Good morning, and welcome to the UnitedHealth Group's Second Quarter 2024 Earnings Conference Call. A question-and-answer session will follow UnitedHealth Group's prepared remarks. As a reminder, this call is being recorded. Here is 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 actual results to differ materially from historical experience or present expectations. A description of some 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 and periodic filings. This call will also reference non-GAAP amounts. A reconciliation of the non-GAAP to GAAP amount is available in the financial and earnings reports section of the company's investor relations page. Information presented on this call is contained in the earnings release we issued this morning and in our form 8-K dated July 16, 2024, which may be accessed from the investor relations page of the company's website. I will now turn the conference over to the Chief Executive Officer of UnitedHealth Group, Andrew Witty.

Thank you, Jennifer. Good morning, and thank you for joining us. The second quarter results we reported today reflect diversified and durable growth and a commitment to ensuring high-quality care is available to every person we're privileged to serve. In the first half of the year, revenues grew by nearly $14 billion, with strong contributions from across the enterprise, led by double-digit growth at Optum. UnitedHealth Group entered the second half of the year with continuing and broad-based growth momentum. As a result, we are affirming our full-year adjusted earnings outlook, even as we absorb $0.60 to $0.70 per share in business disruption impacts related to the cyberattack. These results come from the sustained focus of the 400,000 people of UnitedHealth Group on adding value for patients, consumers, and customers through the fundamental execution of our key priorities. We're also well positioned for growth in 2025. In the selling season to date, the most sophisticated buyers of health benefits and services in the US, such as large employers, unions, states, and seniors, continue to choose the offerings of UnitedHealth Group when looking for managed care, pharmacy services, or a Medicare Advantage plan that provides the best value. This consistent growth reflects customers' recognition of the need for a company like ours. As you know, UnitedHealth Group strives to help reduce the fragmentation and lack of coordination that drives up costs and erodes care outcomes in the $5 trillion US healthcare marketplace. We aim to better coordinate and align incentives among caregivers, payers, and pharmacy, enabling us to focus on the whole patient throughout their health journey. We believe this increases value for customers and consumers, improves people's experience and health, reduces redundancies and waste, and ultimately leads to a more sustainable health system. For example, the proven health and economic value to consumers and taxpayers of Medicare Advantage. A recent study found that the cost to taxpayers of Medicare Advantage is 4% less than traditional fee-for-service Medicare. At the same time, Medicare Advantage provides seniors well over $2,000 per year in additional value through lower out-of-pocket costs and important services like dental, vision, and hearing, none of which fee-for-service Medicare covers. That means a lot to the majority of the people Medicare Advantage serves, who have limited economic resources and otherwise would lack access to such services. The home visits we offer seniors further illustrate the value of Medicare Advantage. Last year, our medical professionals made more than 2.5 million home visits. As a direct result, our clinicians identified 300,000 seniors with emergent health needs that may otherwise have gone undiagnosed. They connected more than 500,000 seniors to essential resources to help them with unaddressed needs such as food insecurity, medication affordability, transportation, and financial support. They also identified and helped close more than 3 million gaps in care that made a real difference in people's lives. Within 90 days of one of our home visits, 75% of patients received follow-up in a clinical setting. Additionally, Medicare Advantage patients with chronic conditions who receive these home visits end up with better managed and more stable health outcomes, as evidenced by spending measurably less time than fee-for-service patients in emergency rooms and other hospital settings. The bottom line is, our home visit programs help patients live healthier lives and save taxpayers money. It is only Medicare Advantage that makes programs and results like this possible. Similarly, Optum Rx clients continue to appreciate the efforts we make to ensure the delivery of the lowest cost drugs in the face of drug companies' sole ability to set prices. They also recognize the importance of the comprehensive pharmacy services we provide to people, which is driving our momentum this year and bodes well for 2025. We also continue to bring practical innovation to people through new products and services and by using new and emerging technologies to improve our own operating efficiency. For example, Surest continues to differentiate itself in the marketplace, which is why more and more customers are offering it to their employees, and why the offering continues to grow substantially. Additionally, investments in the modernization of legacy technology and new emerging technologies are enabling our consumer-centric advancement of healthcare. For example, our growing AI portfolio, made up of hundreds of practical use cases, will generate billions of dollars in efficiencies over the next several years. These investments enable us to improve consumer experience, enhance provider find and price care capabilities to meet people's needs, and improve clinical back-office execution. We expect technology innovation to become an increasingly core driver of our growth over the next two to five years. And now, I'll turn it over to our President and Chief Financial Officer, John Rex.

Thank you, Andrew. I'll start this morning by providing context on some of the unique items in the quarter. Then, I'll follow with perspectives on care activity and general business updates. The overarching theme I hope you leave with today is that UnitedHealth Group continues to deliver broadly diversified growth with expanding opportunities, work that positions us for continued strong performance in '25 and beyond. Now to update on Change Healthcare. Our focus has centered on the patients, care providers, and customers who rely on us to keep the health system running. Payment and claims processing for most care providers are back to normal, but we know that is not the case for some, so we continue to work with those who are not there yet. UnitedHealth Group has provided more than $9 billion in loans and advance payments to help providers mitigate the impact of the attack, all at no cost to them. Cyber impacts in the quarter totaled $0.92 per share, and we now estimate the full-year impact will be $1.90 to $2.05 per share. But let me break that down a couple of steps further for you. Of the total in the quarter, $0.64 per share were direct costs incurred in restoring the clearinghouse platform and other response efforts. These included higher medical expenses directly stemming from the temporary pause of some care management activities. For the full year, we now estimate these direct costs at $1.30 to $1.35 per share. The $0.40 to $0.45 per share increase in this estimate is primarily related to care provider financial support and costs for producing and mailing the consumer notifications that will begin later this month. As a reminder, these direct costs are included in net earnings but are excluded from adjusted earnings per share. The other component affecting our results relates to disruption of the ongoing Change Healthcare business. This largely encompasses the loss of revenues combined with the costs of maintaining these capabilities fully ready to serve. Notably, these effects are not excluded from adjusted earnings. In the second quarter, this impact was $0.28 per share. For the full year, we now estimate the business disruption impacts at $0.60 to $0.70 per share compared to the $0.30 to $0.40 we estimated last quarter. Most of the service functionality is now restored, and revenues are rebuilding even as the pacing of this process varies. These important services are now more modern, secure, and capable, and continuing to advance rapidly. Our ambition continues to be to return to baseline performance in '25 and to grow strongly from there. Turning to international, following the sale last quarter of our much larger Brazil operations, we classified the remaining South American businesses as held for sale. This is a natural step following the Brazil sale. We highly value the relationships we have built with our dedicated colleagues over the last several years and wish them continued success. In a diverse enterprise with a strong growth record and capabilities such as ours, such portfolio evolutions enable us to keep our focus on the many compelling growth opportunities before us. The second quarter includes a total of $1.3 billion in South American impacts, the majority of which is non-cash and largely due to foreign currency translation losses accumulated over the years. About $220 million of this stems from a regulatory action in Chile affecting all health plans. You'll see that as a component in the supplemental financial tables we provided this morning. The action relates to industry premium increases dating back to 2020 but, as configured, will be reflected in consumer premium credits to be issued in future years. As a result, the entire $220 million was recorded as a reduction in premium revenue in the second quarter, increasing our reported medical care ratio by about 25 basis points. Turning to the second quarter medical care ratio, it was also impacted by about 40 basis points, or $290 million, due to the suspension of some care management activities after the cyberattack. That makes for a total of about 65 basis points of non-repeating impacts, including South America. Beyond these effects, the care ratio in the quarter was also modestly affected by three other factors. One being member mix within Medicare Advantage and dual special needs plans, which this year has been shaped by the unusual competitive benefit configurations in the marketplace. The second being the timing mismatch between the current health status of remaining Medicaid members and the state rate updates, a timing mismatch we expect to realign in the months ahead. And third, the lingering upshift in provider coding intensity, which we believe was spurred by the temporary suspension of our care review activities and has carried past. This impact is not reflected in our cyberattack direct response costs, and we have been addressing it. Nonetheless, we continue to expect our full-year medical care ratio, excluding 30 basis points of cyber and South American effects, to be within the range we offered in November, albeit at the upper end. For our 2025 Medicare Advantage planning process, we assumed care patterns and mix at the levels we are seeing today, in addition to fully incorporating the second of the three-year phased funding cuts, and we have been fully attuned to how the Inflation Reduction Act will affect Medicare Part D offerings in '25. Also, as noted, we expect the Medicaid timing mismatch to subside as rates are updated throughout the remainder of this year and into next, appropriately reflecting current member health status. Turning to the performance of our businesses. At UnitedHealthcare, revenues of $74 billion grew by $3.6 billion. UnitedHealthcare's domestic commercial membership grew by 2.3 million in the first half of this year as employers and consumers responded to our distinctive offerings. And while the '25 selling season is ongoing, we are encouraged by the continued momentum we see. Our recently filed Medicare Advantage bid for '25 again took a balanced approach to provide as much stability for seniors as possible while factoring in the realities of the funding cuts and current care patterns. You can expect us to continue to prioritize balanced and durable performance over transitory market share gains. In Medicaid, we expect membership levels to stabilize as we head into the second half of the year, and our teams are executing well with both renewals and expansions. Optum Health revenues grew by 13% to $27 billion, and the operating margin expanded over last year. We are on track to approach 5 million patients in value-based care by the end of this year and are progressing strongly on our earlier and deeper engagement with patients, with a purposeful focus on our newer regions to more rapidly improve health outcomes and experiences. Optum Rx revenues grew by 13% to over $32 billion, driven by a strong customer response to the differentiated value, consumer experience, and clinical expertise we offer. At Optum Insight, for the services beyond Change Healthcare, we see strong performance in line with our expectations. The revenue backlog increased to nearly $33 billion, growth of over $1 billion from a year ago, driven by business process and information technology services for health systems. A few additional items of note. As we highlighted in April, we established an additional $800 million in medical reserves in the first quarter to reflect the potential for the cyberattack to have affected claims receipt timing. With claims now flowing at more normalized levels, we continue to prudently analyze these trends. Similar to last quarter, the second quarter results do not reflect any favorable earnings impacting medical reserve development. Days claims payable at 45.2 compared to 47.1 in the first quarter. The change was primarily due to the return to more normal claims submission patterns from providers and to a lesser extent, some impact from reclassifying the remaining South American operations to held for sale. Cash flows from operations in the quarter were $6.7 billion, or 1.5 times net income, even with the accelerated funding for care providers. In June, our Board of Directors increased the dividend by 12%, marking the 15th consecutive year of double-digit dividend increases to shareholders. During the quarter, as I mentioned earlier, we prioritized devoting resources to support care providers in the wake of the cyberattack over some activities such as share repurchase. It was the right thing to do, devoting all our efforts to provide stability for the health system. Still, with our ongoing strong capital capacities and with support needs abating, we expect to achieve the full-year repurchase objective we shared with you last November. In summary, it is the confidence we have in the performance of our diversified businesses that allows us to affirm full-year adjusted EPS in the range of $27.50 to $28.00, the objective we established last year, even as we have absorbed the unanticipated $0.60 to $0.70 in business disruption impacts. Within this, we expect a balanced pacing in the second half.

John, thank you. As I said in November at our investor conference, we operate in an environment where change is constant. What you've come to see is that when changes happen, foreseen or unforeseen, we just deal with it. UnitedHealth Group is a nimble and adaptable enterprise, well suited to meet the challenges that come our way and the opportunities we pursue with the many diverse capabilities available to us. In this first half, as we've done before, we navigated a complex external environment while managing through a significant business disruption. We continue to deliver on our growth objectives and are committed to delivering on our 13% to 16% long-term growth target. We'll now answer any questions you might have. Operator, please.

We'll now begin the question-and-answer session. A.J. Rice from UBS, you can go ahead.

Hi, thanks for the question. Just to make sure, expanding on John's comments, if we're considering your perspective on the medical loss ratio (MLR) overall for the rest of the year, it sounds like beyond Change, beyond Latin America, there are two items you're calling out. One is Medicaid timing mismatch, which sounds like you think it’s short term, and then this upcoding intensity comment. I assume that's mainly in the insurance business, but maybe it's in Optum as well. Can you just give us a sense of how much those are impacting your thinking and how much is second quarter versus the impact in the back half on those?

Yeah, A.J., thanks for the question. Let me ask John to get right to it.

Good morning, A.J. There are three additional items to discuss alongside the two you've mentioned. The member mix plays a role in this when we consider everything together. I would say their impact is roughly equivalent. As the year progresses, you'll notice some of these elements in action. Regarding Medicaid impacts, pricing adjustments will take place over approximately 12 months, extending through the remainder of this year and into next year. This means that the adjustments needed to align with the acuity of the remaining population will occur during that period. We are actively addressing the coding upshift we discussed, and we will continue to tackle this throughout the year. The current member mix directly relates to the aspects I highlighted in my prepared remarks, particularly regarding benefit design impacts and how those have affected our growth and the membership type as we reviewed our overall configuration. This will remain relevant for us throughout the year and is something we have also factored into our outlook for 2025 as we prepare our bids for that year. Thank you.

Well said, John. And maybe just to reiterate one thing John said and then add a further point, A.J., it is super important just to hear what you said in terms of that member mix. Obviously, we deal with it during this year, but we obviously had the opportunity to incorporate into our '25 planning and bids. So, we feel very good about that. And secondly, to reflect, stepping back a little bit, the biggest incoming dynamic on MLR at the beginning of this year was the funding reduction in Medicare Advantage, the V-28 significant reduction in funding. And you can see that we are fundamentally navigating that extremely well. Yes, there are a couple of areas of pressure at the margin. I think as you just heard from John, they're primarily boxed off in terms of they're going to work their way through the pricing cycle with Medicaid or in the case of concerns around coding activity, we're very focused on that. So those things feel transitory. Most importantly, we feel good about the way our response to the V-28 funding cut is playing out for us in the overall business. And really, as we started the year, that was the much bigger thing to make sure we got right, and I'm feeling like we're well on our way through the first year of this three-year cycle, and we've talked to you about how critical it is to make sure we navigate that over the long run, and we feel good about that. So, thanks, A.J. Next question?

Yes. We'll go next to Lisa Gill with JPMorgan.

Thanks very much and good morning. I want to focus for a minute on SG&A, which came in much better than expected. Can you maybe talk about the key components of where you're seeing cost savings, the durability? And, Andrew, you touched a little bit about AI efficiencies there. Are you starting to see that in this quarter? And how much opportunity is there from an SG&A perspective when we think about AI?

Lisa, thanks so much for the question. I'm going to ask John to comment a little bit. Let me make a couple of upfront comments and then maybe a couple of examples more specifically to help you a little bit on this. To get to your last point, we are running now hundreds of AI use case deployments. I'd say the first wave of those are essentially allowing us to do things much more quickly, reliably, and efficiently than humans can do them. This has enabled us to navigate complexity and find answers within complex datasets. Super important, and I'll give you a couple of examples of how that begins to help us as we go on. I think we are now transitioning into a phase where those same tools will begin to be deployed in the fundamental reimagination of business processes. One is essentially allowing an existing process to run more efficiently. The second is, can we actually take steps out of a process and really start to change things? I'd call out payment integrity as a front-runner in that regard. You'll start to see a lot of movement there over the next year or so, Lisa. In the short run, I'll give you a couple of examples. This plays a little bit around technology. I certainly wouldn't say these are all Generative AI examples, but they're certainly digitization examples, technology-enabled improvements. For example, at OptumRx, we brought on a record number of clients this year. You've seen the growth, and you can imagine the number of folks we've signed up into Rx platforms. We actually spent 9% less this year in the onboarding of that record volume than we did the prior year, entirely due to digitization and technology efficiencies deployed through the organization. Let me take you into another part of the organization, OptumHealth. We've increased our number of fully risk-delegated lives within OptumHealth by about 40% over the last two years. Importantly, that's with zero increase in personnel headcount in the risk-based businesses, meaning we’ve grown our served members by close to 40% with no additional headcount. Those are just a couple of examples. You're seeing that show up in both Optum business lines. It’s something we expect to continue to sustain over many quarters and years.

Yeah, good morning, Lisa. As you can imagine, given how some of these businesses were built and the fragmentation of the system, there are duplicative functions and uneven consumer experiences throughout that we're addressing. As our businesses begin to scale, our ability to produce efficiency accelerates while, at the same time, improving customer experiences and expanding best practices across the broader base. The comments that Andrew was offering in his answer to your question is just the natural outgrowth as these businesses begin to mature. Very strong this quarter. Over the long term, we can expect advancements. I wouldn't expect it to remain at this level consistently as we look ahead over the next few quarters, though. It was a super strong quarter, but we are going to look to invest in many of these items that Andrew just articulated here, getting to more modern, streamlined experiences as these businesses evolve further.

Great. So, Lisa, thanks for raising it. You can tell it's a big focus for us. We laid out when the V-28 funding cut was first announced that one of the three ways we would respond to this is we would double down on our own cost management efficiency and productivity, and you're seeing that. That aligns with an extraordinarily exciting moment around technological innovation, whether that's Generative AI or digitization, all wrapped together in our march toward a greater consumer focus within the organization. All of this really hangs together as a big part of how we think about things going forward. Thanks, Lisa. Next question.

We'll go next to Josh Raskin with Nephron Research.

Hi, thanks. Good morning. Looking at your bids that you submitted for Medicare Advantage for 2025, I'd be curious if you could tell us if you were bidding to improve Medicare Advantage margins in 2025, or if you're still within that target range in light of the SG&A savings? And then more importantly, maybe just some early thoughts on what sort of growth assumptions you have included in those bids, both your assumption for the market as well as any potential market share gains?

Hey, Josh, thanks so much. I'm going to ask Tim Noel to address the first part of your question. On the second part, you won't be surprised that I’m going to defer to make any predictions about next year. It's still a little early. We'd like to see where everybody else plays out in this cycle. I think we're still in the 2024 cycle. Ultimately, the way growth plays out in the marketplace depends on how everybody bids, not just on how you bid. It only takes one bid to be out of expectation and completely distort your view of how things could play out. So, I'm going to defer a little bit on that one, but on the first point, Tim, I'd love you to make a few comments.

Thanks, Josh, for the question. So, as we think about margins in the Medicare Advantage business and as it relates to our bid, I think we've talked about the consistent approach to how we plan margins. We maintain that and we're operating comfortably within our margin range as we have in the past and as we're planning in 2025. And when I think about our pricing approach for 2025, it's too early to get into a lot of specifics as CMS is reviewing those bids right now. But we're in a posture and how we've priced those products; we’ll be comfortable with whatever growth is the outcome of the products that we bring to the marketplace in 2025.

Great. Thanks so much, Tim. And, Josh, I appreciate the question. Next question, please.

We'll go next to Stephen Baxter with Wells Fargo.

Yes. Hi. Thanks. Can you speak in a little greater detail about your expectation that the Medicaid pressure starts to subside in the second half of the year? I guess specifically, can you maybe speak to what you actually know about rates today, either draft or finalized, versus perhaps discussing a general reliance on actuarially sound rates playing out over a reasonable period of time? Just trying to understand the level of visibility you have a bit better. Thank you.

Okay. Hey, Stephen, thanks for the question. I'm going to ask Krista Nelson, who leads our Medicaid business, to respond to that. Kristen?

Yeah, thanks so much for the question. As it relates to visibility, we've got visibility into the majority of our rates for ‘24. While there's just a slight gap in the second quarter, we really like how our 7/1 rates are shaping up and continue to work with state partners to influence key assumptions before those rates become final in the future. While we might see a little bit of dislocation the rest of the year, states have committed to accurately reflecting the change in acuity from redeterminations into current and future adjustments and really expect this to even out as we pace through the remainder of ‘24 and early ‘25. Thanks for the question.

Krista, thanks so much. So, Stephen, I think you heard there why we're confident that this is a time-fenced issue. I would characterize this as a margin impact in the grand scheme of things, not as a sustainable structural issue. You heard exactly why just there. So, thanks, Krista. And, Stephen, thanks for your question. Next question, please.

We'll go next to Justin Lake with Wolfe Research.

Thanks, good morning. Just a quick clarification and then a question about the second half medical loss ratio (MLR). So first, the clarification. On the MLR, it sounded like, John, you're guiding to a core MLR at the high end of the range or 84.5%, and then I would add 30 basis points of the one-timers for the full year that you've seen in the first half, would that leave GAAP MLR at 84.8%. Is this correct? To be clear, is there any expectation for further one-timers in the second half of the year, or should the third and fourth quarters kind of be clean? My question is just around core MLR in the first quarter, excluding the one-timers was 84.2%. Sounds like it will be 84.8% in the second half. Maybe you could help us think about 3Q versus 4Q just to make sure our expectations are set correctly, given how much focus there is here. Thanks.

Good morning, Justin. I’d say first, yes, your description of our assumptions around core full-year MLR are consistent with our expectations. So how you describe that is quite consistent. As it relates to looking towards the 3Q and such, I'd expect that to be in the neighborhood of 84%, very likely a few tens of basis points higher than that. So, it's kind of a little bit above that in that zone. As it relates to other elements that we've pulled out here, no, they shouldn't be material. Those cyber effects should continue to abate. As we mentioned, we're not adjusting for the elements we talked about regarding provider and coding intensity, so that kind of pulls through a little bit. But there shouldn't be any material other impacts that we're considering. Thank you.

Thanks, John. Thanks, Justin. Next question, please.

We'll go next to Scott Fidel with Stephens.

Hi, thanks. Good morning. Actually, I was hoping we could maybe do a similar exercise as Justin just asked about with MLR for OptumHealth margins. Maybe first, if you can talk about how the OptumHealth margins came in at 2Q relative to your expectations. Then, how you're thinking about OptumHealth margins progressing in 3Q and 4Q? How comfortable are you with getting into that full-year target range that you had provided? Also, John, I thought it might be helpful to understand how you're thinking about the pacing in the back half of the year, particularly with respect to an exit rate for OptumHealth margins as we exit 2024?

Scott, thanks so much for your question. I'm going to ask Dr. Amar Desai, who leads OptumHealth, to give you a few comments there. I mean, let me just preface that by saying, look, we feel very good about the continued progression in particular, with how OptumHealth has adjusted to deal with the new funding environment. I'm also very encouraged by the degree of external payer engagement with our OptumHealth platform as they deal with the environment themselves and look at Optum as part of that solution. And I think the performance of the business continues to improve over last year. Let me ask Amar to give you a little sense of how he sees the second half of the year playing out.

Hi, Scott. Thanks for the question. So, as Andrew said, we're in the middle of the first year of a large rate reduction over the next three years, effectively a price cut. As we think about the initiatives, we're pleased with the early success, mitigating the impact of that changing rate environment. In '23, we developed a three-year plan to manage through V-28. Medical cost management and affordability initiatives are at the center of it. Proactive clinical engagement that impacts member experience and total cost of care is core to that, including better prevention and chronic disease management, and disciplined operating cost management. We're executing very well on this plan, seeing solid progress across each of these areas. For example, at this time last year, we had engaged 62% of all members. Year-to-date, we've engaged three-fourths of all members and above that for our highest risk membership. We're also focused on coordination of care, particularly at transition points, where we've increased post-discharge visits for patients who have been hospitalized, which has reduced readmission rates by 10% in our most mature markets. So, as we pace through the balance of the year, we expect to continue to build on this momentum across engagement, affordability, and operating cost management and are confident in the 7.7% to 8% target for the year.

Great. Amar, thanks so much. And, Scott, thanks again for the question. Next question please.

We'll go next to Kevin Fischbeck with Bank of America.

Great, thanks. Just wanted to clarify something and ask another question. It wasn't clear to me what you were saying about no favorable reserve development. Does that mean the $800 million that you mentioned previously is still somehow in the numbers, or is that kind of worked its way through at the end of Q2? And then I guess just trying to understand better where the outperformance is because obviously, you guys have assumed $0.60 to $0.70 of Change costs in your guidance but reaffirm the numbers, and it doesn't sound like Medicare is the answer. It doesn't sound like Medicaid is the answer, and Change isn't the answer. So where has the outperformance come in that has allowed you to maintain guidance?

Yeah. Good morning, Kevin. This is John. So, exactly what we said there was nothing material going on in development. No favorable P&L impacting development in the quarter, very similar to last quarter in terms of there being no impact. As for questions regarding outperformance, that is evident across several businesses regarding strong growth. We're seeing strong growth in our commercial health benefits business and margin progression in OptumHealth. The strong approach taken by the team at M&R in how they looked at '24 has helped in overcoming the headwinds at V-28, and we've had a disciplined approach in how we stepped into the marketplace with the products we introduced. Even with some of the elements that we talked about that we are overcoming, certainly all those create a good impact for us. There is strong and sustained operating efficiencies the company is driving, and as I said, we will continue to make investments but are making significant progress on that front. We're also very early in this journey of leveraging some of these advancements.

Yeah. Thanks, John. Let me also reiterate that. Part of what you're seeing is the V-28 funding cut price reduction, which focuses primarily on our Medicare Advantage business that Tim runs and the OptumHealth business that Amar runs, both of whom are responding well. But let's be clear: while those pricing cuts are focused on two businesses, team UnitedHealth Group is responding. The entire corporation is engaged in how it manages itself better, reduces costs across the company, leverages technology, and accelerates our consumer agenda, all designed to play our part across the board in how we offset the pressure inflicted on those two important businesses. Why we're confident we can navigate this? I think you're seeing that in the performance of the business, and we're going to continue. That's why I stated what I said earlier today. We're going to continue to focus on every aspect of our business to ensure the model we've laid out—one that we believe is the right one for delivering best value care for patients—is the one that thrives, and we're super confident about that. Next question?

We'll go next to Andrew Mok with Barclays.

Hi, good morning. The OptumInsight backlog was down about $200 million sequentially. Can you provide color on the drivers of that and the nature of conversations you're having with providers following the cyberattack? Do you expect further declines in the backlog this year?

Andrew, thanks very much for that. Let me ask Roger Connor to address that. It's pretty straightforward. But let me ask Roger to answer that and give you a little more flavor on what he's seeing.

Yeah, Andrew, thanks very much for the question. Just in terms of backlog, obviously, it's an important measure, and there has been some impact from the Change events. However, it doesn't include what we're doing in terms of bringing in new clients and our whole innovation space. Fundamentally, we are very confident in the performance going into next year with the cyber event's impact on the overall health system being minimal. When we look at our focus, it’s now about driving that business recovery, and that's all about bringing volume back into the system. We're seeing that ramping up with strong momentum. We're not only trying to bring volume back into our current customers but also seeking new clients, which is exciting because this event has transformed the marketplace. They’re looking for access to innovation and security in the system, and that’s what we’re bringing back. We have a very secure system, and that resonates well with the market. Adding that to the underlying strength of the OptumInsight business, this Change event contributed only 15% to our overall business performance this year, which was planned. That's why we feel confident about getting back to our baseline performance in 2025.

Great. Thanks so much, Roger. Thanks, Andrew. Next question.

We'll go next to Nathan Rich with Goldman Sachs.

Hi, good morning. I wanted to go back to the provider coding activity that you mentioned and ask what you saw change in the quarter and what actions you're taking to address this change? Is this pressure something that was accounted for in bids for next year? I also have a quick clarification on the Change impact on EPS. You talked about the return to baseline performance in 2025. Does that mean you would expect to recover the $0.60 to $0.70 in earnings this year?

Okay. Thanks so much for the question, Nathan. Brian, if you'd like to go first?

Sure. I'll answer that first part on the upshift we saw in provider level of care coding patterns. We believe that was largely induced by our level of care waivers during the cyber disruption. The reason we believe that is we saw a higher level of inpatient versus observation mix after we reinstated our utilization management protocols starting April 15th and thereafter. So, we see that as a distinct cause. We are aware of that activity as we plan for 2025 in our bids, and we feel like it is an anomaly tied specifically to our waiver. We have reinforced our utilization management protocols and believe these impacts will dampen as we pace through the remainder of the year.

Yeah. Regarding Change, yes, as we mentioned, our ambition is to return to baseline performance for that business in 2025. Those baseline expectations are what we would have expected prior to any of this happening. Clearly this quarter, we have increased the impact of the business disruption. As we bring those revenues back, it will sometimes take longer, but that is our ambition as we look ahead.

Thanks, John, Brian. Again, just on this business interruption piece, I think, in all honesty, we may have been a bit optimistic in hindsight at the pace at which we thought clients would reconnect to put their workflows back through the system once it was restored. As we've looked at the last several weeks, that momentum and pace feel good, particularly as we look at both new clients coming in and returning clients. I believe we're in a strong position, and we have a clear path for how this plays out for the rest of the year. The platform that we've rebuilt is going to serve people extremely well. Next question.

We'll go next to Erin Wright with Morgan Stanley.

Great, thanks. So on the earlier topic of potential offsets, I wanted to ask about Optum Rx. With the recent level of industry attention on the PBM business as well as specialty pharmacy, how should we think about how those drivers are playing out relative to your expectations, whether it's biosimilars or GLP-1s? How should we think about those near-term drivers across Optum Rx?

Erin, thanks so much for the question. Let me ask Heather, who runs Optum for us, to make a couple of comments on that, if you don't mind, Heather.

Sure. Just basically, I think you can see in the quarter, we’ve had strong performance. A couple of things I would highlight: we've talked for a few years about the investments we've made in Optum Rx, both on the PBM side and on the pharmacy side. On the PBM side, you've seen growth in clients and volume, and the same with respect to volume within our existing clients as well. We take that as a sign of strong retention of existing clients, and we’re continuing to perform with them. I think the key highlight is the modular effect of the PBM business—we serve at the privilege of our clients, offering the programs and services to drive affordability of medications for them in the best interest of their members. We've brought a lot of products and services to market this year that are leading differentiators, which we are seeing health plans and employers capitalize on this year and that are driving growth in products and services.

Heather, thank you. Erin, thanks so much for the question. We have time for one final question, please.

We'll go next to Lance Wilkes with Bernstein.

Great, thanks. For OptumHealth, could you talk a little bit about what pricing has been like there? At Investor Day, it seemed like you may have seen some improved pricing concerning global cap rates due to higher global cap rates out of the Medicare Advantage business. I was wondering if in '25 we should expect continued improvement in that, or conversely, if there's a need for a retrenchment or retracing of that sort of makeup for what was given. Are you starting to exclude things from global cap as you look at 2025?

Hey, Lance, thanks for the question. I appreciate your cheeky attempt to get us to predict numbers for '25, but we're going to defer from that. I’m going to ask Amar to give you a general sense of how we’re seeing that. Please go ahead, Amar.

Thanks for the question, Lance. We continue to have very strong relationships across our over 100 plan partners. In a dynamic rate and benefit environment, we've seen increased outreach from payers looking for an enduring partner that’s very adept at operating within fully capitated value-based arrangements. We've had productive discussions focused on benefit design, funding, market level planning, and we're confident in our position going into 2025. We’re progressing toward adding plan partners and expanding geographies for 2025. Foundational to those relationships and as we think about those arrangements is the quality of care provided by our providers, the strong ability to drive clinical outcomes, improvements in achievement of star measures, and of course, strong documentation and diagnosis. We also see that strength of our network aligned in geographies is an important focus area for plan partners, along with coordination of care, which I mentioned previously. So, when you take that together, it gives us great momentum and helps us drive value for our plan partners in the next two years as we navigate the risk model changes and grow.

Amar, thank you very much. As I think you could probably sense from those couple of answers that Amar has given, he leads a very special team of people running a remarkable business, able to provide great care for patients and deliver a great work experience for healthcare professionals and colleagues in that business. I'm very pleased with the continuation of that business's progress. We're coming toward the end of the call. I'd like to thank you all for your questions this morning. As you heard, our focus on fundamental execution, our restless spirit, and our ability to adapt to changing environments gives us considerable confidence as we look ahead and a testament to the hard work and discipline of the people of UnitedHealth Group who work every day to serve patients, consumers, and care providers efficiently and effectively. We appreciate your time this morning. Thank you.

This does conclude today's conference. We thank you for your participation.