Headwinds primarily associated with Medicare Advantage (MA) and care activity in its insurance business led UnitedHealth Group (UHG) (NYSE: UNH) to lower its anticipated earnings per share for 2025. 

In the first quarter of 2025, UHG’s revenues increased by $9.8 billion year-over-year, reaching $109.6 billion. This growth was primarily driven by a more comprehensive approach to serving its customers across the enterprise. Q1 revenues for its insurance arm UnitedHealthcare totaled $84.6 billion, up $9.3 billion year over year. Additionally, the number of consumers receiving self-funded commercial benefits rose by approximately 700,000 in the first quarter.

Optum, which houses the company’s home-based care business, also reported revenue growth, with first-quarter revenues of $63.9 billion, a $2.8 billion increase, mainly led by OptumRx.

Despite this growth, UHG revised its earnings outlook for 2025 to a range of $26 to $26.50 per share, a decrease from previous estimates. This revision is attributed to increased care activity in its MA business and changes in Optum Health’s member profile. 

“UnitedHealth Group started 2025 in two seemingly disparate ways,” CEO Andrew Witty said during the company’s earnings call. “One, continued strong growth across our businesses, our people are providing more health benefits and services to more members and patients as the market responds to our distinct offerings. The other way, however, was an overall performance that was, frankly, unusual and unacceptable.”

For instance, the company reported a 100% increase in care activity in Massachusetts during the first quarter, primarily in physician and outpatient services. However, Optum Health’s revenue was impacted by a rise in new patients who have lower reimbursement levels, as well as complex patients affected by changes to the Centers for Medicare & Medicaid Services (CMS) risk adjustment model.

“It’s important to recognize that UnitedHealthcare and Optum are distinct businesses with different models, markets, and products,” Witty said. “Optum’s Medicare business is multi-payer and not limited to just UnitedHealthcare members. Given these differences, changes in care activity and member profile do not always follow the same patterns and can result in different impacts on each business.”

The company is working to address the performance challenges, particularly regarding care activity in UnitedHealthcare’s MA business, according to Witty. The company had expected to see a gradual increase in care activity by 2025, aligning with the usage trends observed in 2024. However, indications from the first quarter of 2025 showed that care activity has increased at twice the anticipated rate.

Additionally, Witty noted that many current and new complex patients are significantly impacted by the changes to the CMS risk model that the company is currently implementing.

“To be sure, it is complicated, but we’re not executing on the model transition as well as we should,” he explained. “We must and will work to better anticipate and address these factors still early in 2025. We believe they are highly addressable as we look ahead to 2026.”

Witty announced that the company will make adjustments in five key areas to address current issues.

First, it will ensure that complex patients who are most affected by the Medicare funding cuts from the Biden-Harris administration participate in clinical and value-based programs.

Second, the company plans to engage with members consistently, both in their homes and in post-discharge settings.

Third, UHG will evaluate and update the health status of new patients, especially those identified as high-risk.

Fourth, it will transition to the new CMS risk model by making significant investments to enhance physician clinical workflows. This is aimed at ensuring better care and providing timely insights on when and where care is most effective and efficient.

Finally, Witty stated that these trends will fully inform the design and pricing of MA plans for 2026.

“While we are decidedly unsatisfied with these results, our growth and foundation for improvement remain solid,” he said.

UnitedHealth Group’s subsidiary Optum is among the largest home-based care providers. This was achieved largely through the company’s 2023 acquisition of LHC Group for $5.4 billion.

Currently, Optum is battling it out in court with the U.S. Department of Justice, which seeks to block the subsidiary’s $3.3 billion purchase of Amedisys (Nasdaq: AMED).

If that transaction closes, Optum will control 30% or more of the home health or hospice services in eight states, according to the DOJ’s complaint filed in court. The deal would expand Optum’s home health and hospice footprint to five additional states, allowing the company to gain nearly 500 locations in 32 states.