UnitedHealth Group (NYSE: UNH) Q1 2020 Earnings Call Transcript

UnitedHealth Group Inc  (UNH) Q1 2020 earnings call dated Apr. 15, 2020

Corporate Participants:

David S. Wichmann — Chief Executive Officer, UnitedHealth Group

John Rex — Executive Vice President and Chief Financial Officer, UnitedHealth Group

Sir Andrew Witty — President, UnitedHealth Group Chief Executive Officer, Optum

Dirk McMahon — Office of the Chief Executive, UnitedHealth Group Chief Executive Officer, UnitedHealthcarenitedHeal

Tim Noel — Chief Executive Officer, UnitedHealthcare Medicare & Retirement

Wyatt W. Decker — Chief Executive Officer, OptumHealth

Analysts:

Gary Taylor — JPMorgan Chase & Co. — Analyst

Justin Lake — Wolfe Research — Analyst

Steven Valiquette — Barclays — Analyst

A.J. Rice — Credit Suisse — Analyst

Kevin Fischbeck — BofA Securities, Inc. — Analyst

Josh Raskin — Nephron Research — Analyst

Ralph Giacobbe — Citigroup, Inc. — Analyst

Scott Fidel — Stephens, Inc. — Analyst

Ricky Goldwasser — Morgan Stanley — Analyst

Charles Rhyee — Cowen & Company — Analyst

Dave Windley — Jefferies Group LLC — Analyst

Lance Wilkes — Bernstein — Analyst

Frank Morgan — RBC Capital Markets — Analyst

Presentation:

Operator

Good morning and welcome to the UnitedHealth Group’s First Quarter 2020 Earnings Conference Call. A question-and-answer session will follow UnitedHealth Group’s prepared remarks; and as a reminder, today’s call is being recorded.

Here is some important introductory information. This call contains forward-looking statements under U.S. 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 of the risks and uncertainties can be found in the reports that we file 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 amounts is available on the Earnings Reports & SEC Filings section of the Company’s Investors page at www.unitedhealthgroup.com. Information presented on this call is contained in the earnings release we issued this morning and in our Form 8-K, dated April 15, 2020 which may be accessed from the Investors page of the company’s website.

I will now turn the conference over to the Chief Executive Officer of UnitedHealth Group, Mr. David Wichmann. Please go ahead.

David S. Wichmann — Chief Executive Officer, UnitedHealth Group

Good morning and thank you for joining us. With all that is going on, we’ve structured things a bit differently today. We’ll get directly to what’s likely top of mind for all of you, the impact of COVID-19 global health crisis on our businesses and the actions we’re taking to support our communities, members, patient’s, care providers, customers, government partners, and team members and their family. These are still the early days in the response to COVID-19 and we anticipate we will experience and learn more as events unfold in the months ahead.

UnitedHealth Group was consciously built with a restless mindset, adaptable capabilities, culture and the enduring human values to respond and serve and meeting challenges such as we are seeing today. The commitment, ingenuity, compassion and engagement of the 325,000 people of UnitedHealth Group has never been stronger.

I will start today by expressing my gratitude and admiration to this restless team for the extraordinary efforts and personal sacrifices being made every day. They are doctors, nurses, pharmacists, social workers and other clinical and non-clinical health-care workers on the frontlines of care as well as customer care representatives, transaction processors, supply chain experts, technology engineers, data scientists and others supporting them, the health system in our communities. The COVID-19 pandemic is deeply personal to them and to all of us. They’re connected digitally, triaging people with symptoms, engaging directly with our most vulnerable patients, ensuring essential chronic and COVID-19-related medical and behavioral health services are available and accessed, while helping keep the health system coordinated, connected and working for individuals and their doctors.

They are enhancing safety for those most at risk, making sure the right medicines are getting to the right patients when and where they need it, and the right testing and protective gear is available to properly safeguard the health workforce. They are driving innovative solutions around testing, healthcare workforce safety, improving critical product, supply and services availability, helping develop and evaluate therapies and applying advanced analytics to identify, predict, and combat COVID-19.

For our heroic clinical team, we have further hardened our safety-first workforce environment for those carrying for patients across our more than 1,500 facilities and those providing medications and services, caring for people in their homes.

Like all of us, they are concerned about the health and safety of their own families and friends. Yet, they remain front and centered, engaging fully each day to serve, many selflessly away from their families for weeks, so they can ensure care is provided to those most in need. I have never been more proud or more humbled to be on their team.

Every team member at UnitedHealth Group remains fully employed, supported, protected, and engaged in the COVID-19 crisis.

Let me pause to acknowledge and add a note of deep gratitude to Andrew Witty, who has announced this morning will be taking a leave of absence to provide leadership for the efforts of the World Health Organization to find and distribute a vaccine for COVID-19. Our gratitude for Andrew is grounded in all he has done to guide UnitedHealth Group and Optum so effectively and sensitively for all who we serve and all who work at this enterprise, and his willingness to apply his leadership and phenomenal talents to this new assignment for which he is so aptly suited. We couldn’t be more proud to call one of our own and see one of our own serve in this way. And we look forward to both his success in leading this effort and his return to our company once this important work is done. He is on the call with us today and available to respond to your questions before he reports to duty with the World Health Organization.

From the outset of COVID-19 outbreak, we mobilized to keep our entire enterprise fully intact and functioning at the highest performance levels. As we stand today, we are supporting all of our products, services, and commitments across all of our businesses and markets. We have long had a high proportion of our more than 200,000-person non-clinical team working from home, and we were able to quickly move nearly all of the rest to work at home as well. They have been performing well and our service levels remained strong for our clients, members, patients and the health system broadly.

For the millions of people we are privileged to serve through UnitedHealthcare, we have taken every step possible to broaden access to care. We have offered additional enrollment opportunities to those who previously declined employer-sponsored offerings, eliminated all COVID-19 related cost sharing’s, and removed prior authorizations to speed patient transitions of care, so health systems can diagnose, treat, and redirect patients. We have developed, revised payment timeframes to help people sustain coverage, and we are helping people displaced from their job to smoothly transition to affordable coverage, which meets their needs.

Last week, we moved to provide nearly $2 billion in liquidity to the health system, accelerating payments to care providers whose clinical operations have been impacted. We have been partnering with other companies and academic institutions to develop and validate protocols and processes to more rapidly and frequently test healthcare professionals on the frontline, applying new technology to ensure safe and full availability of this critical workforce. This leverages the self-administered collection innovation we developed, which is simplifying COVID-19 testing and we have been tracking infectious disease pattern to identify supply-demand in equities and resource needs in every major metropolitan statistical area across the U.S. health system. This will emerge as a new capability to provide enhanced disease surveillance in the future.

Our high-risk members have been identified and we are surrounding them with services to reduce the impacts of social isolation on their access to physical and behavioral care while keeping them as safe as possible. And we have provided over $50 million in initial domestic and global grant funding and investments to advance health workforce safety, support those in geographies most afflicted, aid seniors included in their homes, and help communities address rising levels of homelessness and food and security.

Like the broader health system in recent weeks, we have seen a reduction in elective care which is impacting both the UnitedHealthcare benefits and the OptumCare delivery businesses. Most traditional procedure work has been postponed at our SCA ambulatory surgery centers. Likewise, the UnitedHealthcare and Optum at-risk care delivery businesses have seen lower demand for these services.

We are seeing timeframes and discussions for new business opportunities being extended as most business partners focus on crisis response. Many employers have had to furlough employees, driving higher levels of unemployment, which may ultimately affect the outlook for growth in our Group Benefits business, while increasing our membership in individual lines and Medicaid coverages.

While it feels awkward to be talking about earnings outlook at this moment, you saw our press release, we are maintaining our 2020 earnings per share outlook established at our Investor Conference. We view this as the most reasonable baseline posture in these uncertain times as we continue to grow and operate our businesses while assessing the multitude of potentially offsetting factors across our uniquely diverse enterprise. These factors will become clear in the months to come. The related financial effects on our business will clarify as well.

As they do, we commit to providing swift relief, even as we consider the uncertainty of the environment going forward. While there is still much to understand, we can be very clear with you today that we are committed to ensuring that any financial imbalances which arise from this situation, are reconciled proactively and addressed fairly and timely for all those we serve.

Let me now share a few of the specific actions underway at Optum and UnitedHealthcare. Optum has cared directly for more than 10,000 COVID-19 patients to-date and is operating more than 400 test sites across the country. We quickly shifted more than 4,000 additional OptumCare physicians to our digital care clinics on our way to more than 10,000 in the weeks to come. These rapid responses was made possible by the swift work of the regulatory agencies, allowing flexibility in state licensure requirements for clinicians across service categories and state lines. We thank and commend them for these actions and encourage long-term continuation of these policies.

Our digital health consumer engagement has accelerated in many directions. For example, we’ve applied new COVID-19 clinical pathways to our device based remote monitoring services to identify and prioritize high-risk individuals for follow-up care.

Our newly developed COVID-19 symptom checker provides people with recommendations on how to proceed, based on the results. And we’ve provided access to our digital behavioral health care services which give clients on-demand help for stress, anxiety, and depression. All content, coping tools and peer support are free to everyone. Because it’s critical everyone receives their needed medications, we are providing early refills, extended authorizations and increased home delivery options. We also extended hours at our behavioral health pharmacies to ensure medication adherence for those with mental health and substance abuse challenges. The spread of the virus has created a significant health risk for those receiving life-sustaining infusion services traditionally administered in the hospital or hospital clinic settings. For these patients, we’re providing infusion services through our Optum Infusion ambulatory suites and in their homes through our nurse infusion specialists.

Finally, Optum is innovating on the frontlines of care delivery, developing screening protocols to identify patients who are likely to need hospitalizations and collaborating with health and care delivery organizations to share this knowledge.

UnitedHealthcare is working at full speed as well with partners across the health system to address the current global emergency. For consumers, UnitedHealthcare has made it simple and easy to access care, waiving cost sharing for COVID-19 testing and treatment and eliminating many administrative requirements. Tens of thousands of people have taken advantage of the special enrollment period we opened for those needing coverage for health benefits, and more than 2 million consumers took advantage of our offer to obtain early prescription drug refills to ensure no one experienced gaps in treatment.

UnitedHealthcare digital and telehealth services were ready, and as a result, extensively used as a safe simple and free way to connect with care providers, either through a partner or directly with the patients’ own doctor. UnitedHealthcare is paying careful attention to vulnerable members especially in Medicare and Medicaid by expanding access to our personalized digital care platforms, which provide up-to-date information about prevention, coverage and care. People can quickly talk to a nurse, refill and schedule home delivery for prescriptions and get access to emotional support 24 hours a day.

We are also helping federal, state and local authorities address system capacity shortages by supporting them with the main operating experience. One example involves two UHC Community & State leaders, Dr. Jeffrey Brenner and Kathleen Stillo, who are now working exclusively with the State of New Jersey, for the next several months to establish a critically needed field-based hospital system. These are just a few examples of how the people of Optum and UnitedHealthcare have mobilized to respond to this public health challenge. There are many more and they are happening every day.

Now, I’ll turn it over to John Rex, our Chief Financial Officer.

John Rex — Executive Vice President and Chief Financial Officer, UnitedHealth Group

Thank you, Dave. I know you’ve had an opportunity to look through our first quarter financial results this morning. And as such, given the unique circumstances, I’ll be brief about the quarter. As Dave said, while it feels somewhat uncomfortable to be speaking of the financial aspects of this challenging situation, we know this is what you need to understand for your work. Given the timing of the COVID-19 outbreak and its progression in United States, the first quarter financial impact was limited. As you know, incidence rates in the U.S. only started moving meaningfully in mid-March. And elective care trends did not begin to be meaningfully impacted until later in the month.

At the segment level, UnitedHealthcare and the OptumHealth, OptumInsight, and OptumRx businesses all reported first quarter operating earnings that were in line with our own expectations going into the year.

Looking ahead, we are maintaining our full-year 2020 earnings per share outlook. As I’m sure you would expect this view is subject to a number of key considerations that yet to play fully out, including the full incidents and intensity levels we experience, the duration and ultimate impact on economic, employment, and business activity levels, and the duration and extent of disrupted care patterns as the virus runs its course.

Beyond our maintained earnings per share outlook, we anticipate other key Investor Conference metrics likely will play out differently than we expected at that time. And our quarterly progression will likely vary from historical patterns. For example, the environment today suggests the second quarter could be the lowest medical care ratio of the year, potentially, meaningfully so with elective care demand still restrained. Offsetting this impact, we would anticipate the second half medical care ratio could be meaningfully elevated.

Among some of the factors we consider, people will hopefully have more comprehensive care access by the second half of the year. And some of the currently deferred care can be restored. Individuals with chronic conditions are among those for whom we have considerable concern in this environment. While we are mitigating the impact through other means, mistreatments can aggravate health status, resulting in initially more intensive care needs as the system reopens. We will proactively work to help them quickly seek care. And the impact of testing and coverage expansion such as serologic tests. These are just a few of the factors we must consider, and I’m confident you are eager to probe into all of these areas and likely more.

We appreciate your understanding of our need to defer on providing point estimates and even ranges today, given the evolving situation, the multi-variables at play and their interdependencies and our regard for the mini thoughtful view that will shape the situation.

Our strong financial position and liquidity enable us to fully meet both our operational and strategic needs. We ended the quarter with an intentionally higher excess cash balance and a higher than normal debt-to-capital ratio. This was a prudent response to what we saw in more volatile financial markets during the month of March. When considering our quarter ending excess corporate cash position, we size our debt to total capital ratio at about 40.5%. As markets become more normal, we will return to our previous cash management and leverage position.

Given our critical relationship with our healthcare delivery partners, we moved quickly to implement policies to provide enhanced liquidity for care providers, by accelerating nearly $2 billion in payments, provided needed support to health systems and individual care providers. These types of actions are important to help provide more financial stability for the system.

We expect some metrics such as days in medical claims payable and cash flow will be impacted as a result of these actions. Well, that will be transitory as we move through this situation together.

With that, I’ll turn it back to Dave.

David S. Wichmann — Chief Executive Officer, UnitedHealth Group

Thank you, John. I hope this gives you some insight into what we are seeing and the actions we are taking to serve people, communities and the health system during these unprecedented times. We are committed to applying the full capacity of our enterprise to serve, not just our patients, members, and customers, but also the hundreds of millions of people impacted across the nation and around the world.

We will continue to protect our team members and their families, apply our skills, energy and broad capabilities to serve and aid others in this time of crisis.

Our mission is to help people live healthier lives and to make the health system work better for everyone. This moment of challenge is proof of the resolve of the 325,000 women and men of UnitedHealth Group to achieve this mission, and you can also expect us to be fully prepared to excel on the other side of COVID-19, ready to respond to demand for health system resources and adapt our strategic priorities to emerging opportunities to lead in the development of the next generation health system in a socially conscious way.

Let’s open it up to questions please. One per person, so we can get to as many as possible. Thank you.

Questions and Answers:

Operator

[Operator Instructions] Thank you. We’ll go first to Gary Taylor with JPMorgan. Please go ahead, your line is open.

Gary Taylor — JPMorgan Chase & Co. — Analyst

Hi, good morning. Thank you very much. Wondering if we could get the quarter-end IBNR before the quarter. And if you could just comment on OptumHealth performance from 2007 to ’11, and how the business is different today in terms of more risk-based business? You’ve added some fee-for-service businesses, but how you would expect the performance of OptumHealth to track versus how it performed back in the financial crisis? Thanks.

David S. Wichmann — Chief Executive Officer, UnitedHealth Group

Gary, can you clarify the first part of your question please?

Gary Taylor — JPMorgan Chase & Co. — Analyst

Yes, I was just hoping, within the medical claims payable number, you could give us the IBNR number that typically shows up in the queue.

David S. Wichmann — Chief Executive Officer, UnitedHealth Group

Do you want the dollar estimate?

Gary Taylor — JPMorgan Chase & Co. — Analyst

The dollar amount, yes.

John Rex — Executive Vice President and Chief Financial Officer, UnitedHealth Group

So, Gary, this is John Rex here. We get our Q out very-very quickly and we’ll have that for you, and you can follow-up with Brad also if you need any color on that particular metric.

David S. Wichmann — Chief Executive Officer, UnitedHealth Group

And so, as for — I think you can see that our days payable are consistent with quarter-end last quarter and then also slightly elevated year-over-year as well. So, I think you can take something from that. And then also just generally speaking, what’s going on with development in terms of the continued conservative posture of the business and how it records its year — quarter end, year-end and other IBNR estimates. Just also rely on the fact that it’s consistently applied to the best of our ability as always, and informed not just by claim lags but other things as well.

So, on OptumHealth, just I might suggest rather than responding directly to your question, I’d just suggest that it is right on our expectations. I know there’s some commentary about it this morning. But it is definitely on our expectations. What people I don’t think realize about this business is that the elective in chronic disease management deferrals work both ways in a business that has 2/3 of its business revenues are risk-based, and a 1/3 them are fee-for-service space. So, you might want to think about that as you think about the performance expectations of this business going forward. I just want you to know I’m very proud of this team and how they’ve served and how they’ve adapted. And if I can, I’d ask Wyatt Decker to provide you with a few examples of how the team has performed.

Wyatt W. Decker — Chief Executive Officer, OptumHealth

Thank you, Dave; and thank you, Gary, for the question. Yes, to characterize the response to COVID-19 of Optum and OptumHealth, I would use four adjectives: courage, compassion, collaboration, and a can-do spirit. The over 65,000 doctors, nurses and advanced practitioners and others of this team have been on the frontlines of the COVID response, as you heard earlier from Dave, and has stood up over 436 testing centers.

We have dramatically scaled our ability to care for patients digitally, including through telehealth vehicles, and will by the end of this month have over 10,000 providers on telehealth platforms and solutions.

We have been proud to be also on the front lines of innovation, collaborating with R&D on a whole host of solutions. And just as an example, in New York and New Jersey, we have over 329 care sites including 49 urgent care centers, and stood up the first drive through testing solution for the State of New Jersey and continue to work very closely with those states and the cities within them to respond effectively to COVID.

So, much more to come. We anticipate to emerge on the other side of this a even more sophisticated, digitally enabled national provider of health care that is focused on serving our patients and delivering value-based health care. Thank you, Dave.

David S. Wichmann — Chief Executive Officer, UnitedHealth Group

So that was Dr. Wyatt Decker. I think most of you know Dr. Decker well enough by now, having been with us for a while. But just as a reminder, he was the CEO of Mayo Scottsdale, which is obviously one of their strongest flagship locations. He’s also an emergency room physician, which clearly showed through in this crisis or is showing through in this crisis. He’s intensely calm right in the middle of the crisis. And if you think about the numbers of things they’ve had to deal with, I’d just say it’s been an honor and a privilege to have him here with us today. Next question please.

Operator

We’ll go next to Justin Lake with Wolfe Research. Please go ahead.

Justin Lake — Wolfe Research — Analyst

Thanks, good morning. First, I wanted to dig into early trends on commercial membership. Would love to hear what you’re seeing in the commercial risk book, for instance, in terms of premium collections at April through mid-month, right, how much have you collected in April, given all the uncertainty here versus a typical collection? And, how many of your members you think have been furloughed? We’re just trying to understand the impact of furloughs versus unemployment. And then, I know there’s a lot of uncertainty out there, but if you go into promotional renewals that have to be priced for 71 and have to set Medicare bids in the next four to six weeks; a lot of questions on how you’re going to be our bid or set price relative to the potential for deferred utilization coming back next year, possibility of a COVID return during flu season etc. So, any color you can give us on pricing as well will be really helpful. Thanks.

David S. Wichmann — Chief Executive Officer, UnitedHealth Group

Okay. Dirk?

Dirk McMahon — Office of the Chief Executive, UnitedHealth Group Chief Executive Officer, UnitedHealthcarenitedHeal

Yes. Thanks, Justin, for the question. So, on a premium relief, we’re working with our customers on a daily basis to find the right solutions to ensure their employees can continue to have access to the care they need. I’ll give you a little bit of numerical context. In a typical month, we extend grace periods or offer payment plans to customers. That represent about 0.4% of our premium base. For March one premiums, we collected most of the premiums prior to the COVID impact really kicking in. And these extensions increased to about 1% of our premium base. So for April one premium so far, the amount of extensions have grown to about 3% of our premium base.

So, a little bit elevated, but we’re to continue to work with our customers on payment plans to give them the options for coverage that they need.

Let me switch to your second question. You talked a little bit about commercial pricing. Of course, we’re in the process of developing our pricing for 2021. We’re closely monitoring the emerging COVID-19 information and including things like the claim experience from our members who have been diagnosed with the disease, as well as the abatement of other procedures.

We’re going to continue our commitment to pricing to our forward-look of costs, including estimates of things like significantly increased testing costs as well as hopefully the cost of the vaccine. Our view of the 2021 costs will continue to evolve as we learn more about the virus. The majority of our member months you should note are really priced after September. So, we’ll have time to get a better view on what the 2021 environment will look like.

David S. Wichmann — Chief Executive Officer, UnitedHealth Group

And if it’s okay, Dirk, one of the more immediate needs as well as what we’re doing on pricing for Medicare. So, Tim, do you want to take it?

Tim Noel — Chief Executive Officer, UnitedHealthcare Medicare & Retirement

Good morning, Justin. Thanks for the question. And as you know, some of the key inputs to the 2021 Medicare Advantage bid process were published by CMS only last week. So, really early in the process and we never harden our position at this stage. In 2021, as always, we strive to provide consistency and benefits for the members that we serve. We have a long track record of stable-to-improving benefits and have accomplished this in some challenging circumstances in the past. The HIT dynamics that played out over years are an example. So, too early to talk in detail about our benefits and some of the assumptions there. But our clear goal is stability. Stability is always extremely important to our members and it’s especially important at a time like this.

David S. Wichmann — Chief Executive Officer, UnitedHealth Group

Good, thank you. Next question please.

Operator

We’ll go next to Steven Valiquette with Barclays. Please go ahead.

Steven Valiquette — Barclays — Analyst

Great, thanks. Good morning, everyone, and thanks for taking the question. Hope everyone is staying safe. So just a follow-up further around the commercial enrollment trends. And I guess I’m curious for 1Q20, curious how that membership shook out relative to your own expectations. I think there wasn’t any impact yet related to the rise in unemployment in late March in those 1Q numbers. And how are you thinking about unemployment impact on overall membership for the overall company as the year progresses? I know you claimed that you may recapture or gain some members in the Medicaid book as well. Thanks.

David S. Wichmann — Chief Executive Officer, UnitedHealth Group

Dirk, you want to take that?

Dirk McMahon — Office of the Chief Executive, UnitedHealth Group Chief Executive Officer, UnitedHealthcarenitedHeal

Yes. So, thanks for the question. As I said, in January, we were expecting to be down for both fully insured and self-funded membership in the first quarter. But we expected to gain that membership in both areas as we paced through the year. With the current COVID crisis, we expect to be down for the year as business is closed and employers reduced payroll associated in driving group attrition. At this early stage, I can’t tell you what that will be. Again, I will say we’ll continue with our pricing discipline and remain focused on delivering the unique value proposition for both our customers and consumers.

We do expect to see, as you noted, increases in Medicaid and our individual products to ultimately offset some of the losses we experienced in the commercial group business.

Steven Valiquette — Barclays — Analyst

Okay. Just one quick confirmation question. Just on that $2 billion of accelerated payments to care providers, that’s certainly commendable and very much appreciated on the receiving end. Just from an accounting standpoint, does that have any impact on the reported MLR of 81% in 1Q? Or does the timing, that change in your P&L from a cost recognition perspective around?

John Rex — Executive Vice President and Chief Financial Officer, UnitedHealth Group

Hi, this John Rex here. No, it didn’t have any impact on that.

Steven Valiquette — Barclays — Analyst

Okay. I just wanted to make sure.

David S. Wichmann — Chief Executive Officer, UnitedHealth Group

It could affect our cash flows in the Q2. That maybe the way to think about it. Next question please. Thank you, Steven.

Operator

And next is A.J. Rice with Credit Suisse. Please go ahead.

A.J. Rice — Credit Suisse — Analyst

Hi, everybody. And I’ll also echo about everyone staying safe. John, you mentioned in your comments about the slowdown in some re-contracting RFPs. And that makes sense that people can have face-to-face meetings when they’re considering big deals. I assume that that would impact potentially Group sales on the insurance side, the OptumRx selling season and the OptumInsight selling. Can you just maybe flesh out a little bit more of how big an impact that is? What you’re seeing in those different businesses with respect to large sale activity?

David S. Wichmann — Chief Executive Officer, UnitedHealth Group

So, A.J., it’s Dave. I’ll take that. So, yes, just as this hit, there was a lot of activity in the commercial markets, let’s call it, where folks were trying to get their employees to safe place, work at home, and kind of reestablish operations as you would expect. It isn’t as if everything dried up, but it did slow down a lot. And at least as it relates to the commercial markets, I would expect that that will come back online here as we get to the other side of COVID-19 or at least for a period of time.

Where I think the other place I’d like you to have commentary on would be with Andrew Witty, if Andrew might want to talk a little bit about the impact of the COVID-19 on the appetite for health systems and health plans and others, I mean what their availability has been for business as well.

Sir Andrew Witty — President, UnitedHealth Group Chief Executive Officer, Optum

Yes. Thanks very much Dave. And A.J., thanks for the question. As Dave said, it’s very interesting situation. I would say pipeline opportunities for OptumRx and for OptumInsight, very strong. The timings of meetings obviously disrupted by the COVID crisis, as Dave just referred to. Our focus really just now on the OptumInsight portfolio and pipeline, where we’re actually seeing significant engagement and interest, I’d say actually a step-up in terms of general interest for innovation of how to start thinking through to improve healthcare delivery, how to try and improve their economics as different players in the system become under pressure. We’ve seen particularly more and more interest in the John Muir type deal that we announced last year, the more comprehensive engaged system.

So, timing is unpredictable. We just don’t know. But in terms of appropriateness of our offering, well, the needs that we’re hearing our clients and customers express, feel very good about that. And I would also say the team led by Robert Musslewhite at OptumInsight are working super hard in terms of innovating our offerings in response to some of the new needs that are being expressed by our clients at this time.

So, I would say overall, feels like a continued meaningful opportunities for OptumInsight; timing, unpredictable; and we have to wait for a little bit more time to go by before we can be certain of when some of these things get closed.

David S. Wichmann — Chief Executive Officer, UnitedHealth Group

Thank you, A.J. So, my view is that we’ll see a strong demand for Optum’s value proposition once we get to the other side of the situation. Next question please.

Operator

Okay. And the next question is from Kevin Fischbeck with Bank of America. Please go ahead.

Kevin Fischbeck — BofA Securities, Inc. — Analyst

Hey, thanks. I appreciate the commentary about the seasonality and MLR lower in Q2 and then higher in the back half of the year. Do you guys have any just general thoughts and framework about whenever things do get back to normal, I know that’s still a moving target, but how much of what is deferred actually comes back when you see disruptions like this and how long does it take for that deferred volume to actually come back into the system?

David S. Wichmann — Chief Executive Officer, UnitedHealth Group

It’ll be very difficult for us to project that at this stage given all the uncertainties that are out there. Kevin, it’s a really great question. It’s something that we’re going to monitor closely. And I think by the time we get to the second quarter call, we’ll probably have a better view of all that. John, do you have anything you want to add?

John Rex — Executive Vice President and Chief Financial Officer, UnitedHealth Group

Yes, I would just add, this situation is just so different than anything we’ve seen before. When we look back at prior situations when you’ve seen a cessation demand, it’s a different event. It’s a hurricane. At some other event where the system shuts down and when the system opens up, that demand comes back quite quickly, actually, as long as everything is up and operating. But this is one of these times where we just haven’t been through it before either. So, in terms of us trying to step out and understand both when systems are up, open and operating, when comfort levels are there to reengage with systems, are elements that we certainly haven’t experienced yet. And so, I wouldn’t want to step out and kind of predict that the past events that we’ve seen when something like this has occurred are predictive at all of that.

David S. Wichmann — Chief Executive Officer, UnitedHealth Group

So, it will have a lot to do with whether it comes back in the fall, what the timeframes are wearing off, whether the electric procedures come back online, and what pace. There’s just so many unknowns right now, Kevin. So, I wish we could answer your question more fully and we hope to be able to provide you guys more guidance going forward. Next question please.

Operator

And we’ll go next to Josh Raskin with Nephron Research. Please go ahead.

Josh Raskin — Nephron Research — Analyst

Thanks, good morning. Just wanted — first one is a clarification. When you’re saying guidance is unchanged despite the moving parts and the metrics moving, is that just at this point you view the COVID impacts to be offsetting or is this just simply we’re going to wait to change anything overall? And then my real question is just from the physician groups. You talked about 2/3 of the payments being capitated. So, obviously that’s a huge help from a liquidity perspective to the providers. But is that 2/3 of the total dollars of the OptumCare physicians, or are you talking about just 2/3 of the dollars from UnitedHealthcare to the OptumCare providers?

David S. Wichmann — Chief Executive Officer, UnitedHealth Group

It’s across the entire business, Josh.

John Rex — Executive Vice President and Chief Financial Officer, UnitedHealth Group

Yes, Josh, it’s John Rex. So, 2/3 of OptumHealth revenues are risk — are premium revenues, capitated revenues.

Josh Raskin — Nephron Research — Analyst

Okay.

David S. Wichmann — Chief Executive Officer, UnitedHealth Group

So, obviously there is a — there is deferrals of services. Their utilization is lower against their capitated base, as an example. So, and as it relates to the guidance going forward, based upon what we see at this stage, we’re maintaining. That guidance is really not a whole lot more to be said about it. What I think John articulated well, which would suggest that the elective deferrals to-date are offsetting COVID-19 costs and what we’re committed to to-date is to the extent that that drives any imbalances in terms of performance or economics across the system, we’re committed to rectifying those as swiftly as possible. Obviously, we have to be thoughtful about how we go about that, but it is, that’s one of the commitments that we’re making today.

John Rex — Executive Vice President and Chief Financial Officer, UnitedHealth Group

Josh, clearly, we have a number of surveillance tools that we use in kind of both the data and the direct communication. We have members, patients, our clinical workers, and all these are going to continue to inform our response in our forward-planning.

David S. Wichmann — Chief Executive Officer, UnitedHealth Group

Thank you, Josh. Next question please.

Operator

And we’ll go next to Ralph Giacobbe with Citi. Please go ahead.

Ralph Giacobbe — Citigroup, Inc. — Analyst

Thanks. Good morning. I just wanted to clarify and understand the commentary around sort of that, what you just said in terms of ensuring financial imbalances are reconciled. Does that mean potentially rebating back this year beyond any MLR triggers? Or — just hoping to understand the context a bit more there. Thanks.

David S. Wichmann — Chief Executive Officer, UnitedHealth Group

Yes, it could be. So, there is a number of things to take into consideration. There is challenges with health system funding and liquidity at the beginning, so we put $2 billion to work. There was clearly homelessness and insecurity issues evolving, so we put a fair amount of dollars to that. There was a shortage of PPE broadly across the country, including with our own care delivery capacity, so — and we remain resolved and committed to making sure that not only our health workforce, but the health workforce broadly is protected. So, not only did we source PPE, but we also focused on generating new and innovative testing capacities that would resolve PPE use as well as keep broadly the health workforce safe across the globe.

So, those are all good examples of what I’ll characterize is imbalances that occurred throughout. And obviously, there is the possibility of financial imbalances to occur as well. And so, as we think about those, employers are having to furlough employees, they have no revenues today. They need and want to keep people in coverage. And it very well could be that in under the circumstances, deferrals of services outweigh COVID-19 costs. In those situations, not only would there be normal MLR rebate situations, but we very well may find ourselves in a position where we can provide some additional premium relief to those clients.

It remains to be seen whether or not we are able to do so and to what extent. But it is something that we’re deeply committed to doing. Next question please.

Operator

The next question is from Scott Fidel with Stephens. Please go ahead.

Scott Fidel — Stephens, Inc. — Analyst

Hi, thanks. Good morning, everyone. My question is, just thinking about the individual business and your current footprint there and if we assume that the economic impacts persist for a period of time and that impacts commercial group enrollment. Just interested in your thinking about potential appetite for reentering BAC Exchange markets that you had exited. And I guess just given the timing of when you need to submit those filings, I would assume that that’s probably decision that even though there’s a lot of uncertainty right now, you guys are probably going to have to start thinking about right now, and just interested in how your thought process is right now on that.

David S. Wichmann — Chief Executive Officer, UnitedHealth Group

So, what you can count on is we’ll make no staff reactions to this situation in terms of making strategic decisions about going into markets. But we have given this considerable thought, leading up to this crisis and through it all. Dirk, would you want to comment?

Dirk McMahon — Office of the Chief Executive, UnitedHealth Group Chief Executive Officer, UnitedHealthcarenitedHeal

Yes, sure. Thanks, Dave. Yes, we began to look at participating in more exchanges prior to the COVID-19 crisis. And so — but we’re still in the process of going through market-by-market, evaluating the relative efficiency of our network, our ability to compete and states where we would like to extend Medicaid. To be honest with you, we’ll have a more hardened view of our individual exchange intentions on the second quarter earnings call.

David S. Wichmann — Chief Executive Officer, UnitedHealth Group

Okay. Next question please.

Operator

And we’ll go next to Ricky Goldwasser with Morgan Stanley. Please go ahead.

Ricky Goldwasser — Morgan Stanley — Analyst

Yes, hi. Good morning. So, one follow-up question and a real question. So, first of all, understood obviously that it’s very difficult to predict now the — when procedures are going to come back. But when you think about the capacity of the system to catch up on elective procedures, if we’re going to see things coming back in the fall or this is just kind of like a 2Q phenomena, how much capacity is there to catch up by end of the year versus what might spill over to second quarter? And the follow-up question was on the pricing. Your membership guidance provided in the 4Q assumed some level of mid-year renewals. So, any color about pricing from midyear in light of all the puts and takes of the situation?

David S. Wichmann — Chief Executive Officer, UnitedHealth Group

Yes, sure. I’ll give the second question to Dirk. The first, we just don’t know exactly when elective deferrals will come online and what the overall capacities are broadly for them to come online, given the circumstances. I think you just think about the evolution of this disease, how fast it came on in the United States, which is where 95% of our revenues are across our company. But think about the evolution of that and then think about the tail and then the possibility of it coming back or not. And the timing of the vaccine, and a number of other things that need to be taken into consideration. They just create an uncertain future to get specific around things, our ability to respond to questions, like you just asked.

So, I apologize that we can’t, but it is very difficult for us to give you the responses to those kinds of details. Dirk, you want to talk about mid-years?

Dirk McMahon — Office of the Chief Executive, UnitedHealth Group Chief Executive Officer, UnitedHealthcarenitedHeal

Yes, well, like I said to begin with, the majority of our member months to start off with were pricing for — the majority of our member months for 2021 are going to be priced after September. So, we’ll have a little bit better view. Now, many of the mid-year renewals have sort of gone out the door. So, that’s sort of the scenario we’re in.

David S. Wichmann — Chief Executive Officer, UnitedHealth Group

And let’s say just as it relates to our care delivery practices, we’ve been evolving the ways in which we provide care and ensuring that our chronic members who have also deferred treatment that they have the option to get treatment through these telehealth capacities, the way in which we’re working at OptumRx to make sure that they are compliant with their pharmacy solutions and the way in which general pharmacies are available and community mental health centers and federally qualified health centers, to ensure that those patients who have high needs are attended to as well.

So, there is evolutions that are going on underneath, what’s happened here to make sure that we’re opening up capacities in new and different ways. And then the only other thing I would just say is that when we get to the other side of COVID-19, our operations are all standing ready to respond to the demand that might be there. So, our ambulatory surgical care centers will be available immediately to respond to the demands, the pent-up demand that will exist for joint replacements and the number of other things that they do so well.

So, part of what we’re doing is making sure that when we get to the other side, we’re ready. And not only ready to respond to the immediate demands, but also we’re ready to adjust and evolve our business strategies to respond to the things that we’ve learned through this crisis. Thank you. Next question please.

Operator

And next is Charles Rhyee with Cowen. Please go ahead.

Charles Rhyee — Cowen & Company — Analyst

Yes, thanks. Thanks for taking question. So, I know you guys have been hesitant to put hard numbers around how you expect, like, the procedures to sort of rebound back particularly in the back half of this year. But Johnson & Johnson on its earnings call yesterday noted that — there’s a slide also in the presentation, the elective procedure volumes to be down about 55% to 80% [Phonetic] in the second quarter. But third quarter also down about 40%, with the rebound really above baseline coming in 4Q of around 15%. This seems sort of more conservative in terms of a rebound than you’re kind of noting. Maybe can you kind of give us some of your thoughts on what’s behind your assumptions? And/or is your thoughts on how they’re looking at the situation perhaps? And then, John, I know you said that this is not like other situations; obviously, in natural disasters, things bounce back fairly quickly because the demand hasn’t really gone away. Is may be looking at something like the financial crisis a better proxy then or how we might think about elective procedures kind of coming back? Thanks.

John Rex — Executive Vice President and Chief Financial Officer, UnitedHealth Group

Sure. Hey, thanks, Charles. So, a couple of thoughts. And then I won’t opine on anyone else’s, any other company’s comments they put out there. But let me just kind of try to give you a few of our comments. I think one of the very important things to keep in mind in this extremely different situation are the co-dependencies and the interplays across a business like us, in terms of all the things you’re describing.

And so, when we talk about — there’s a lot we don’t know right now and we’re actually not going to try to make calls on some of those. Keep in mind that there are factors that move differently in a diverse enterprise like this. Intensity levels, durations of the virus impact also the duration and intensity of the deferral of elective procedures. So, there are factors in there as you go across the range of options that we consider the multi-variable factors that we look at when considering our outlook that interplay. And so, that informs kind of how we think about — how we just think about trying to consider different, different, different way that things would play out.

And certainly, Dave, did mentioned that, yes, and I mentioned also that we did — we have seen declines in procedural volumes and we saw those starting kind of late in March and those continued into April. But trying to use some of these other examples, even as you mentioned, the financial crisis as a measure, from our perspective aren’t necessarily still measures that we think are all that instructive because we haven’t seen a cessation in activity before like this. And the reason for the cessation in activity are very-very different and the duration of those also is quite different. So, I don’t know that I’d even go to that one as kind of — as the instructive measure for us.

David S. Wichmann — Chief Executive Officer, UnitedHealth Group

Thank you, John. Next question please.

Operator

And we’ll go next to Dave Windley with Jefferies. Please go ahead.

Dave Windley — Jefferies Group LLC — Analyst

Hi, good morning. Thank you for taking my questions. I wondered — my question is on capital deployment. I wondered if you might comment on how the crisis is impacting your thinking around that with maybe two opposing specific thoughts, one being your comments around conservation of liquidity at the corporate level, but then also the thought around say larger health systems being more capable of responding to a crisis like this and the strain on some providers perhaps presenting some consolidation opportunities? So, wondering if you might comment on capital deployment.

David S. Wichmann — Chief Executive Officer, UnitedHealth Group

John?

John Rex — Executive Vice President and Chief Financial Officer, UnitedHealth Group

Sure. So, I think our long-term capital deployment strategies remain. Our long-term capital deployment strategy is absolutely in terms of how we think about allocation of capital into our businesses, into new organic growth opportunities, M&A opportunities, and as we think about things like dividend and share repurchase also. And clearly, you saw, we responded, we are in the fortunate position of being able to respond to what we saw as some instability in the financial markets in March, by increasing our cash position in order to fortify that, and in part and kind of given the role that we play in being reliable partners for the broad health care delivery community. And so, that part being important, you can be sure that as we think about things in kind of the very near term, we’re respectful of markets, that is financial markets and how they’re behaving, and we’ll continue to be respectful of those and understand kind of that they are functioning and functioning fluidly as we consider those elements. And that may impact the timing of how we think about different capital allocation activities. We’re going to be super respectful of that because of the important role that we play in the health system and our obligations to be — provide health security for the people we serve and to be ready, enable and reliable partners for the health care delivery community broadly.

David S. Wichmann — Chief Executive Officer, UnitedHealth Group

Thank you. My comments would be that it’s — this is exceptionally well capitalized company. It’s been maintained with the capital structure, been maintained very consistently with high integrity. And I think it’s one of the strengths of an organization going into the situation to have the capital structure that we have today and the financial backing broadly. Next question please.

Operator

Next question is from Lance Wilkes with Bernstein. Please go ahead.

Lance Wilkes — Bernstein — Analyst

Yes, good morning. I appreciate all that you guys are doing. I thought it was a great job outlining the number of things that you are contributing to the system. Just wanted to ask a couple of questions, really more OptumHealth OptumCare related. And it’s just one variant of the same question. For right now, could you describe how you’re standing up telehealth enablement and virtual care delivery within the services? And then before you get to the kind of post-COVID, as you’re thinking about that transition period as you’re ramping back, as the economy is ramping back into service, have you guys come up with perhaps how you will scale back? Meaning, are you going to be doing temperatures, masks for patients, things like that to try to get a sense of how quickly you can start to ramp back in the ASC business and some of the other physician businesses?

David S. Wichmann — Chief Executive Officer, UnitedHealth Group

Great. Thank you, Lance and appreciate your comments about the company’s performance during this timeframe. Dr. Wyatt Decker?

Wyatt W. Decker — Chief Executive Officer, OptumHealth

Yes. Thank you, Lance, for your question. And on the digital health and telemedicine side, we have both our internal capabilities which we’re leveraging extensively, including telepsychiatry, that’s the nation’s largest telepsychiatry platform. We’re also working with partners, collaborators and vendors and have over half a dozen national partners who are assisting us to stand up solutions quickly.

I would also add that we believe that telemedicine is not all created equal and we’re very focused on keeping the personal and intimate nature of health care alive and well. One of the ways we’re doing that is by making sure whatever possible that our OptumCare patients can reach out to their already established provider using telemedicine, which is a very different experience than a random or unknown provider, as an example.

So, we’ll continue to leverage this. We’re also leveraging the Internet of things, caring for people in their home and AI-enabled symptom checkers as other examples of how we’re really dramatically accelerating our digital health solutions.

And then to your second part of your question around the other side of this and how do we adapt? Obviously, that’s something that is evolving. We will, of course, work and have been working hand-in-glove with local, state and federal recommendations and authorities on when is it safe to resume elective and scheduled care and procedures.

We will also, as Dave mentioned, are taking great care of our health care workforce, so that they are able to resume activities really quickly, which we expect to be a differentiator. And then the final thing I’d say is that when you look at OptumHealth, one of the remarkable things is what a resilient and diversified health care business it is. So, we’re in 43 states. We have ambulatory care surgical centers, we have primary care, we have specialty care. And because the COVID pandemic is playing out differently across the United States, we feel we’re really well positioned and have been able to keep our workforce busy, contributing to the communities they serve, while we adapt to this changing environment. Thank you.

David S. Wichmann — Chief Executive Officer, UnitedHealth Group

And one of the things we did was, as part of all, is we created a — leveraging that swabbing testing capability, so it allows for self-administration in a clinical setting. We also, alongside that, developed a new test — set of testing protocols, procedures, and applied technologies for the health workforce. And part of it was to ensure that that workforce is safe to apply their services, but also that we were able to ensure that they were as fully available as possible, which I know is on the top of mind for each and every one of them.

So that technology, those protocols, that process that was developed, likely find its way not only into a clinical setting but also could find its way into other essential business settings as well, as a normal course of business going forward. So, we could see applying those types of concepts across OptumCare but frankly across the industry.

We have time for one more question, please.

Operator

And we’ll go next to Frank Morgan with RBC Capital Markets. Please go ahead.

Frank Morgan — RBC Capital Markets — Analyst

Thank you. You’ve had a lot of success with engaging physicians to taking risk. And I’m just curious how do you think this long-term impact of the pandemic will affect the interest from physicians in participating in the risk model? Thanks.

David S. Wichmann — Chief Executive Officer, UnitedHealth Group

I think as it relates to this one, at least so far, they probably have performed just fine. Obviously, it will remind a number of them about how important it is to align with certain partners that have a strong financial standing. And I would characterize UnitedHealth Group, in particular, Optum and OptumCare as being those kinds of entities. So, I hope what they do is they seek a greater sense of alignment towards — with partners or choose their partners based upon the strength of them in multiple different dimensions. And I think Wyatt has done a great job of building that business in a multi-dimensional way with a great number of strength. So, hopefully we’ll see greater alignment to UnitedHealth Group.

Thank you for your questions and thank you all for your time and your questions today. As we’ve shared with you, we’re going to continue to apply the full breadth of our resources, technologies, innovations, and compassion to support our members, our patients, provider partners, our team and the broader health system as we see our way through this global health crisis together.

Please be safe each and every one of you and thank you for your time today.

Operator

[Operator Closing Remarks]