

Brian, thank you very much. Justin, regarding your second question about the pipeline, while we don't comment on transaction speculation, I would like to share some general observations. In Q1, we successfully closed and announced the integration of Refresh Health into our organization. This is an excellent business founded by Steve Gold and his team, enhancing our behavioral delivery capabilities within OptumHealth, which complements our extensive behavioral health network across the country. Our pipeline of opportunities is as diverse and perhaps deeper than it has ever been. We feel optimistic about our potential for capital deployment. We are committed to being extremely disciplined in focusing on opportunities that align with our core strategies and growth areas, such as Refresh Mental Health. This fits well with our value-based approach to integrating behavioral health management with medical management. It's essential that any opportunity aligns with our strategic framework, and we must trust in the culture and leadership of teams we bring into UnitedHealth Group. Additionally, the economics of these opportunities must meet our high standards to support our long-term growth ambitions of 13% to 16% and fulfill the expectations of our shareholders. This motivates us as we move forward, and I'm confident in our ability to continue capital deployment, which has always been crucial for our long-term growth. I hope this gives you a better understanding of our current position, Justin. Now, let's move on to the next question.

Thank you. We will now take our next question from Gary Taylor from Cowen. Please go ahead.

Hi, good morning. I just had a question. Now that we're thinking about OptumHealth, the type of growth, Andrew, that you were just talking about and really tens of billions of dollars of capitated risk, how do we think about the reserving, if OptumHealth was a stand-alone company, how do we think about reserving against that risk it's taking? I presume capitated from UHC is an elimination, has all the other payer medical expense accrual, is that just rolling through your total medical accrual, John, or is there somewhere else on the balance sheet where there's payable numbers we should be paying attention to?

Yes. Gary, thanks so much. Let me go straight to John to respond to that.

Good morning, Gary, it's John. Yes, it'll be rolling through in the same place that you'd be seeing everything else in terms of how those occur. You're right in terms of how you think about eliminations with UnitedHealthcare business versus external business, which would not be eliminated, of course. But all in the same place in terms of how we would be appropriately reserving for those arrangements.

Thank you so much, John. Gary, thank you very much. Emma, next question, please.

Thank you. We'll now take our next question from Kevin Fischbeck from Bank of America. Please, go ahead.

Okay. Great. Thanks. I wanted to go back to the growth in OptumHealth for a minute. Can you talk a little bit about what drove that $100,000 higher number? Is that an organic number? Is that driven by deals? Is it direct contracting? Is it internally United? Is it external? Is there some way to kind of think about that growth and what drove it? And then, I guess, just generally speaking, when you think about deals in that space, how are you thinking about multiples, either on earnings or on where you think the long-term earnings can eventually be when you move that practice to capitation? Thanks.

Yes. Okay, great. Listen, Kevin, thanks so much. I'll hand to Dr. Decker to respond to you on the first part of where that extra $100,000 taken us up to $600,000 is coming from, and it'd be good for you to hear that from him. I think in terms of how we think about how we invest in this space, I'd say, each one is pretty much a unique situation, right? I mean, every doctor clinic, they're all different. They've all got tremendously different histories, situations, dynamics. And obviously, we take a view within a broad piece of not just what have they achieved to date, but how alongside the rest of our capabilities can we build opportunities and value for patients and the utilizers of those environments. And that's what really drives our kind of economic assessment. Now, I think, what you can see is the way in which we understand and seek to continue to learn how to work better and better within the value-based envelope and how we can utilize the skills of these organizations allows us to be confident in being able to set very fairly, reward people who choose to join our organization. And that's what's driving our ability to be successful integrators of some phenomenal people and their teams across the country. And I'm so pleased they stay inside the organization. And it’s super nice to be able to see OptumHealth continue to strengthen itself as a physician-led organization. And I think that is really contrasting to many others out there. This is an organization led by physicians at every level of the organization, and it makes a huge difference in terms of the way the heart and soul of this place is starting to be. And, I think, that's what underpins a lot of our contribution and competitiveness. With that, Dr. Decker, as the physician leader of the organization, maybe you could just reflect a little bit on how you're successfully driving up that growth rate.

Sure, Andrew, I'm happy to address that, and Kevin, I appreciate your question. What you're witnessing is the outcome of nearly a decade of developing a flywheel that now possesses substantial momentum. We have made investments in personnel, technology, data, and the expansion of our networks, while also deepening our presence in established areas and entering new ones. All these efforts continue to provide benefits and, honestly, contribute to growth. Regarding your question about the additional $100,000, the answer is yes, that reflects organic growth. We experienced strong outcomes in open enrollment and member retention. Additionally, we have both four-star and five-star plans capable of enrolling patients throughout the year, including those in duals. I also want to highlight that a third of this year's growth comes from the dual special needs population, which is composed of individuals struggling to access care. We're able to provide care in home and community settings, offering wraparound solutions in their residences. This model further supports our growth. Thank you.

Thank you so much. Kevin, thanks so much for the question. Much appreciated. Next question, please.

We will now take our next question from Stephen Baxter from Wells Fargo. Please go ahead.

Yes, hi. Thank you. Just a follow-up on a previous question. I wanted to ask a little bit more directly about the significantly higher interest rate environment we're currently experiencing. Was hoping you could talk a little bit about how you expect this will impact the investment portfolio over the next couple of years as your investments mature and reinvested at higher rates. And I guess also, how should we think about this as impacting EPS growth rate you target? Is this potential upside or tailwind going to be used to offset inflationary pressures elsewhere or maybe a softer economic backdrop, or is this something you think could actually be a net tailwind to our earnings growth over the next few years?

Stephen, thanks so much for the question. John?

Good morning. Yes, certainly, anything more than 0% interest rates is going to be helpful to us overall as we move in that environment. But it does take some time, as I think as you're accurately pointing out here. So, maybe a few perspectives I could offer on that. Roughly 40% of our $70 billion in cash and investments is tied to floating rates. So, that would be the first cut you'd want to take of that. The other 60% would be in the fixed rate environment. So, as you are alluding to, those will mature and be reinvested at higher rates over time. But not much of that piece would have any year one impact, call it, in terms of how one would think about that. So, maybe just to give you a hypothetical here. Say you had a 100 basis point increase in interest rates. So, that would impact that 40% or call it roughly $28 billion of cash investments that are tied to floating rates. So, that would be the first place you'd see that. So, put that in the zone of it's really about $28 billion in that component. So, $280 million impact on investment income. Important to note on that, we also have about $10 billion of floating rate liabilities. So, think about the swaps floating the rest of commercial paper. So, that would also have about $100 million offset to that $280 million. So, that would be the zone I'd put you in, if you think about getting 12 months out from a first 100 basis point increase, that would be the zone. The rest of that portfolio, the other 60%, will roll off over a period of years, call it, think of that probably maybe $5 billion a year rolling off as those things mature, and that would be the pacing that you should expect.

John, thank you very much, Stephen. Thanks so much for the question. And the next question please.

We will now take our next question from Josh Raskin from Nephron. Please go ahead.

Thanks. Good morning. I was wondering if you could speak to the local market strategy, more on the Optum side in markets like New York or Houston or maybe Houston soon. I'm specifically curious about how much of the delivery system you feel you need to employ, control, own, and how we should be thinking about sort of long-term success and growth. Is that on the delivery side? Does that manifest on the benefit side as well? Thanks.

Thank you, Josh. That's a great question. I would say that over the past decade of development at Optum, our perspectives on the best operational approach have evolved significantly. This includes the dynamics between us and the physicians, the roles of physicians compared to advanced practice clinicians, and the differences between clinic-based and home-based environments. Particularly in the last 24 months, our thinking on these matters has progressed considerably. I will pass it to Wyatt now, but I would frame our considerations around three key areas: location, the nature of relationships, and the types of clinicians involved. These are evolving dynamics that we are becoming increasingly definitive about. Wyatt, could you elaborate on this further?

Yeah. Thanks, Andrew, and thanks, Josh, for the question. Andrew framed it up very accurately. And so our thinking and frankly, the practice of value-based medicine is evolving as we're able to go into the home, provide virtual care, and behavioral care, and comprehensive services even that overcome things like social determinants. So in markets like New York state that have primarily been fee-for-service, we do see an opportunity to move to value-based care. And it's a blend of employed physicians and affiliated and contracted physicians. But increasingly, it is bringing all of the solutions that we offer within Optum, including OptumRx and other places in the enterprise and OptumHealth to bear on helping people get the best health care outcomes possible, lower the total cost of care, and actually make care very convenient for health care consumers. And that's differentiated in the marketplace. Thanks.

Wyatt, thanks so much. Josh, thanks for the question. Next question please, Emma.

We will now take our next question from Ricky Goldwasser from Morgan Stanley. Please go ahead.

Good morning. OptumRx experienced mid-single-digit EBIT growth. Should we consider this as a steady state going forward, and if we look ahead to next year, would high single-digit EBIT growth be a reasonable expectation in addition to what we've seen this quarter? Additionally, Dirk, you mentioned in-home testing in your opening remarks. Is this initiative targeted specifically at the Medicare and dual book, or is it also available to the commercial book? Are you collaborating with national labs on this strategy?

Ricky, I appreciate your questions. Before I go to Heather, let’s address your second question first. I’ll ask Tim Noel to provide some insights from the Medicare perspective regarding the home testing opportunity and its dynamics.

Yeah, Ricky, Tim Noel here. Thank you very much for the question. In-home testing is certainly a huge area of focus for us. There’s, obviously, a component of it that relates to some of the work that we do on an annual basis with respect to Star and closing some of those gaps related to the Star measurement methodology. But more recently, we've really been focused on reaching out to people that we know to be under-diagnosed for conditions like Hep C and diabetes. And in doing this, we've reached out over the last year to about 1 million members who we suspect to be under-diagnosed and offering in-home testing solutions that are then delivered by our health call partners over at Optum. I mean these completion rates have been really promising, 35% last year, and we'll continue to evaluate expanding this program. That will do a really nice job of helping us understand where conditions are under-diagnosed and can be better treated.

Tim, thanks so much. And Dirk?

Yeah. So Tim did a great job explaining Ricky, and the direct answer to your question, we have started with Medicare and we'll move to commercial as we proceed along. But this is a Medicare start, was what I was talking about specifically.

Thanks so much. Before I hand over to Heather to discuss the OptumRx aspect, I want to highlight that as we approach next year, we are entering a new cycle in the pharmaceutical industry, particularly regarding biosimilar opportunities, which you've mentioned as significant. It's going to be a very dynamic environment, and Heather's team is fully engaged and preparing for it. I'm pleased to see the acceleration of growth during the first quarter, which results from a lot of hard work in developing the right products and services that drive our retention and win rates. I also keep track of the number of bid opportunities we have coming up, and it's been interesting to witness that increase over the last 12 months. The market is becoming active, which is not surprising given the recent years, but it is indeed activating. We are seeing an influx of business opportunities. I am reassured by our consistently high retention rates, and now I’ll let Heather share her insights on how she expects this to unfold over the next year or two. Heather?

Thank you. I’d like to expand on what Andrew mentioned, particularly in response to your question, Ricky. We are consistently focused on growth in the pharmacy benefit business and pharmacy services, as well as our direct-to-consumer initiatives. This focus will continue to drive our top-line growth and support membership growth in the PBM. Additionally, our pharmacy services will play a crucial role as we anticipate multiple opportunities in biosimilars and other specialty services for our members in the coming years. The services we provide through our pharmacy programs are expected to not only enhance our business growth but also contribute to our earnings, which we remain committed to guiding this year at mid- to high single digits. Looking ahead, growth is expected to moderate to mid-single digits as we maintain our focus on delivering value through pharmacy services to our clients and their consumers. We aim to drive the tools and services that our clients find valuable, including those from our external client base, such as UnitedHealthcare, and our community pharmacy clients who benefit from services like our behavioral health offerings that integrate fragmented systems. As we move forward, tools such as our clinical analytics, our PBM, and our specialty program management services will be key to our growth, alongside our ongoing initiative to leverage our pharmacists in this process.

Great. Heather, thanks so much. And Ricky, thank you very much for the question. We just have time for one last question. So Emma, maybe go to the last question.

Certainly. We will now take our final question from Steven Valiquette from Barclays. Please go ahead.

Great. Thanks and good morning. So just to tie a lot of things together that have been talked about on the call, with the $0.90 increase in EPS guidance for 2022, just wanted to ask for a little bit more color on how much of this better outlook is driven by the Optum segment in particular versus the UHC segment versus any other factors at the corporate level? I'm guessing it's maybe mostly driven by Optum and maybe OptumHealth within that, but also what else ex Optum is maybe performing better, that's worth calling out as well? Thanks.

Thank you, Steven. I believe there was a slight misunderstanding. We have raised our guidance range this year by $0.10 at both the upper and lower ends of that range, just to clarify. This increase is mainly due to our strong performance in the first quarter, which gives us confidence moving forward. While there are always various factors at play, as highlighted by Brian, the overall year is aligning closely with the expectations we communicated in November last year. Our strong performance is backed by effective execution across all our businesses. The core operations of Optum and UnitedHealthcare have had a solid start to the year. We remain focused on executing within these areas, and I hope you have noted this in today’s conversation, which is clearly reflected in our results. The opportunities for synergy between both organizations are becoming more evident. We discussed the value-based care model, which we believe can transform experiences for patients, physicians, and payers. This is a result of our two organizations collaborating effectively. The development of in-home care is another area led by this partnership. As we enhance our capabilities in these sectors through capital investments and acquisitions, such as with NaviHealth and Landmark, we are also driving significant external growth. This showcases how innovating in healthcare not only benefits UnitedHealthcare but also appeals to a wide range of payers, reinforcing our commitment to serving multiple payers through Optum's products and services. That's what bolsters our business and supports our confidence in raising our outlook for this year. I hope this provides clarity and I appreciate your final question, Steven. Thank you to everyone for participating in the call today. We value your interest and attention. I hope you sensed our confidence in our long-term strategy and our disciplined execution focus. We aim to create value for consumers, advance our mission, and achieve high-quality diversified growth now and in the future. We look forward to updating you on our progress again in July. Thank you and we appreciate your attention today.

Ladies and gentlemen, that will conclude today's conference. You may now all disconnect.