UnitedHealth Group currently stands as the nation's largest commercial provider of health care management. The company operates more than 20 HMOs and PPOs, point-of-service facilities, preferred provider organizations, and worker's compensation programs. It also offers other health care products, as well as Medicare gap insurance through an agreement with the AARP. Guided by the belief that shrewd business practices bring better and cheaper health care to the patient, UnitedHealth Group provides its services to more than 14.5 million people in over 150 markets in the U.S., as well as Puerto Rico, Hong Kong, Germany, and South Africa. Founded in 1974, UnitedHealth Group (formerly United HealthCare, or UHC) has grown under the leadership of current CEO William McGuire, who guided the company through a series of acquisitions, including its 1995 purchase of HMO firm MetraHealth and its 1997 acquisition of Medicode. United Healthcare is now a business unit of UnitedHealth Group.

Failed Humana deal

In 1998, UHC made public its intention to undertake its most ambitious deal yet, a $5.5 billion merger with Louisville-based health care giant Humana. The deal was to create the largest managed care company in the country, providing services to over 19 million people. Unfortunately for the two, it was revealed that poor income figures for UHC's Medicare HMO business would cause it to take a $900 million restructuring charge against second-quarter earnings. The company's stock tanked, dropping 15 points in one day, and the deal had to be shelved (the watchful eye that the U.S. Department of Justice had on the proposed merger did not help its chances either). The possibility of a future deal seems unlikely, but, according to UnitedHealth Group senior executive vice president Stephen Helmsley: "Never say never."

Tough year

In the wake of the failed Humana deal and the $900 million restructuring charge, in September 1998 UHC announced 1,200 job cuts spanning 44 of the markets in which it has operations. It also planned 4000 cuts (more than 10 percent of its total workforce) over the next two years in an effort to reduce costs and streamline the business. The company faced more bad news that month, as a group of stockholders filed a class-action suit alleging that they had been misled about UHC's financial performance, in part to inflate the stock price for the benefit of principal officers McGuire and David Koppe. After all this turmoil, the company unveiled a new structure, designating six linked business units under the new UnitedHealth Group name.

A novel idea

In November 1999 UnitedHealth announced plans to end its utilization review policy. This policy gave UnitedHealth employees, instead of doctors, the final say in treatment decisions. The tactic, which is practiced at many health maintenance organizations, has gained the ire of the public, doctors, and congress. As a result, United's move has produced a bevy of positive PR and placated many angry customers. Following the policy shift, The Wall Street Journal reported that the initiative was seen as an "industry watershed" that could spawn a wave of similar moves from other managed-care plans. Already Aetna/US Healthcare is discussing a similar move.

Doctor dismay

Doctors have been complaining about HMOs since the 1980s when they were created, and are now doing something about it. Medical groups are leaving HMOs across the country, citing various reasons, though failure to get payments and low rates are the major ones. Columbia Orthopaedic Group and Columbia Surgical Associates Inc. left United Healthcare in 2000, and others may join them in departing.

Focus on the patient