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Does Results Based Medicine Mean Profits for UNH
United Health Group, UNH, is steadily moving towards results based payment systems and eliminating fee for service systems in dealing with doctors and hospitals. For investors, traders and options traders the questions is if results based medicine means profits for UNH. United Health Group, UNH, is a diversified managed health care company. It is ranked #14 in Forbes top 500 companies in the USA. The company has its roots in the Physicians Health Plan of Minneapolis and United Health Care emerged as its management arm in 1977. Since that time UNH has grown and evolved into a company that tracks and analyzes massive amounts of data relating to health care, methods, results and costs. Going back to its first days many physicians and their patients complain that the whole point at UNH is to pay providers less and provide fewer services to patients in order to increase the corporate bottom line. However, this company has steadily amassed data showing what approaches to patient care are the most cost effective without endangering the end result of successful prevention and treatment. The question for the options trades is this. Does results based medicine mean profits for UNH?
Time to Short UNH?
OptionsHouse is of the opinion that UNH is overpriced and in their words would be a healthy short.
Shares of healthcare services company UnitedHealth Group Inc. (NYSE:UNH) have surged after this week’s earnings results, adding to an already steep run. However, UNH stock increasingly looks overbought, and active traders and investors could consider UnitedHealth from the short side for a mean-reversion trade.
When UnitedHealth reported its fourth-quarter results on Wednesday, it beat expectations on both the top and bottom line and gave promising guidance for 2015. UNH earned $1.55 per share to beat estimates by a dime, and revenues of $33.43 billion just cleared expectations for $33.11 billion. All told, profits grew 10% year-over-year while sales improved by a respectable 7%.
And for next year, UnitedHealth is projecting earnings to come in a range of $6 to $6.25 per share of UNH stock, which is better than the consensus mark of $6.17.
Nevertheless, optionshouse thinks that on a technical basis the stock will fall. Obviously if you are an options trader and believe this you should be buying puts.
There Goes Fee for Service
The goal of UNH is to quit paying doctors and hospitals for how much they do and pay them for measurable results and for improving those results. In this vein UNH will increase value based payments doctors and hospitals by twenty percent in 2015.
“We are expecting about a 20% increase in the concentration of value-based reimbursement,” Dan Schumacher, chief financial officer of UnitedHealth’s UnitedHealthcare subsidiary,