And gentlemen, Senior Vice President, UnitedHealth Group, John Penschorn.
Good morning. Welcome to UnitedHealth Group's 2016 Investor Conference. It is great to be here and to see you all this morning. As it turns out, as is our tradition, we are going to make forward looking statements today. And so I need to remind you that there are risks and uncertainties associated with any forward looking statement.
Actual results may differ materially. And those risks and uncertainties are articulated in cautionary statements on our SEC in our SEC filings as well as posted on the Investor Relations section of the UnitedHealth Group website. Our posted materials also contain a reconciliation of non GAAP measures used this morning to the most comparable GAAP measures. Those non GAAP measures are also at the back of your investor books, which you received on the way in this morning. The investor books have the slides from today's presentations.
And just a word about that. The UnitedHealth Group section this morning, which is Steve Hemsley, Dave Wickman and Larry Renfro, does not have slides in the book. The presentations are more illustrated than slide material. So there'll be graphic illustration, but it isn't really the type of material that lends itself to slides. The Optum and UnitedHealthcare Business Presentations have their slide presentations.
And then John Rex's UnitedHealth Group Financial Presentation has additional slide materials. So the materials that he covers in his speech, John also included additional financial reference materials in his section, and you'll see that behind the UnitedHealth Group tab. With that overall orientation, it is my pleasure to introduce our Chief Executive Officer, Steve Hemsley.
Good morning,
and thank you for joining us. We will do our best to make your participation today a good return on your time. In so many ways, this is an interesting moment to gather with you. We've just finished an important election cycle, and there is a temptation to view everything through the lens of what we'll call transitional undercurrents as a new administration is forming. That might lead to overlooking much of the good that has been going on in health care over the last few years and consequently misread what we might expect to continue both in the near future as well as in the longer term as natural market forces continue to advance as they have for many years now.
Let's look back to the last change in administration in Washington and what has evolved over the last few years in healthcare. Today, there is clearly better and growing alignment among consumers, care providers, health plans and their engagement and accountability around affordability and value based care funding. The way we design and pay for health care is steadily changing. There have been meaningful advances in technology, in basic connectivity and the effective use of information and how these are being applied across the health care system. And we are in the very early stages of that effort.
We are seeing steadily advancement in the adoption of modern approaches for coordinating and managing care in public and senior benefits. The health system is steadily embracing population health, quality and cost transparency, expanded ambulatory care, pharmacy care services, telehealth, digital health and more. And cost trends, while certainly still too high, have moderated to mid single digits from annual double digit levels a decade before. These are all part of natural and positive market progressions in health care, not politically or administratively driven. Substantive natural market trends such as these have been in motion for a long time, proving once again that because health care is at its core a social market, change takes place more slowly.
You need to think more managed evolution than chaotic revolution, which brings us to the question about what will keep evolving over the next 10 years. We think the basic trends stay much the same, but the pace should accelerate. We have barely begun to create this more modern, more effective, more affordable and simpler health care system in the United States or globally. This natural health care evolution has a long way to go, driven by changing social expectations and dynamics and from within the private sector. And we're doing our best to enable a better system and drive the pace of change.
There are some important things we feel will continue in the coming years and a few we don't yet know. Biggest unknown obviously concerns immediate legislative priorities, the ultimate reshaping of the more challenging aspects of the ACA and the evolutionary pace for the mainstay government programs of Medicare and Medicaid. What we expect to endure relates to society's ongoing health care needs and trends. As we've said for decades, access to quality care for all Americans should be a national social expectation, and we believe it has become that. The question remaining is the ultimate approach as to how to best achieve and sustain it, but full market coverage will ultimately be achieved.
2nd, seniors and our most vulnerable citizens continue to need an effective and efficient health safety net, and that need is growing both demographically and in its clinical and social aspects. The cost of care continues to rise, creating pressure across all markets. And we know those costs are better when managed and coordinated than when they are not by a factor of 20% to 30%. Clinical quality, consistency and accountable health outcomes must continue to advance. Governments and plan sponsors must ensure that health resources are spent optimally.
There is less margin for error today than it was 20 or more years ago. And in light of these challenges, innovative solutions and old fashioned perseverance remain critical to ultimately meeting society's health care needs for both health benefits and health services. We believe UnitedHealthcare, Optum and UnitedHealth Group are ideally positioned to continue helping those we serve address these issues. We have the right capabilities firmly in place. We are operating strongly, and we have growing momentum.
But we are more capable and engaged than we were when the last administration changed. UnitedHealthcare, our health benefits platform, is a leader in every major U. S. Market, commercial, Medicaid and Medicare. We continue to emphasize the quality of our work, consumer engagement and experience, and optimal care provider support, building closer relationships and trust with all those that we touch.
Optum, our health services platform, has built a reputation for exceptional innovation and service based on distinctive analytic science applied to the deepest health data resources in the market today. We continue to better align resources to address enduring market trends, making the health system work better for everyone. Strengthening relationships and unique collaborations across industry segments. Larry Renfro, who has been an exceptional leader for Optum, has been integral in developing these strategic relationships in his role as the Vice Chairman of UnitedHealth Group. And that role will only gain more profile and impact in the years to come.
Under Larry's leadership, Optum is more integrated and connected than ever before, and its growth momentum remains remarkably strong and robust. Our global presence continues to deepen as health systems outside the United States learn better how our capabilities can help with the similar problems they face, and we learn how to apply these capabilities in different social settings. We continue to maintain our holistic our historic capital disciplines, built and stress tested over many years. We apply private capital in a strong and sustainable fashion, and we return it in the form of growing dividends, share repurchases and share appreciation. We use this capital to help address acute social needs, while achieving a 13% to 16% long term earnings growth rate.
We aspire to be a model of the modern next generation corporation in this private capital to social mission and market approach. And as I have said, we are even more engaged with health care policymakers and thought leaders at all levels, offering practical experience in dealing with complex health issues at a large scale across all social market segments, along with concrete insight on how to advance the care system both nationally and from within local markets where reality actually resides. Today, we advocate for a modern, high performing, simpler health system. 1st, by reinvesting in health care to create a simpler, more diverse 21st century care infrastructure and workforce with modern and interoperable administrative support platforms and more agile and responsive health research and innovation that includes affordability as a priority. 2nd, to achieve full access to care by building on existing and proven flexible state based coverage, combined with employer sponsored benefits and by continuing to support modernized Medicare and Medicaid coverage systems, moving them fully to proven managed care approaches.
And finally, to make health care more affordable by fully engaging consumer product designs, while promoting a transparent value based care payment system, a system where price increases and fees can be justified by the measurable value delivered and by eliminating taxes that simply make care less affordable to the consumer. We're focused on how our products and services line up with the challenges that face health care around the world, challenges that remain regardless of election outcomes. Today, we are positively engaged with consumers, care providers and our customers and all the constituents of health care around a higher quality NPS Net Promoter Score experience. And we are steadfast in our commitment to the interest of our shareholders and providing you a consistently strong return on your investment. The stability and the growth momentum of this enterprise are embedded in our character traits as a company.
Longstanding attributes that are core to UnitedHealth Group, to Optum and to UnitedHealthcare. These include being committed and guided by a single mission: helping people live healthier lives and making the health care system work better for everyone adaptability in an ever changing health care environment dedication to consistent, fundamental execution, getting things right the first time and every time a chronic institutional restlessness. We are far from performing to our natural potential, and we remain driven to constantly improve our businesses and thus our service to people and to markets. This restless drive is shared by well more than our 200,000 people who believe deeply in both our mission and our potential and work every day to see it fulfilled, led by some of the most talented health executives in the industry today and importantly, a singular and enduring corporate culture centered around the values of integrity, compassion, innovation, relationships and performance. We are still growing in these values, which are becoming a vital part of our identity, our character, who we are and how we operate.
We are moving into the future with strong forward momentum in our market growth and diversity. In our financial performance, our EPS performance and our steadily improving quality, our NPS performance in developing trusting and deeper relationships with everyone we serve and in embracing the opportunity and the responsibility to drive our mission and by doing so, experience remarkable growth and distinctive capital returns. For all these reasons, we are looking forward 2017 with renewed commitment and energy. When you consider the advances of the past decade in managed care penetration, in consumer participation, in value based payment models, the applications of technology, the use of better the use of data to drive better performance and the introduction of 1st generation digital services and the cumulative market effect of these changes that are driving in the market, we see the next 10 years as holding even greater opportunity and growth than the last 10 years for this company. I believe you'll find this enterprise continuing to grow and advance as we enable these forces for change and play an even more valuable role in the health care markets of the future.
Our ultimate goal in the next decade is to reach that full potential. As we achieve that, we will be helping meet the healthcare needs of the consumers we serve and of society, as well as any company on the globe, and continuing to deliver exceptional performance to you, our shareholders. Thank you. And I couldn't be more pleased now to put the conference into the exceptionally talented and capable hands of Dave Wittmann, who has been my partner in every aspect of this enterprise for the nearly 20 years we've shared here and will now lead you through the day. Thank you.
Good morning. Thank you for being here with us today. We appreciate your investment of time to understand our business and the opportunities offered by the growing health care market. I hope you'll be able to join us for the Clinical Insights luncheon and the various seminars we have planned. They cover areas of both interest and complexity in health care as well as provide a deeper review of the opportunities we have for growth in 5 emerging market subsegments: Medicaid Long Term Services and Support, Group Medicare Advantage, Health Care Delivery, Specialty Pharmacy Management and Payer Services.
As John Rex will describe, we have a very strong growth and financial outlook for 2017. Our business will achieve upwards of nearly $200,000,000,000 in revenues, 20% growth in adjusted EPS and $12,000,000,000 in cash flows from operations, virtually all organic. We believe a reasonable starting point for 2017 at this distance. This level of performance comes from our business model and from our people. The 2 are uniquely aligned around our single mission: to help people live healthier lives and to help make the health system work better for everyone.
The alignment is also a cultural one. We have consciously been advancing our culture for 7 years now, supported by an intense focus on integrity, compassion, relationships, innovation and performance. Embedded in these values is a commitment to put quality at the center of everything we do, quality defined by those we serve and measured outside in through a Net Promoter Scoring System. This system drives continuous improvement in the level of trust we build and loyalty we achieve from those who access or support global health care. We want to be a better health care company and play a significant productive role in improving the health system, one we hope will provide more value to people than it does today.
For us, health care is full of opportunity to help people more effectively, to unravel complex problems, to become simpler and to grow our business. It is a more than $7,000,000,000,000 growing global market, and we are a mere 2.5% of it, even with our relative size. Against the backdrop of some of the most challenging years in Health Care, we have built solid momentum in our mission and culture, in quality and growth, in EPS and NPS, in benefits and services and in the U. S. And increasingly abroad.
There are still tough issues to be tackled. Millions in the United States still lack steady access to care and costs continue to climb. Whether existing public policies are refined or replaced, they need to be approached with a consumer mindset and then leverage the incredible capacities of the public and private domains to achieve the best possible outcome for people. These decisions are not unique to the United States. In just the last week, I was in South America and Europe, visiting 2 countries facing their own challenges and opportunities.
Throughout the world, there are common themes. People don't find enough value in health care. There isn't enough access to high quality care. And the care that is needed costs more than people and governments can afford. That underscores the opportunity for a mission minded health care company like UnitedHealth Group.
We plan to be better at everything we do and deliver ever more distinctive value in 5 strategic growth areas we are particularly focused on serving: pharmacy care services, health care delivery, consumer centric benefits, technology enabled information and services and global opportunity. Our colleagues from UnitedHealthcare and Optum will discuss our engagement in these areas and our ambitions for 2017 in more depth. But let me give you some of the thinking behind the more recent extensions in our diverse offerings, starting with our basic framework. We operate 1 company, 1 mission and 1 culture, with 2 strategically aligned but distinct platforms, benefits and services, leveraging 3 core competencies: information, technology and clinical insights, all built on a core set of values that reflect recognition that we serve one of the most socially sensitive aspects of society, health care. We believe success for society and for us will be achieved when engaged consumers access a more modern, more intelligent and more aligned health system.
This will provide high quality consumer responsive services, primarily in ambulatory care settings focused on better quality, lower cost and higher consumer satisfaction. These are the objectives that shape our business priorities and our growth investments. To that end, we are investing in pharmacy care services, not simply PBM capabilities. We are engaging consumers better at the point they access the health system with the highest frequency, the pharmacy transaction. Each encounter represents an opportunity to engage consumers in better managing their health care and closing gaps in care, many of which are caused by modifiable consumer behaviors or fragmented care.
At the same time, pharmacy trends have elevated due to manufacturing pricing practices and the introduction of high cost biologics. These drugs, while often effective, just as often carry substantial considerations related to patient safety and comparative effectiveness. Their introduction needs to be managed thoughtfully to ensure the right people receive the most clinically effective, safe therapies at the best possible value. This complexity and these emerging trends are why our pharmacy care services needed to be different. Our business takes a whole person integrated approach to manage all gaps in care, medical and pharmacy using our vast data, technology and clinical know how.
The approach is effective, saving consumers approximately $1300 per consumer per year in pharmacy spend, while reducing medical costs by an additional $130 to $190 per consumer per year. This is an early emerging business for us, and Mark Theurer will discuss our considerable opportunity to better serve people
and to grow our business.
Our health care delivery businesses are also designed to improve the value provided by the health system. You might recall a few years back, we decided to pursue freestanding primary and ambulatory care in 75 markets, constituting twothree of the U. S. Population. Our experience so far in about 25 markets shows we are reducing the use of emergency, acute and subacute services.
We're providing consumers with more proactive health engagement, and we're yielding higher quality care and higher patient satisfaction at a lower cost. To date, in more mature markets, we are seeing substantial positive impact on health system performance, while achieving substantial investment returns. Eventually, each of these markets will consistently pursue a variety of aligned, value based arrangements, committing to achieve lower cost, higher quality health care for consumers. We aim to achieve a leading market position in this segment with returns on capital in the mid to high teens. Amir Rubin will elaborate on this opportunity in just a moment.
Consumer centric benefits is a growth area we have pursued for decades. Yet, we have just reached a point where shifts in the market have really come together with our product designs, clinical approaches, technology, information and service capacities. As they do, they are yielding distinctive value, which is producing sustained growth, with 11,000,000 domestic members added in the last 6 years, virtually all organically, including striking growth momentum in Medicare. As access to care and coverage grows among all segments of the population as it must, so too grows the need for private sector solutions. Our information enabled clinical and social intervention services have made possible more clinically aligned, cost effective approaches to serving a higher risk patient base.
These services also receive higher NPS scores from patients, while saving states and the federal government 1,000,000,000 of dollars annually. We expect to grow at an above market rate for the foreseeable future. We will augment our organic growth in consumer centric benefits by establishing and improving our market presence in select geographies. One recent example, our prospective new partnership with the Rocky Mountain Health Plan on the Western Slope of Colorado. This alignment provides continuity of coverage for the people of the Western Slope, while extending our Colorado business statewide, leveraging a proven local market engagement model among the community, its doctors and the health plan.
Another example, we continue to advance a wider range of offerings enhancing health systems effectiveness in local communities, better serving the needs of lower income consumers. We wrap the system and people with the services they need to make health care work better, services like more reliable transportation, housing, engagement tools and data to name a few. We don't know exactly how large the addressable market potential is for us at this pilot stage. States spend as much on these services as they do on medical care for their Medicaid populations or around $1,500,000,000,000 These services are proving essential to achieving health goals for people and budgetary goals for states. In all, we expect strong growth from our Benefits businesses and expect each to sustain leading market positions across all 3 primary payer types: commercial, Medicare and Medicaid.
Our UnitedHealthcare leaders will discuss with you how our support of consumers, health care providers and customers is leading to distinguished growth for our Benefits businesses. Underpinning the distinctive qualities of our business is a commitment to the use of information and technology to continuously improve individual health and the performance of health care. Here's one illustration. A few years back, we bought a small company now called Rally Health. It was an innovative consumer wellness platform with about $3,000,000 in annualized revenues and around 50 people.
Our vision was to evolve Rally into the world's most successful digital health care company, helping people select and enroll in their plan, assess individual health risk, administer health care more progressively and identify and engage in health improvement behaviors through missions, social networks and incentives. Today, Rally Health is well on its way to becoming the nation's leading digital health company with annualized revenues approaching $400,000,000 and employing 500 people in 2017. We're just getting started. Like Rally, other digital approaches such as Link, Real Appeal, Health Plan Manager and United in Motion reflect the progress we are making in digitizing health care and using information to help people and improve the performance of health systems. At substantially greater scale and impact, our Optum Insights efforts to meaningfully advance the performance of full health systems through its fast emerging and growing technology enabled information and service offerings.
Bill Miller will show you how we are doing this in just a moment. Last, but certainly not least, is the global opportunity. Some people may not be aware, we serve over 130,000,000 people in 125 countries. Our offerings are small in most countries, but our nascent presence provides an avenue to develop relationships and gain market insights, while providing substantive coverage, cross border and assistance services to companies with a global footprint. Our most meaningful presence at this time is in Brazil, the 2nd largest private health care market in the world.
Over the past 4 years, we have transformed Emil from a 2 city insurance company into a Brazilian health care enterprise with national scope and leading positions in health insurance, health care delivery and health care services. We operate Brazil's largest health insurance enterprise, serving 4,000,000 people with full medical benefits and 2,000,000 more in dental. We also operate the largest health care delivery company with 5,700 beds owned or affiliated. We have begun to pursue public private partnerships through the use of data and information and have begun to support ambulatory services like oncology and surgical procedures in local communities. We plan to apply a similar model in priority development markets in the future with a focus on the larger, more developed markets where our services can be applied more broadly.
We have a practical yet ambitious agenda for our company and for you here today. You'll get a broad view of our ever more diverse business and related growth ambitions. But what I hope will become most apparent is the energy and ambition of our team. The restless commitment we share to serve the evolving needs of the health care markets and for consumers and the grounding in our mission to help people live healthier lives and to help make the health system work better for everyone. You'll see an intense focus on improving quality, not only what we do, but how we do things.
And the impact on all those we serve and work with measured objectively through MPS. And you will see effort to advance our leadership in innovation, clinical insights, technology, information management, policy making, consumerism and importantly, consistent financial and capital disciplines with an emphasis on achieving total shareholder return. Indeed, we have come a long way as a company, but we are not satisfied with our performance relative to our potential. Achieving our potential will be made possible only by the 225,000 people of UnitedHealth Group. We are grateful for their tireless contributions to this company and their compassionate approach to the more than 130,000,000 people we are privileged to serve.
And few are as tireless in their pursuit of excellence as the Vice Chairman of UnitedHealth Group and Chief Executive Officer of Optum, Larry Renfro. Larry has a passion for growth, big and small. It's a discipline he brought to our company, and you can see it play out across the entirety of our business, especially Optum, where he has architected growth performance like no other. So it is my pleasure to turn the stage over to Larry Remfro.
Thank you, Dave. Good morning, everyone. It is once again a privilege to speak with you about the evolution of our enterprise and the progress we are making on our mission to help improve global health systems and the health of the people these systems serve. UnitedHealth Group occupies a unique position in health care. Our customers use our innovative, uniquely effective capabilities across both health benefits and health services.
Our resources and breadth position us to enable a progressive, better quality health care system for decades to come in the U. S. And across the globe. Our collective strengths are harnessed in an organizational design that respects our customers' interest, enables us to deliver greater performance and better value and allows us to establish broader strategic relationships. As a result, we can produce compelling improvements in health care for those we are privileged to serve.
There are many steps we take as an enterprise to move health care forward. We invest $3,000,000,000 annually in technology. Participants across the health system benefit from the insights and innovations that emerge from this work each year. We build, we combine and deliver integrated care services and synchronized pharmacy care services for consumers across the U. S.
And we are positioning these capabilities to serve international markets. We drive accuracy and accelerate the cycle time of revenue management and claims processing for health care payers, providers and most importantly, patients. Constantly evolve to meet the needs of the health care consumer by designing benefit plans informed by deeper levels of insight into the needs of specific populations. With these insights, we can accurately deploy advanced care support, wellness strategies and resources that improve the health of individuals and entire populations. These efforts reflect UnitedHealth Group's system wide focus, which is global in its ambitions.
In Brazil, we serve consumers through an integrated health plan and deliver care centered in a market leading hospital network. In line with our global strategy, we are developing these foundational assets as we build an integrated health care services organization, one that can serve Brazil and ultimately, the broader South American markets. We are investing to support the entire system market wide with infrastructure, analytics, care delivery models and benefit designs. In England, we are supporting the National Health Service to achieve the vision set out in their 5 year forward view, helping to make higher quality and lower cost a reality through the use of data, technology and new care models. In the U.
S, we support federal and state government agencies as they seek to fulfill their health care stewardship. You can see that in UnitedHealthcare, where 5 new Medicaid markets are set to start in 2017, and in Optum's multibillion dollar Veterans Disability Care Awards. More specific examples of our work show that by combining our businesses' capabilities can generate value that far exceeds the sum of the parts. That is essentially true in applying our data and proprietary analytics. The insights we generate inform the design of our clinical delivery systems.
They have allowed us to move from prescription fulfillment to synchronize pharmacy and clinical care and ultimately empower consumers by enabling more precise and responsive benefit plan design. Serving with this precision and transparency drives customer loyalty. Loyalty improves retention rates and higher retention helps drive both overall growth and quality of that growth. Scale and real world experience are fundamental to innovation. Our ability to sustain this growth through continued innovation distinguishes the value we are able to deliver to the broader marketplace.
We benefit from shared disciplines across UnitedHealth Group, principally among them a focus on continually elevating quality and customer satisfaction as measured by those we serve using tools like Net Promoter Score. We embed these principles into our culture. Every year at this conference, we share the mission and vision of our diverse organization. Over the course of the day, I hope two things become clear. First, UnitedHealth Group has a distinct ability and inclination to build, nurture and sustain deep enterprise wide relationships at an increasingly large scale.
Because of the complex nature of health care, relationships that connect information, processes and accountability across the system are the only way to make transformative progress over time. And these relationships yield growth. Over the past 5 years, including 2016, UnitedHealth Group revenues will have grown by $82,000,000,000 and the majority of that growth is organic. Secondly, our goal is to make health care simpler and work better, most significantly on a human level. Examples from market leaders in other industries teach us that to make systems work more efficiently and simply, we cannot shy away from complexity.
We must own it so that those we serve don't have to. We are restless about this and working with the urgency to harness the power of 1 of our greatest assets, which is firsthand insight into the processes underlying each level of the health system. Our people know health care, and they operate in every corner of the system. We will not be satisfied until this complexity is simplified for all end users, And we will be relentless in pursuing this goal. Now let me talk specifically about Optum.
Our people today, some 120,000 strong, serve organizations across the systems: care providers, employers, health plans, life sciences companies and governments, both here and abroad. Our service is designed to benefit the 115,000,000 consumers we reach who deserve the best possible care, support and health outcomes. Our performance and the quality of our service can be attributed to an unwavering focus on the very same priorities we set for Optum at the start: simplifying our business, focusing on relationships, driving growth and strengthening leadership. Since 2011, Optum revenues have nearly tripled from just under $30,000,000,000 to more than $83,000,000,000 And our earnings have grown at a 33% compounded annual growth rate. In 2013, I made a commitment to build strategic relationships that draw on the full breadth of Optum's capabilities.
This year alone, we have established another 12 of these strategic long term relationships, and our strong momentum continues. Let me offer a few examples. In the Q1, we announced a major relationship with Walgreens, focused on offering more choice to consumers and greater savings to benefit sponsors. This relationship has helped to drive OptumRx's strong performance this year. We also kicked off a broad technology partnership with leading health IT provider, Availity, to improve the claims process for payers, care providers and consumers.
In the second quarter, OptumRx was privileged to be entrusted with several major new customer relationships based on our ability to deliver pharmacy care services that enable whole person care. These wins alone brought more than 1,300,000 new consumers to our service. Then this past quarter, we reached agreement with Quest Diagnostics on a collaboration that spans our enterprise, starting with Optum 360. Turning to the government market. Optum was honored to be awarded several multiyear, multibillion dollar contracts by the Department of Veterans Affairs to provide disability exams for men and women of the military.
And in a relationship that uniquely crosses Optum Insights and Optum Health, we signed a long term agreement with Allscripts to bring integrated technology and solutions to the market. And now today, we are pleased to announce a new relationship with CVS Health. It will provide access to medication for our members. The relationship will give consumers the ability to pick to really pick up 30 90 day prescriptions at CVS with preferred rates. We will continue to innovate with retailers like CVS to drive better outcomes from the pharmacy counter and greater efficiency from the back office, which is good for both our customers and for consumers.
These new and diverse relationships are made possible by bringing together Optum's broad, unique capabilities to deliver value that sets us apart. In 2017, our job will be to serve our new partners with excellence and deliver consistent innovation as we continue to pursue a decades long growth opportunity. We see that global market opportunity for Optum approaching $1,200,000,000,000 including a U. S. Market opportunity for health services of almost $700,000,000,000 and an international market that represents another $500,000,000,000 in potential.
Today, a team of Optima leaders and experts will show you how we are addressing this opportunity. We do this by offering 5 core capabilities that match market and social needs: data and analytics, pharmacy care services, population health, care delivery and health care operations. You will note we start this list with data and analytics. It underpins everything we do. The same robust information powers all of our solutions.
It brings deep, actionable insight to our customers and system partners, resulting in improved outcomes and lower cost every day. We serve a growing base of demanding visionary customers and partners who are among the most advanced and courageous players in healthcare. They share our mission and are demanding more strategic, comprehensive data and technology powered solutions. They push us hard, and we are better for it. Before I turn this over to the Optum team, I'll make a final and essential point.
The people of Optum The people of Optum are our organization's greatest strength. Our team is dedicated to health care, exclusively focused on the health system and will not deviate from the mission that has driven Optum from the start. I am grateful for their efforts. Optum leaders will demonstrate this morning how our people are bringing our capabilities together in new ways to take on the most critical challenges facing health care. We hope you come away with a deeper understanding of our commitment to a growing impact across the marketplace and appreciation for the tremendous opportunity in front of us.
And there is no one better to keep this dialogue going than Bill Miller, CEO of OptumInsight.
Thank you, Larry. Data and analytics have been a critical building block for our company for more than 40 years, delivering distinctive and actionable insights to our customers. Our industry leading data cent is the foundation. We start with nearly 180,000,000 lives of claims data and 85,000,000 lives of clinical data. Our data includes 5,000,000,000 medical procedures, 11,000,000,000 lab results and 4,000,000,000 diagnoses.
We pair our data with thousands of dedicated people, including data scientists and clinical experts, actuaries and programmers, just to name a few. On top of that foundation is a broad set of proprietary analytics solutions that unlock the value in our data. They help our customers translate data into actions that measurably improve health and cost outcomes. For example, OptumOne is our analytics platform focused on predicting outcomes for populations and individuals and today is the nation's leading source of insights for physicians, hospitals and health systems. Nearly 700 hospitals have chosen OptumONE, enabling almost 140,000 care providers to access its capabilities.
In the last year alone, more than 100 additional hospitals have adopted OptivOne. Top industry research firm, Frost and Sullivan, named Optum 2016 Company of the Year for Population Health Management, citing our robust analytics as a unique strength. In payer analytics, our solutions are used by 20 of the top 25 U. S. Health plans to improve claims processing and the quality of care.
Our analytics drive real value by identifying the best actions to take at the right time, such as when a doctor has the information she needs to guide a patient down the best care path. And when the data alerts us to an at risk health plan member who hasn't been following their treatment plan. The impact of analytics is also clear when we identify members of a population in greatest need and get them to the best care for their condition or when the benefit sponsor sees troubling health trends across their workforce and we help to reverse those trends. Those are just a few examples. Analytics are hard at work across our business every day, driving innovation and value for everyone we serve.
Joining me and now let's take a closer look.
Good morning. I'm Mark Thier, the CEO at OptumRx. Well, at OptumRx, we're using the most frequently utilized real time consumer touch point in the entire health care system to fundamentally improve the care experience for over 64,000,000 consumers. And at the same time, we're bringing new levels of value to our benefit sponsors for whom we manage $80,000,000,000 in drug spend, while processing more than $1,000,000,000 adjusted prescriptions per year. So this year, we focused on advancing our strategic new business relationships to meet the changing needs of the marketplace.
And you heard Larry reference new partnerships we have with pharmacy leaders in this industry that give our consumers more choice in how they fill their prescriptions and at a lower cost. A growing number of major employers and health plans have chosen to place their trust in us. They recognize a need to evolve from the traditional PBM model, and they see Optum leading that evolution. Our differentiated pharmacy care services model serves the broader needs of our customers and is moving this industry in the direction it needs to go. We go beyond the prescription.
We use our data and our multiple interactions with members to create a whole picture of each member, and we help them right at the right moment. We leverage Optum's clinical services and expertise to guide them to the highest quality care and support. Now this approach aligns the interests of both patients and payers, and only Optum can do this. Here to help me explain and illustrate exactly how we bring these capabilities together in pharmacy care services is Doctor. Natasha Deckman from OptumHealth.
Hey, Natasha.
Good morning, Mark.
How are you?
I'm good.
Well, let's talk.
Let's talk about specialty pharmacy and the biotech business. Obviously, one of the biggest problems our customers are facing today, it's a very difficult challenge. We know that many specialty pharmacies fill prescriptions and occasionally will counsel a member. But in our business at Optum, our specialty pharmacists and our clinicians go much deeper. Now most of these patients, chronically ill patients with specialty conditions, have 3 and sometimes more comorbidities.
I mean, they're not well. So Natasha, maybe you can, for the group, share how Optum can help these folks.
Absolutely. Let's take a scenario, a patient of ours, Nancy. Nancy has multiple sclerosis. And she called us to refill her prescription. And of course, our first goal was to do that, was to give her her specialty medication.
But once we did that, that was when our holistic approach really came to light. Because our nurses can see much more about Nancy than her pharmacy information, they can see her medical information, her clinical, her lab information. They're able to identify interventions that are appropriate for Nancy to better manage her health. Then our predictive analytics, they help us identify which intervention is most likely for Nancy to accept. And in this case, it was a long term diabetes management program.
So, while on the phone, the nurse explained to Nancy that she was eligible for such a program that would go far beyond medication adherence. It would actually help her manage her daily life living with diabetes. Nancy really appreciated this and enrolled immediately. And now she's on the path to better health.
So Natasha, I think that's a great example of how Optum uses the proprietary analytics that we have to solve a complicated problem. Another big issue that our plan sponsors are grappling with is behavioral health. So maybe you could share with the group what can Optum do to help?
Yes. Let's take another example of a patient of ours, Michael. He has diabetes and hypertension. And again, like Nancy, he called us to refill his prescription. But while on the phone, the nurse was alerted that he might benefit from some other help.
So, she started to have a conversation with him. How are you doing? Is everything okay? And in so doing, she was actually screening him for depression because we know that's a risk for patients with multiple chronic conditions. But it had to be a conversation, not a checklist or Michael wasn't going to engage.
So while on the phone with him, we used our integrated care system to check his benefits, identify eligible clinical programs and then get him to a behavioral health support team member. And in that moment, we were able to address before it led to an issue. Michael can stay on his care plan, avoid sick days at work and stay healthier in the long run.
Well, I think you can tell from Natasha's comments that in both of these cases, Nancy and Michael, Optum went deeper and really addressed this whole person approach. And we supported these folks on their journey to better health and containing costs. And it is making an impact. We're seeing reductions in inpatient admissions, reductions in emergency room visits. We're seeing consumers participating at a whole new level and taking better care of themselves.
And they're being more adherent to their medications. We're proving this. And importantly, for plan sponsors, we're seeing reductions in pharmacy and overall medical costs. So that's what pharmacy care services is really all about. And it's all about going beyond the prescription.
Thank you, Natasha. Welcome. And I'd like to welcome John Prince.
Good morning. Today, I'm pleased to tell you about our distinctive approach to population health. It's a term that gets thrown around plenty, and it means different things to different people. For many, it's a product or program. At Optum, it's about our core capabilities.
Over my decade at Optum, population health management has grown to represent one of the best examples how we bring our expertise, people and capabilities together to help our clients, our partners and the consumers we serve. Together, through this approach, we actively meet the unique needs of a population, driving value, high quality care and better outcomes through consistently better consumer engagement. There are 3 key components to population health at Optum, consumer engagement, data and analytics and clinical services. The most challenging and critical aspect of population health is effective and sustained consumer engagement. Our patented consumer analytics provide a more complete understanding of consumers' health needs and opportunities, enabling us to engage them with the best guidance and support when and where they're most receptive.
Data and analytics are at the core of our approach. Care providers use OptumONE to stratify their patient populations and identify those who need more support or interventions to close gaps in care. Benefit sponsors use our data visualization and reporting solutions to better understand the quality and true cost of the population's health and strategies, insights they continually use to improve their programs. Finally, our clinical services and expertise are best applied to support population health and pharmacy care services is a good example of that. There are many other examples you'll recognize from the OptumHealth business, including leading wellness, care management and behavioral health programs.
Our specialized care networks and growing care delivery organization focus on the right care at the right place at the right time and with the right cost. And Optum Bank empowers people to own their financial health, providing a range of services that help them save, invest and pay for health care. Together, these programs impact tens of millions of people. Population health is a core competency at Optum that draws on a full spectrum of our core capabilities and people, and we do it at large scale. We have 10,000 people who spend their days directly engaged in supporting the population health needs of our customers.
They answer important questions, identify gaps in care and guide them to resources and the care that they need, all with a human touch. I'd like to welcome Sarah King and John Bunker, who provide 2 unique perspectives on how Optum helps improve and sustain population health for our customers. Thank you.
Thanks, John. My name is Sarah King, and I lead Optum's large employer team responsible for our relationship with companies like Best Buy. A few years ago, Best Buy came to us as they wanted to create a culture of health across their 125,000 employees. And core to that, they wanted more of their employees to access all of the services that they make available to them.
But they wanted to do it
in a way where they would be able to achieve sustainable cost savings. So Optum partnered with Best Buy on a fully integrated population health model. Now this model is comprehensive, including many of the services that John referenced. However, what sets it apart is our ability to motivate individuals to take action on their health. I'd like to share 3 examples of how we do that.
1st, we deliver personalized communications to Best Buy members specific to a call to action around their health needs. Next, we offered a personal advocate as a single point of contact for Best Buy employees and their family members. Now this advocate is available to answer any question they might have, but also to redirect them to all the services that Best Buy offers. We also embedded a health specialist on-site at Best Buy. Now this specialist works like a wellness champion and really is an extension of the Best Buy HR team, helping identify new ways to engage the population and also bring that culture of health to life.
When we deployed these strategies, we saw engagement rates rise dramatically. More than 50% of members are more engaged than they were previously. And employee use of wellness and coaching programs more than doubled. This means individuals are getting access to the care that they need. We saw 70% increase in the number of care gaps resolved and hospital admissions dropped by 15%.
Now this increased engagement is more than just activity. It's translating into real cost savings for Best Buy. Since our partnership on this population health model began over 4 years ago, Best Buy's total medical cost savings have nearly doubled. Our partnership with Best Buy continues to grow. Optum is serving Best Buy members irrespective of the health plan that they have.
And that culture of health is taking hold. John?
Thank you, Sarah. Good morning, everybody. My name is John Bunker, I have the privilege of leading OptumCare's West Region. Best Buy is a great example of how we help benefit plan sponsors to engage members. But I'd like to pivot from the benefit plan sponsor and speak with you a little bit about how OptumCare's provider groups, and in this case, Southwest Medical Associates approaches population health from a direct health care delivery perspective.
For context, Southwest Medical Associates is a wholly owned subsidiary of OptumCare. It's located in Las Vegas, Nevada, and it employs nearly 400 primary and specialty care providers. In early 2016, Southwest Medical partnered with one of its largest and most important clients, that being the Station Casinos Group, with the overall objective to improve the employee health care of that population. Using the OptumONE analytical tool, Southwest Medical identified over 1500 patients within the Station Casinos population who had diabetes and developed a personalized experience for those who are at the highest risk of potentially needing hospitalization or emergency room services in the future. Southwest Medical's care managers contacted each of these patients individually.
And within 15 days, over 60% of them had an appointment with their physician.
Now I want you
just to imagine for a second that you might have been one of those employees and received that telephone call. That emotional connection that is made at that point between a patient and a provider creates such a bond of confidence and trust. Well, within months, we saw significant improvements. Those patients who saw their provider and received a personalized care plan saw significant improvements in their cholesterol levels, their blood sugar levels, decreases in body mass index and were more compliant with their insulin usage and used it more appropriately and timely. This engaged population of patients, together with this specialized care plan that received by their physician and the encouragement and follow-up for their physician, they were able to avoid emergency room usage and lower their overall health care spend by over 20%.
For those individuals that didn't see a doctor or receive that personalized care plan, it's the complete opposite. All those same indicators that I mentioned, blood sugar, cholesterol, body mass index, all rose, together with their corresponding increase in health care costs as opposed to a decrease. That's the difference an effective population health strategy can make. Opt in Care's provider groups, in this instance, Southwest Medical Associates, is able to engage members at a higher level, close gaps in care, lower medical costs and not only identify but treat a health care condition before it becomes more serious and more costly. Thank you for allowing Sarah and I to share these important examples with you this morning.
We'd now like to invite to the stage Amir Rubin, who joined us earlier this year after leading the Stanford University Health System. Amir?
Thank you, John. Care Delivery gives Optum a primary access point to consumers, where we directly influence and improve their health, experiences and outcomes, and where we drive value and improvement from the center of the healthcare system. We carefully invest in leading providers in markets where we can make meaningful impacts on the health of the community. These are progressive providers with a population, accountability and risk mindset. We bring the full capabilities of Optum to the table, clinical insights, best practices and consumer engagement models from Optum Insight, data and analytics, advanced technology and scaled operations and expertise from across Optum on how to effectively manage risk.
Today, we are advancing care delivery in several ways through primary care, urgent care and broader clinical services. Through 20,000 physicians, our clinical practices deliver care in 26 markets nationwide. Our growing leadership in urgent care includes one of the nation's largest neighborhood care center networks, MedExpress. By the end of the year, we'll have nearly 200 MedExpress locations in 15 states with plans to meaningfully expand our footprint in 2017. Our clinical services extend and complement our clinical practices.
We are one of the largest commercial employers of advanced practitioners in the United States. And many of these 6,500 professionals care for patients with complex needs in their homes or in long term care facilities. Through our House Calls business alone, they complete more than 1,000,000 home visits per year. And we remain honored support the health needs of military members and veterans through clinicians in our Logistics Health business. Importantly, our model is multi payer to ensure the broadest population possible can access higher quality care in the communities we serve.
Today, our physicians work with more than 80 healthcare payers across the country. Our care providers deliver notable improvements in quality and value for these payers and their populations. For 2017 CM centimeters centimeters centimeters
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centimeters S star ratings, about 90% of OptumCare's Medicare Advantage patients will be in plans rated 4 stars or higher. And one of our plans in Texas is one of only 12 5 star plans in the nation. Our growth potential is significant on a national scale. With our care delivery practices alone, we plan to grow our physician base by 40% in addition to entering new markets, attracting more patients and developing new payer relationships. Ultimately, we believe that full scale primary care driven ambulatory care services can help improve the care and health of the people we're privileged to serve.
Now I'm pleased to welcome Doctor. Todd Staub, who has been a primary care physician for 32 years and helped build one of the largest primary care groups in the nation. Doctor. Staub?
Thank you, Amir, and good morning. My name is Todd Staub, and I served as Chairman of ProHealth Physicians for the last 16 years. Almost 2 decades ago, we founded ProHealth Physicians from 81 small primary care practices in the state of Connecticut. Over that next period of time, from those beginnings, we created one of the largest integrated primary care group practices in the country. And in December of 2015, we decided to join OptumCare and become part of Optum.
We made that decision because we needed a partner who could bring us the resources, capabilities and expertise to help us transition to a new value based model of health care. We needed a partner who understood the importance of primary care in redesigning a health care system that works for people. And we needed a partner who honored as much as we do the core values in medicine that are based on trust and strong long term relationships with the people that we serve. We found that partner in Optum. Since joining Optum, we have redesigned and refocused our population health strategy in important ways.
One example is the field team that we created to go right into the homes of the 62% of our elderly population. By bringing the right resources to the point of service, we were able to help people avoid the emergency room, avoid unnecessary hospitalizations, avoid days in the nursing home, all while keeping people where they most want to be, right in their own homes. Alone, our physicians would not have been able to do this without the help of Optum. Now we are part of building something greater. We are joining with some of the best medical groups from around the country to create a new kind of delivery system, one that is based on a strong foundation of primary care, one that is embedded in the communities and neighborhoods where our patients live, one that adapts to the regional variations and local markets that we find ourselves in and one that meets people where they are and brings health care to them.
We believe that this new delivery system that we're building together can lead the transformation of health care in our country. And so that is why in ProHealth Physicians, we feel that this decision to join Optum is one of the best decisions we have ever made. Thank you.
Good morning. I'm Norman Wright. Today, I'm going to talk about some vital capabilities we put to work behind the scenes that are having a profound and growing impact on the system. These capabilities are doing the unseen critical work of healthcare by targeting the processes, workflows and administrative functions needed to make the system work better. As you've seen throughout our discussion today, all of our customers and system partners are seeking to use data and technology in new and transformative ways.
Optum is is accelerating that evolution by helping them put the data to work and essentially rewire and modernize their operations. We help improve the efficiency of critical administrative processes and workflows through technology, consulting, managed services as well as specialized IT and business process services. Diversity and scale of our offerings allows us to serve as a key partner in virtually every aspect of health care operations. We also provide modern technologies and expertise to make the interactions among health care payers, care providers and other industry stakeholders smoother and more effective for everyone, including consumers. And we have thousands of people doing administrative work ranging from field based staff in hospitals, coders, clinicians and customer service staff.
An example of how we're improving operations is payment integrity. Reimbursement is one of the most fragmented processes and one of the most complex processes in health care today, but it doesn't have to be that way. Our managed services, technology and consulting offerings are improving all aspects of the process. We help health plans ensure that they make the correct payment on the right claim at the right time and realize billions in annual savings as a result. Optum 360, our revenue management business, was founded just 4 years ago.
And today, we have over 10,000 people dedicated to this business. And in 2017, we will manage $60,000,000,000 in billings for our partner organizations. 4 out of 5 U. S. Hospitals rely on at least 1 Optum 360 revenue management solution, and there's an opportunity to expand those relationships and deliver even more patient satisfaction.
Now let's take a closer look at Optum 360 and how our team is innovating with health system leaders to modernize revenue management. I'd like to welcome Todd Gustein from the Optum 360 team. Todd?
Thank you, Norman. I'm Todd Gustein. I've had the privilege of working for Optum 360 since its formation. Each year, Optum 360 is making the coding and claims process more timely, more accurate and less labor intensive in ways that only Optum 360 can. One example, coding and claims used to be done manually.
Today, our clients can do it in real time using our proprietary natural language processing and computer assisted coding technologies. Natural language processing reads physician documents, identifies gaps or inconsistencies, incorporates medical logic and ultimately maps it to an appropriate code. We're working with our provider clients in order to automate this coding process so that billing is more consistent and accurate. Optum 360 is also making it easier for payers and providers to collaborate. We're shifting the revenue cycle forward closer to the time when services are rendered.
That shift reduces costly errors upfront, eliminates rework that needs to happen and ultimately minimizes the frustration between payers and providers. Optum 360 is growing because the value and the innovation it delivers is real. Clients see it in terms of improved efficiencies. They see it in a shortened cash collection cycle, and they see it in lower administrative costs. Every year, I've watched Optum 360 add value in new ways, adding value by a more simplified financial experience for patients, and at the same time, a more accurate and consistent revenue cycle for providers.
Thank you.
Well, good morning, everyone. I'm Tammy Reller. And a few things stand out as one listens to the Optum capabilities review. Data and analytics are at the heart of Optum. Stakeholders across the health system are finding distinctive value in Optum's capabilities.
And the market dynamics, when they're matched to Optum's unique assets, position us for growth for sustained years to come. I thought it might be help I thought it might help to connect the 5 core capabilities that we just reviewed back to the reporting segments that you know best. Data and analytics and health care operations of all forms for payers, providers, sponsors, life science companies and governments are all contained in OptumInsight. Pharmacy Care Services is our OptumRx business. And population health in the broadest sense as well as care delivery constitute the entirety of OptumHealth.
In addition, Optum's capabilities are central in the five priorities of the UnitedHealth Group that Dave outlined earlier this morning. So let's review our operational performance in 2016. Over the past year, we've strengthened in meaningful ways to fully serve customers and consumers. 1st, the integration of Catamaran delivered on our commitments to improve value and service. Customers benefited from our combined scale as we aligned our formulary approaches and management and consolidated the 2 companies' purchasing contracts with drug manufacturers and others.
In service delivery, we executed for consumers with the highest degree of accuracy to date and with more improvements to come in 2017. In addition, we've now aligned our specialty pharmacy and our home delivery operations, driving direct value for customers, which will be more of a benefit in 2017. We streamlined operations at OptumRx fulfillment centers, and this move has reduced mail order delivery time for consumers by more than 10% and importantly, increased the number of automated deliveries by 20%. We improved our competitive position by reducing fill costs per script another 5%, and that's on top of last year's 10% reduction. And we delivered on our synergy targets and still expect further benefits in 2017.
2nd, we deliver increasingly effective service for our clients and for consumers. We completed a record number of client implementations. Our customers benefited from readiness process improvements that resulted in simpler, more accurate, more consistent and predictable installations. We continue to elevate the quality that consumers experience through our call centers. We further reduced the time it takes to resolve issues, which decreases appeals and it improves turnaround time.
So in addition to the large strategic relationships that Larry highlighted earlier this morning, more mid market customers are seeking integrated solutions that help them solve complex problems. And the number of these customer wins grew around 15% this year, and we're looking to drive this even more intensely in 2017. 3rd, we continued to simplify our business and manage costs across Optum. We again met our cost savings targets in 2017 through productivity and by optimizing supply chain and vendor relationships. We achieved $200,000,000 in cost savings, and that's above and beyond the gains in drug procurement.
And it's on top of the $200,000,000 in savings we achieved in 2015. In technology, we increased the productivity of our computing platforms by more than 10% year over year, And we're driving double digit cost reduction through continued purchasing efficiencies. At our size, this progress delivers meaningful benefits to our customers, to consumers and our own businesses. 4th, we strengthen care delivery to benefit patients and payers across the nation through OptumCare. We support value based care for customers and physicians through our investments in technology and analytics.
And by the end of 2016, we will have deepened our footprint in 4 of our major primary care markets through 35 new neighborhood urgent care centers opened in 2016. The 5th point. We are delivering higher levels of innovation to an even broader set of customers. In 2016, Optum customers experienced more than 80 new or significantly enhanced products across the Optum portfolio. Just one example, we enhanced our digital interactions with consumers by investing in new approaches that have made it simpler for them to access our services.
These new approaches include telehealth for behavioral services and modern digital experiences for people needing support with diabetes, pregnancy among others. In addition, we now have more than 200 new product development initiatives that are moving through our product innovation and life cycle management process, representing significant opportunity for Optum and importantly, value
for customers.
Okay. Now on to the numbers. I'll provide an overview of our 2016 performance and then highlight our expectations for 2017. We expect to finish 2016 strong, with each business again delivering double digit percentage revenue and earnings growth. Optum revenues will reach $83,000,000,000 That's growth of 23%.
Revenues in 2016 are driven by strong organic growth, including contributions from behavioral solutions and population health as well as from our technology enabled products and services in OptumInsight. The pharmacy care services combination and our care delivery market expansion were also strong contributors to our top line growth. In 2016, we expect a 31% increase in operating earnings or growth of more than $1,300,000,000 to earnings of $5,600,000,000 This is consistent with the range we provided a year ago. Performance within OptumRx supported incremental investments in key businesses within OptumHealth, including Care Delivery and MedExpress. Overall, 2016 operating margins will expand 40 basis points over last year from 6.3 percent to 6.7 percent.
And we expect the momentum to continue. For 2017, we see revenues reaching $90,000,000,000 up 7,000,000,000 dollars This growth, coupled with continued operational improvements, will further improve operating margins and drive double digit earnings growth. We expect earnings will grow to a range of 6,200,000,000 to 6,400,000,000 dollars driven by pharmacy care services, expansion within care delivery as well as population health and continued strong growth from our tech enabled businesses. Let me now talk to the specific segments. Within OptumHealth, we expect revenue growth of 14% to 17%, with operating earnings growth in the 12% to 19% range as we continue to expand our OptumCare footprint, and that includes MedExpress.
We will end 2016 serving more than 81,000,000 unique consumers. And in 2017, we anticipate growth in the 4% to 6% range to around 85,000,000 consumers. The revenue and earnings contribution from increases in the number of consumers served is influenced by product mix. So over time, as we deepen relationships with our consumers such as through OptumCare, we expect the financial contributions per consumer to grow. For OptumInsight, we expect to end 2016 with backlog of $12,700,000,000 and that's growth of more than 20%.
Backlog is a key indicator, as is normally the case, for Optum Insights' future revenues. We project to grow revenues 10% to 14% in 2017, and we will have more than 80% of that already booked in backlog by the end of this year. We expect to end 2017 with backlog in the range of $15,000,000,000 to $16,000,000,000 growth of 18% to 26%. And this is going to be driven by large managed services awards as well as mid market customers. We forecast Optum Insight earnings will grow 10% to 17%, and this earnings growth will be primarily driven by Optum 360, Payment Integrity and our full portfolio of other payer and provider solutions.
We will also continue to invest in developing and implementing end to end solutions for health plan customers and the government market. Turning to OptumRx. We expect adjusted scripts will grow next year by $20,000,000 to $50,000,000 This is the direct result of a successful 2016 selling season, including customer retention rates in the high 90s as well as membership growth from UnitedHealthcare. As a result, OptumRx 2017 revenues will grow in the 6% to 7% range. And OptumRx operating earnings are expected to expand 8% to 12%, and this is based on serving more people, incremental synergies as well as specialty growth.
In summary, 2016 has been yet another strong year for Optum and 2017 is setting up to build on that momentum. Next year, we expect our work for customers will produce revenues in the area of 90,000,000,000 dollars and operating earnings nicely above $6,000,000,000 At the midpoints of our outlooks, each of our now sizable core businesses is expected to grow operating earnings at double digit percentages. We are truly privileged to have this opportunity to help the people that we serve achieve their goals. It's an opportunity that I see our people embrace each and every day with both purpose and with determination. We are encouraged by our progress, and yet we know much work remains to achieve our full potential.
Thank you once again for your time today and your continued interest in Optum. Now I'm very pleased to introduce Steve Nelson to start the conversation on UnitedHealthcare. Steve?
Good morning. Thank you, Tammy. My colleagues and I are grateful for this opportunity to update you on how UnitedHealthcare is making a difference for the 51,000,000 people we are privileged to serve globally. Overall, UnitedHealthcare is performing well. We continue to improve the quality of our work, appropriately manage medical care and related medical costs and strengthen the trust in and loyalty with us.
We are really energized by the opportunities to help more people live healthier lives and make the health system work better for everyone. This mission leads us to directly improve the health care of the individuals we serve and advance the experience, affordability and success of the overall health system. We do this by partnering with consumers, care providers and customers to help create an even more integrated, higher quality health system here in the United States and throughout the world. Our approach is to surround the people we serve with a comprehensive coordinated system of support, including aligned incentives, personalized engagement and collaboration, relevant and actionable information and connectivity to others and to each other and to us. With this system of support, UnitedHealthcare is driving distinguished value for customers, leading to higher growth with lots of momentum.
First, let's take a look at how we support consumers. Consumers have an important and growing role in health care decision making. Over the last 15 years, the portion of household income spent on health care has more than doubled. It should be no surprise people are becoming engaged health care shoppers. They expect a simple experience, and they expect it to be personalized, predictable and dependable.
UnitedHealthcare is meeting that expectation and providing the needed support, 1 consumer at a time. We start by offering affordable product designs using incentives aligned with healthy behaviors and lifestyles, guiding people along a more engaged and a healthier path. These modern benefit designs incent people to see the right doctors and pharmacists by rewarding them for making good and timely choices. Employers have seen improvements of 20% or more when members see a higher quality, more efficient provider. That leads to better health outcomes for the individual and greater health care savings because these quality care providers are 12% more cost effective.
So part of getting to better health and more efficient delivery of care is by personalizing the health care experience in new ways. The insights we've gathered from Net Promoter Scores across consumer segments help us focus on the key drivers of consumer and customer satisfaction and loyalty. NPS measures whether someone would recommend our products and services to others and most importantly, why. We use this data and advanced analytics to track an individual across experienced touch points and provide real time information to our people who work on the phone or online. This helps create a personalized experience for each consumer, one that offers choices and solutions they didn't even know to ask about.
It allows us to engage with people as individuals with unique needs and preferences. We call this advocate for me, and it creates a personalized experience and circle of support around the consumer. Through it, we organize all aspects of care, clinical, financial and administrative. When a person calls, we're doing more than just reacting to a benefit question. We're recommending helpful services, like a house call or a wellness visit or scheduling medical appointments for them, all based on proprietary technology enabled information and clinical insights into individual and their family needs.
This results in fewer calls, more than 200,000 appointments scheduled this year, higher net promoter scores and an overall satisfaction rate of 95%, all contributing to improving retention to the highest rates in our history, now for our 3rd straight year. This personalized service experience was central to closing over 10,000,000 gaps in care this year, providing better health for the people we serve. Advocate for me provides more help and more heart. Let me offer just one example of how we deliver compassion at scale, our initiative in our Medicare business. Last year, we showed our advocates the direct correlation between the number of health screenings they scheduled for members and lives saved.
This really motivated them to take action. Before the Save A Life effort, we scheduled about 200 screenings per month. That number has grown to over 20,000 per month in 2016. And not surprisingly, our employee engagement scores jumped 10 percentage points, and many of our advocates, like Mike Baker, now personally know people whose lives they've saved, people like Donna.
Donna is one of our Medicare members. Donna called one day to ask a question about her benefits and our systems immediately alerted the advocate she'd not had a mammogram in over 18 months. Our advocate recommended she do so and then scheduled the appointment for her on the spot. Donna kept the appointment, went in for her mammogram and was diagnosed with stage 2 breast cancer. She went through many months of chemotherapy, but I'm pleased to report she's now in remission and doing fine.
We encourage our advocates to treat every member as if they were their own loved one. This inspiring story gets even more personal for us. As it turns out, Donna's granddaughter Alexis is a colleague of ours. She's an advocate too. It's a remarkable example, really, of how our mission to help people live healthier lives is very real for our advocates and they're on the front lines of healthcare.
Save a Life, it's the name of this program, but more importantly, it's a sense of purpose that guides our actions every day. And each month we receive surveys and emails, handwritten notes for members who tell us we played an important role in helping them discover a serious health condition early. That makes me very proud to be a member of the UnitedHealthcare leadership team. Like my colleague Alexis, UnitedHealthcare cares for someone important to me, my mom.
I think Donna's story really brings home the importance of using data to get health care right for consumers every time. But it's not just about using the data we have about them, it's also about the relevant information we give them and how we offer it at the point of decision making. One example, a simple digital experience we created to help consumers make smart choices. When a consumer enrolls, a service we simply call Choice helps them pick the best plan for their needs, taking into account age, family status, health background and economics. Then Connect, another simple service, helps them find the highest performing doctors based on demonstrated performance on quality and cost as well as provider scoring based on other consumer experiences.
And then our Engage service makes achieving health goals easier by providing digital tools, incentives and support groups to help people get healthy and stay healthy.
Jen makes the health decisions for her family and simply wants to ensure that she chooses the right benefits. We get to know Jen better through our intuitive digital enrollment process, where we make recommendations based on data that we already have, and we ask Jen a key set of questions, questions about her budget, her provider preference, her health needs and much more. We package this information in a simple and clear easy manner so Jen can evaluate her options, make decisions and have no surprises. One of the key decisions that Jen needs to make in this process is in choosing an in network doctor or care location. With Connect, we've transformed that experience for millions of consumers, helping to make it easy to choose the right doctor, the right place at the right time.
In this process, we've as a fact, over 75% choose a Tier 1 PCP, meaning for Jen, higher quality care at lower cost. In this process, finally, Jenn indicates that she's interested in losing weight. So we offered to her a personalized and intuitive weight loss management program, where over 80% lose 5% to 7% of their body weight, reducing risk of illness and for Jen, helping her live a healthier life.
We still have huge opportunities to simplify and personalize the experience for consumers. So we're stepping up our efforts on their behalf. And I can tell you we are passionate about getting it right for every consumer every time.
Our relationships with care providers are critical to delivering better medical outcomes, improving the health care experience and lowering cost for consumers and customers. Hospitals and physicians are looking for trusted partners as the payment system continues to move to value based care. They face difficult changes in this complicated transition: increased demands for transparency, better coordination of care and greater accountability for improved outcomes. UnitedHealthcare's relationship with care providers is evolving from a transactional experience centered on what we expect from them to a collaborative relationship where we work even more closely with them to help their patients and their practices, a framework in which all of our interests are aligned. We're on a journey with providers, and it's up to us to become a better, more useful traveling partner.
It began more than 40 years ago when our company first focused on using data and technology to help providers manage care. We've evolved from simple disease management programs that only engaged after a patient became ill to data rich, proactive and predictive approaches. This enables us to help address a broad spectrum of medical needs as well as inpatient and outpatient and transitional care. The data have pushed us deeper into the health care system and is responsible for significantly improving the quality of care for the people we serve, while generating meaningful medical cost savings each year. Just like with consumers, we have a system supporting care partners that provides aligned incentives, personalized engagement and collaboration, relevant and actionable information and connectivity with their patients and to us.
We sit down with individual care providers to understand their unique challenges and opportunities and together establish aligned goals and incentives for coordinating care, for consistently providing evidenced based care and for improving health outcomes. We're building multidimensional relationships with 100 strategic providers who represent $35,000,000,000 in medical spend with us. These are among the largest health systems in the nation. They're sharing their strategies and their business objectives with us. We help them drive improvements in medical outcomes and simplify the administration of their practices, generating lower cost and shared revenue growth.
UnitedHealthcare has nearly 15,000,000 consumers receiving care from physicians and other care providers in value based care arrangements. About 110,000 physicians and 1100 hospitals now participate in some form of value based care with us, already accounting for $52,000,000,000 in annual spending. Care providers are in different stages of maturity on this journey to value based care, so we don't take a one size fits all approach. We flex to their level of readiness to share in the risks and rewards that come with basing a larger portion of their revenues on performance based measures and managing population health. In clinically and financially integrated relationships, we provide information and analytics on patients' clinical interactions, including medical referrals, emergency room visits, hospital admissions and readmissions, discharge and follow-up care.
We share analytical information identifying high risk patients and whether certain individuals are predisposed to specific illnesses or conditions. Now armed with this information, care providers focus on what they're trained to do and are passionate about: keeping patients healthier. Our most mature relationships show the most improvements in care and quality, performing better on 83% of common quality metrics, including diabetes management, preventive screenings and prenatal care. And from those quality improvements, we're seeing a reduction in medical cost of up to 12%. Let's walk through how a more progressive value based relationship actually works.
So let me
share with you how a value based relationship actually works. Meet Doctor. Kletter, our Market Medical Director, who also leads our ACO activation team. He partners with Central Ohio Primary Care or COPC to have discussions on how they can expand and focus on reducing ER visits as well as reducing admissions. Through expanding their office hours as well as focusing in on the high risk members, he was able to partner with them to achieve that success.
Michelle, she's our clinical practice consultant. She partners with Central Ohio Primary Care almost on a daily basis. She partners with them by bringing her expertise, such as clinical practice workflow as well as helping them review their inpatient census data as well as identifying gaps in care for their physicians to intervene. Tanya, she's our data analyst and shares with them reports that are actionable. A recent analysis showed that Central Ohio Primary Care had higher radiology usage compared to their peers.
This resulted in them intervening by changing their practice habits as well as site of service, resulting in significant out of pocket cost reductions for their members. From this collaborative effort, Central Ohio Primary Care was able to generate a 13% lower acute hospital admissions rate for their Medicare members, a 22% lower ER visit rate and a 39% lower radiology utilization rate. To quote Central Ohio Primary Care, we now see UnitedHealthcare as a true partner who understands our business and our goals.
These relationships require continuing collaboration, empowering our partners with timely, relevant, actionable information about their practices and the patients they manage. We're helping our network care providers move from siloed, closed systems to interoperability with shared data and analytics, which leads me to Link. Link is a single digital interface and it looks much like the collection of apps you have on your smartphone. Care providers and healthcare administrators use Link to access information they need across multiple networks and systems efficiently, securely and in real time. This includes accessing patient data that helps them improve outcomes and better collaborate with other care providers across the system.
And on the administrative side, LINK supports verifying benefits and eligibility, e prescribing, checking claims status and submitting prior authorizations. Care providers don't want multiple systems for multiple payers. They need a simple platform. The benefits for providers are numerous: reductions in paperwork, improved accuracy, simplified claims processing and real time provider data updates, leading to healthier patients.
Doctors consistently tell us 2 things. They want to know what happens with their patients after they leave their office, and they want less administrative process so that they can focus on patient care. Optum and UnitedHealthcare have partnered to create LINC, a web based tool that supports both the clinical and the administrative side of care delivery. On the clinical side, LINC provides basic, but important information. Has a patient seen another provider?
Have they visited an ER? Have they been admitted to a hospital, transferred or discharged? LINC provides daily notifications with just this type of data, arming providers with the information that they need to deliver the best care and the best patient outcomes. On the administrative side, LINC simplifies paperwork, improves accuracy and saves time. For example, through Link, providers can check member eligibility.
They can update their directory information and let us know if they are accepting new patients, and they can electronically submit claims, prior authorization, even medical records. Providers using LINC have seen remarkable results. Over 1,000,000 Medicare gaps in care reports have been delivered. We've seen a 20% reduction in the number of phone calls to check member eligibility, and we've eliminated over 1,000,000 paper submissions year to date. LINC is an important resource in our journey to connect with care providers on the things that matter most to them, to us and to their patients.
As we strengthen digital tools and data resources for care providers, we've improved our approach to patient centered care. We now go beyond health to get closer to an individual's actual quality of life or their total well-being. This requires a health care system in which all care providers are connected as a team aligned around patients' needs. Our whole person approach improves coordination among providers, identifying and engaging high risk patients earlier and fully integrating patient care, especially for those with the most complex needs, who make up roughly 5% of the population but generate 50% of the cost. With better information and connectivity, care providers identify and act on behavioral and social barriers to physical health.
This type of visibility takes on new importance as providers' reimbursements increasingly depend on improving quality and patient health outcomes.
David is one of those patients that could easily have had an important diagnosis slip through the cracks because of his complex needs. In today's fragmented health system, many patients just like David often have their health issues go undiagnosed or worse yet misdiagnosed because they're seeing doctors who don't have a complete picture of their behavioral, social and medical needs. Thankfully for David, who's one of our patients, that didn't happen. David does have a behavioral health condition that he lives with and he's being treated for that. But he also was suffering from severe headaches that were untreated, undiagnosed, debilitating and really having a negative impact on David's quality of life.
David's whole person care coordinator didn't know about the headaches, but she did notice that he had missed his preventative visits and she encouraged him to make an appointment with Doctor. Gensini, his David's primary care physician in rural New Mexico. Doctor. Gensini quickly diagnosed David with high blood pressure, which was the main cause of his headaches. With proper treatment of the high blood pressure, David's headaches completely went away and his behavioral health condition improved.
David's story is really a great example of why treating the whole person is so important, why bringing together behavioral, social and medical information about a patient is critical. Doctor. Gensini told us, most of the time when his patients leave the office, he has no idea what's happening to them. Are they in the emergency room? Are they seeing other docs?
Have they filled the prescription that he just wrote for at the pharmacy? He doesn't know. By providing Doctor. Gensini line of sight to his patients' entire healthcare experience, Doctor. Gensini is convinced that he can really now help his patients be healthier.
And the data suggests that's true. In New Mexico, where Doctor. Gensini practices, our whole person care results for the Medicaid population that we serve have been dramatic. We've seen a 39% reduction in hospitalizations and accompanied by that a 12% decrease in emergency room visits in 2015 compared to the prior year.
Clinical practice and health care delivery will continue evolving. We're actively working to become the partner of choice, supporting more care providers with our system of aligned incentives, engagement and collaboration, information and connectivity.
The work we are pursuing with consumers and care providers directly benefits our customers, creating value in both government programs and employer plans. Our customers' needs and our mission are strongly aligned. We want the same things, better care and lower costs. We work closely with both government and commercial customers to align their plans and our services around what is most important to them and to help improve both the quality and affordability of care. Our continuous improvement in star ratings for our Medicare Advantage plans is concrete evidence of this.
For 2017, we expect 80% of UnitedHealthcare's Medicare Advantage membership will be in plans rated 4 stars or higher by CMS. For 2018, we expect this metric to exceed 85%. We are using the knowledge we have gained through STARZ to benefit all of our lines of business, improving HEDIS scores and employer health plans and for individuals and state based qualities in ratings in Medicaid. State governments are under increasing pressure to improve quality for beneficiaries, while ensuring the financial sustainability of their programs. We help state programs improve quality and outcomes for all types of Medicaid beneficiaries.
Because of our long standing experience in improving outcomes by directly managing care, states turn to us for help with their most difficult and expensive cases. Our nearly 3,000 community based clinical representatives work 1 on 1 with patients in collaboration with local care providers to personalize care management. People who need long term services and support and dual eligible patients, those who qualify for both Medicare and Medicaid, are perhaps the populations with the greatest health care need. Today, UnitedHealthcare is the largest provider of services for them, serving nearly 700,000 vulnerable individuals. And with the remaining market opportunity sized at more than $200,000,000,000 there is still plenty of room for continued growth.
Our employer clients look to us to help manage the health of their people, while keeping health care affordable. We set shared goals around quality and cost. And when we achieve those goals, everyone benefits. We offer our commercial customers connectivity and real time information on what's happening with their employees so they can easily manage their health plan performance. We meet this need using a data analytics capability called Health Plan Manager, providing integrating reporting for many of our national account clients.
Our clients tell us it's not just data that's important. It's how the insights from the data can provide targeted actions. Health plan manager technology allows employers to use real time data to take targeted actions on issues that are specific to their population. The end goal is to increase the quality of care for their employees, which improves health and supports the performance of their health care benefit strategy. Let me give you an example of one client.
The health plan manager data revealed that there was an increased utilization pattern on out of network spend. The data showed that the out of network costs were 22% higher in Florida, and more specifically, 70% higher in South Florida. Further drill down on the data showed that the issue was specific to the Hispanic population in Miami, nearly double the national average. Our heat map analysis pinpointed that the out of network spend was located with outpatient surgeries with a concentration on back surgeries. From the information that the health plan manager was able to provide and in partnership with our client, we developed an action plan to flex our dedicated clinical nurse team to include bilingual resources and provide an educational campaign.
This allowed members to better understand their benefits and make more informed choices about where to get their care, resulting in a 4% reduction in trend and hospital admissions reduced by 10%. It's a matter of health plan manager turning big data into practical data.
Health Plan Manager is empowering to employers. It allows them to conduct their own analysis of clinical and economic performance to see employee participation levels and to measure how UnitedHealthcare's programs and services are performing for them and their employees. In summary, we offer customers the value of the UnitedHealthcare system of support we've described to you today: value based care provider relationships proactive clinical support a higher level of consumer engagement with tools and information to help people make better decisions and capabilities to strongly manage health plan cost trends as well as population health. We offer this support through a wide range of product solutions for active employees and retirees. Products including health savings accounts, ancillary services and risk, fee and stop loss arrangements.
Through it all, our focus is on how we can better partner with our customers to maximize their health benefits, improve the quality of care for the people who depend on those benefits and reduce costs for individuals, for our customers and for the health system overall.
This morning, my colleagues have shared what we are doing to advance our service to consumers, to strengthen our partnerships with care providers, and to deliver on our commitments to customers. You can see the results of this approach in our performance. Today, we support over 51,000,000 people. This includes 1 in every 5 seniors in Medicare, the employees and dependents of 200,000 employer clients, nearly 6,000,000 Medicaid recipients, almost half of them children and 4,000,000 people in Brazil. As we close this year, we will have grown our domestic medical membership by almost 2,000,000 people.
This growth is balanced across our portfolio and frankly in the offerings that drive the most value, employer group coverage, Medicare Advantage, and people with more complex needs in Medicaid. We continue to increase our share in each of our businesses as the market responds to the value of our products and services. In 2017, we expect to add 1,600,000 people at the midpoint of our range, excluding 2 items: the reduction of our individual exchange related footprint and the transition out of the TRICARE West region contract. 2017 will mark the 6th year out of the last 7 years where we will have grown organically by more than 1,000,000 people. Turning to our commercial business.
Our fully insured enrollment outlook includes a reduction in our exchange related individual offerings of just under 1,000,000 people. That estimate is based on a reduction of approximately 650,000 on exchanges, combined with net declines in our off exchange individual business. We expect continued profitable growth of more than 200,000 consumers in full risk programs in the small business and middle market segments using the midpoint of our outlook. The pricing environment for commercial risk remains consistent, and we continue to find the market to be generally rational. We expect a modest decline in self funded enrollment.
Growth in our middle market client segment will be more than offset by a contraction in our larger national accounts consumer base, in part due to our successful efforts supporting clients who choose to migrate their retirees to Medicare offerings. In our Medicare business, we are just wrapping up a successful open enrollment period. For the full year, we expect to add up to 800,000 seniors in our Medicare Advantage offerings, well balanced between individual and group based offerings, another substantive growth year in Medicare Advantage. Our consistent growth reflects the value seniors find in the stability and quality of our offerings. And our retention levels are strong due to that value and the Medicare product experience our members receive.
And we expect to continue strong, steady growth in our Medicare supplement offerings and a return to growth in our standalone Part D offerings. In our Medicaid business, we expect another meaningful growth here, adding 500,000 people at the midpoint of our range as we serve more people with more complex needs, like in Virginia begin additional new state awards in Missouri and California expand with new awards in existing states like in Nebraska, and grow organically in existing markets. Finally, we expect our international business to return to modest growth on more stable unemployment rates in Brazil. On to medical costs. We expect to close 2016 with a commercial net medical trend of approximately 6%, squarely in the range we provided you a year ago.
We continue to see the effectiveness of our strong medical management disciplines as 2016 marks the 8th consecutive year of absolute declines in hospital admissions on a per capita basis across all of our businesses. Looking ahead, we forecast a modest increase in utilization trend, offset by 1 fewer calendar day in 2017. The net of these factors results in a stable commercial net medical trend outlook in the range of 6%, plus or minus 50 basis points. This outlook reflects consistent unit cost increases of around 4% and utilization of approximately 2%. We will continue to move our reimbursement arrangements towards value over volume and advanced benefit offerings that motivate consumers to make better choices and play an active role in their health care.
Today, we have $52,000,000,000 in annual spend under value based arrangements, and we are right on pace to deliver our long standing goal of $65,000,000,000 by the end of 2018. As in past years, unit costs continue to be the largest cost trend driver. New specialty drugs and cost increases on existing therapies are the primary factors, partially offset by a reduction in the use of hepatitis C therapies. We are hosting a seminar this afternoon to discuss specialty pharmacy in greater detail. We are looking to physicians for greater and more consistent engagement to further improve quality.
This will contribute to a modest increase in physician utilization. Meanwhile, our inpatient and outpatient trends remain fairly consistent year over year, supported by this engagement and effective medical cost management. Turning to operating results. We expect to close 2016 with revenue of more than $148,000,000,000 exceeding the high end of the range we provided 1 year ago by nearly $5,000,000,000 We expect reported earnings of $7,600,000,000 within the range we provided 1 year ago despite the previously discussed $325,000,000 in greater than expected losses in individual ACA offerings. In 2017, revenue will grow to as much as $160,000,000,000 reflecting year over year advancement up to $12,000,000,000 or 8%.
This includes a reduction year over year in individual revenue of nearly $5,000,000,000 and over $2,000,000,000 in gross health insurance taxes not billed to clients in 2017. When you exclude these two items, revenue is growing at a double digit rate of 13%. Across UnitedHealth Group, we expect our reported consolidated medical care ratio in 2017 to be in the range of 82.5%, plus or minus 50 basis points. This 120 basis point increase year over year is driven primarily by the insurer's fee deferral in 2017. Our exceptional organic growth and continued effective medical care management and operating cost disciplines will drive strong earnings in 2017.
Next year, we expect after tax operating profit in the range of $5,100,000,000 to $5,400,000,000 This reflects growth of 19% to 25% year over year. John Rex will take you through how the individual exchange related business and the insurers tax deferral affect the company's financials at a consolidated level. These strong financial results are a direct outcome of our concentrated efforts across UnitedHealthcare to better serve the needs of consumers, care providers and our customers. We surround them with a supportive system of incentives, engagement, information and connectivity that helps people live healthier lives and makes the health system work better for everyone. We've shared how we think differently about our role in health care, with responsibilities well beyond a traditional payer.
This unique position provides a platform to fulfill our mission and drive steady growth and profitability in 2017 and for many years to come. Thank you. Now please welcome John Rex.
Well, good morning.
Just have to take a moment and survey this crowd. It's so good to see all of you here. And thank you for taking time to spend a day with us. It's an honor to have you here, and I know well how valuable your time is. So this is my first opportunity to be before you in this role, but it's far from my first UnitedHealth Group Investor Conference.
That would have been nearly 20 years ago, sitting where you're sitting today. I just happened to take a look at the materials from that meeting the other day. Yes, CFOs can get nostalgic, and we hold on to anything with numbers. Back then, we talked about a company that would exceed $17,000,000,000 in revenue, serve 5,000,000 Americans in health plans and have a workforce of nearly 30,000 people. We talked about expanding into new markets such as Medicare with an aim to reach 300,000 members that year.
Yes, there was even a discussion about that year's version of Medicare reform and what BBA 97, the Balanced Budget Act, for all of you that remember, might actually mean. Bell Atlantic, Northwest Airlines, Continental Airlines, Washington Mutual were among our important commercial account wins that year. Brand names that don't even exist today. And one exciting new client was America Online, blazing paths in the new world of the Internet. We talked about the emerging discrete benefits and services platforms within our enterprise.
And yes, for all of you, even about medical cost trends and the commercial pricing environment. Some things indeed never change. There was even an Optum presentation. Yes, there was. It's actually titled that.
It described a new services venture with ambition to build multiple integrated horizontal platforms to help manage the complexity of the healthcare system. Now the goal was to serve UnitedHealthcare with distinctive capabilities and also take those capabilities into new external markets. That year, an entity called Optum would post just over $70,000,000 in revenue. Over the next 2 decades, we continue to evolve, building and strengthening the foundation of the distinctive growing enterprise we're privileged to represent. Today, we have shared many numbers and measures with you, 1,000,000,000 and 1,000,000,000.
I'll have another batch for you in
just a
moment. And certainly, the numbers are important. We use them to manage our business, track our progress, set goals and report to our valued stakeholders, including all of you. But the numbers, they don't measure us. They don't define us.
That definition can be better found on our intent focus on the future, the next 10 to 20 years. Much as when I sat in your chair 2 decades ago. As they have in the past, our people are delivering through innovation, adaptability, performance, and new levels of compassion. And the global need to help people live healthier lives and to make health systems work better for everyone has never been more urgent, compelling or humbling. This morning, you have heard about commitments and goals for the value UnitedHealth Group can deliver.
We measure these in many ways healthier lives, net promoter score, operating performance, growth and so much more. Over the next few minutes, I'm going to walk you through the financial results that are driven by that value delivery. You have our conference book with all the details, so I'll stick to the highlights. In short, the 2016 headline story is strong and balanced growth and momentum heading into next year and beyond. The $27,000,000,000 revenue increase is driven by performance across the breadth of our company.
Steady double digit gains in each of the Health Benefits businesses and high teens to mid-20s percentage growth in Optum's businesses. Operating earnings are estimated to grow by 20% this year, with OptumRx leading the way at over 50%. Growth rates are in the mid to upper teens in the other Optum businesses and 13% at UnitedHealthcare. We look for adjusted net earnings of about $8 per share, growth of 24%. Strength and consistency of cash flow continues and at $10,000,000,000 full year cash flow will approach 1.4 times net earnings.
Turning to 2017. We expect continued strong financial performance. We look for revenues to approach $200,000,000,000 growth of about 8% on our sizable base. As Dan described, our top line growth is moderated by the reduced footprint in the individual markets and the ACA tax moratorium. Combined, these have about 400 basis points of impact.
Optum and the UnitedHealthcare Public Sector and Senior businesses will be the prime drivers of revenue growth. As the commercial benefits business continues steady disciplined growth. Like this year, revenue growth is paired with improved net margins at about 40 basis points. The net margin improvement stems from core business performance, reducing the exchange footprint and the ACA tax moratorium. And we expect strong cash flow again.
At $12,000,000,000 cash flow will increase 20% and approach 1.4 times net earnings. With the effects of both the reduced individual footprint and the tax moratorium, it might be helpful to roll forward adjusted earnings to illustrate the strength of the underlying business performance. All in, we project growth of 16% to 20% in net adjusted earnings to a range of $9.30 to $9.60 per share. Starting with this year's $8 per share base, we suggest you consider 2 tailwinds. First, we expect to gain about $0.25 per share from a reduced profile in the individual insurance business.
This eliminates the losses incurred this year, but also assumes that some of the related fixed and semi fixed costs remain. 2nd, removing the ACA tax next year creates a transitory tailwind, which we size at about $0.25 per share. You may recall, we discussed the headwind impact when the tax loss remain. 2nd, removing the ACA tax next year creates a transitory tailwind, which we size at about $0.25 per share. You may recall, we discussed the headwind impact when the tax was first implemented.
You can also conclude that the tax will create a headwind in the year it returns. As we've stated before, these impacts essentially neutralize over the course of several years. Our ability to drive earnings per share growth through the use of cash is a modest headwind that may not be as readily apparent. As you recall, when we made the strategic decision to expand the pharmacy care services business, we also knew that we'd be allocating capital to delever. So while this has modest in year EPS growth impact compared to our long term potential, it positions us for strategic growth, provides financial flexibility and creates long term economic value.
Consistent with our long term 13% to 16% EPS growth outlook, we continue to view capital allocation activities such as M and A and share repurchase contributing up to 5 percentage points over time. At the top end, adjusting for the 2 tailwind factors results in 14% adjusted earnings per share growth from the underlying performance of the businesses. Next, I'll take you through some of the key ratios. While the net effect of the moratorium is a tailwind, it has opposing impacts on several metrics. Premiums are essentially grossed up for the non deductible health insurance tax.
So the removal lowers premiums having an unfavorable impact on both revenue and operating earnings growth, while raising the CARE ratio. Going the other direction, the moratorium improves both the operating cost ratio and tax rate. Let me spend just a few moments on each of these. First, we expect the medical care ratio to be stable before considering the effects of the insurance tax and the individual business. The impact of the moratorium is partly offset by the absence of losses in the individual market, netting to just over 1 percentage point.
We expect a slight increase due to the mix effect of public sector and senior growth. This leads to an 82.5 percent care ratio, plus or minus 50 basis points for next year. The second effect of the moratorium is about an 80 basis points impact toward lowering the operating cost ratio. We expect to continue to achieve our target of 20 to 40 basis points of productivity and efficiency gains per year and balance this with increased investments and opportunities that have been described here this morning. These will drive improved outcomes for the people we serve and more effective use of resources across health systems.
To name just a few, these include the Care Delivery Businesses, Optum 360 Growth, Rally Health Innovation, Network Enhancements and incremental quality and STARS initiatives. 3rd, the moratorium of the nondeductible health insurance tax reduces our reported tax rate, offsetting the impact to operating earnings. Removing the tax is positive for healthcare affordability, as the tax is mostly passed on in higher premiums. This is worth about 5.5 percentage points to our effective tax rate. The approximately 34% rate we expect is closer to our pre ACA fee rate.
Whether considering this year or next, our tax rate remains comparatively high versus leading companies in other industries. Turning to the balance sheet. We continue to operate from a position of strength. Our EBITDA interest coverage ratio is 15 times, and we plan to continue to reduce our leverage position to 40% over the course of the year. Since 2013, the compounded annual growth rate of dividends is about 30%.
Next year, based on existing dividend levels, we will return about $4,000,000,000 to shareholders through a combination of dividends and about 1,500,000,000 dollars in share repurchase. We will invest $1,700,000,000 in CapEx, similar to this year's pacing. UnitedHealth Group has a tradition of disciplined use of capital to create shareholder value, both by building businesses and by returning capital directly. Over the last decade, about $90,000,000,000 in total. And over that period, having close to a fifty-fifty split between the categories, while given the opportunities before us, showing an emphasis on building businesses.
Looking ahead, we believe the combination of our capabilities, market presence and financial discipline positions us to continue to compound growth, to serve more people, more effectively, and produce advancing results for our shareholders. Thank you again for joining us this morning. And now I'd like to invite some of my colleagues to the stage so we can take
your questions. Dusan?
Dusan, thank you. Two things that I'm going to ask for your help with as we assemble for Q and A. The first is a survey. We're going to send a survey out tomorrow afternoon. You're going to get it from me.
This is Net Promoter Score Culture Meets Performance Value. We'd like to hear your input on today so that we can continue to make this conference the best possible use of your time. If you preregistered, you're going to get it tomorrow. If you came in kind of at the end of registration or just signed up today, it's going to come to you on Friday. The second thing is lunch.
Just a couple of words about that. I need your help in coming into the lunch in a very timely way. It's going to be a very full luncheon presentation, and it's going to be a very full lunchroom. As you can hear them setting in there, we're going to have a sit down plated lunch and a clinical insight discussion over the course of the lunch. And the room is very full.
So if you are a Board member of UnitedHealth Group, Danette Smith has a table for you at the left side towards the back or towards the front of the room, the opposite side from here. If you are a UnitedHealth Group leader, whether you are presenting or whether you're here at the conference in another capacity, there are reserved table tent signs for you. They are not by name, just any reserved table tent sign, you'll recognize them because they're the seats with the backs to the stage. So thank you
for your help with that.
And if you're an investor coming in, please, as you come in, maybe if you're one of the early people into the room, move to the front so that we can get everybody in. We would like to be sitting down and eating at 11:20 in order to keep things moving through the course of the day. Leading a company of this size is obviously a complex challenge. Steve Hemsley is going to start by introducing the concept to the Office of the Chief Executive and how that works for us.
So we just thought as we kind of open this, we would give you just a couple of themes about how we think about leadership. And we think about it very much in team dynamics. So what you have in front of you is the office of the CEO, which is kind of at the top of the house, the first line team that really leads the organization. If you think an enterprise like this is ever led by one person that is a complete fantasy. You need a lot of really good people and they have to have a good chemistry and they have to work together and there has to be a natural kind of engagement.
And that's what I think we have in the office of the CEO in a very informal way. It's not Tuesday meetings at 9, it's calls at 10 o'clock, calls at 6 in the morning. It's whatever it needs to get done and what needs to be responded to while we continue to drive kind of a strategic agenda. So this is that team and just really functions extraordinarily well. But 2 of our team members haven't had a opportunity to kind of have formal comments this morning.
So we thought, I thought I would hijack a couple of minutes and ask them my own questions. And when I think about all the leaders that you saw today, and that's not an accident, that's purposeful, And we have about 70 or 80 of our emerging leaders that will be with us through the course of the day and so so that they get an appreciation for what we're doing. Keeping that going and keeping that alive, I'm going to ask Ellen Wilson to kind of comment about how are we going to do that?
Good question. Well, we take leadership development and talent management incredibly seriously here, especially with our growth plans. So I look at it in 3 different ways. One is the new talent we bring in, so talent acquisition. And we'll probably fill almost 40,000 jobs this year.
So those are new jobs. Those are replacement jobs. We look at every labor market. We look at every possible way to access these candidates. So that is a huge piece of what we do and then to assimilate them.
Once they're here, development is a huge undertaking, and we do both formal programs. But I would absolutely believe that 80% of development is on the job. And so we're fortunate that we're growing because we have access to new jobs almost every day. And then the third leg of that stool is talent mobility. So it's actually planning helping people plan their careers and actually giving them access to different opportunities.
So this year, we'll probably move almost 20,000 employees into different roles internally in the company, and that's worldwide. So I think of it as a 3 pronged approach, incredibly serious business. You never want to have a lack talent for the growth of the business.
Thank you. And if we think about other themes that came across today, I'm hoping that you got the sense of our commitment to quality and NPS and a clear building block of that was making our regulatory compliance a very strategic, very operational sense of accountability that if we want to be a trusted name in healthcare that compliance and real respect for regulatory needs was clearly a core element of what we talk about in terms of quality. So I'm going to ask Mary Anne to comment a little bit about those things.
Thanks, Steve. So as you've heard and as you've seen fabric, and it translates our company values in everyday actions that we take. Compliance, we say, and I think you've heard from the stage again, that we think it's a competitive advantage for us here at the company. It improves our relationships with the public sector as well as our commercial clients. And it improves, importantly, the measurements of our success as a business.
We've talked a lot about NPS today, but also star ratings and audit outcomes and really, member retention. And of course, that all leads to success in the business as well. So when we deliver the highest quality of service, we're really doing that for our customers and our clients. And it gives us more opportunity. It gives us retention.
It helps us to grow as well. So, the other thing I think about compliance when I think about it, it is really the tone at the top. It is led by the most senior leaders, as you've seen here, again, from the stage. So, it has the right degree of importance, and it has the right degree of dialogue, and there is nowhere to hide from it because it comes from the top. So, a couple of just other little points that I'd make about it.
Obviously, it's what binds us. It makes us better. But compliance is dynamic. It's not static. We work on it regularly.
We have the usual annual training programs that we run on all of our codes and all of our laws. But it is living, breathing. It shows up in almost every meeting that any of us attend, I think, and how we run our business. So, I would just end by saying that I said it's our competitive advantage, but, we are really true advocates then with state and federal regulators on how to break down some barriers and have better access for our customers and clients. And compliance helps us with that.
And state and federal regulators recognize us for some of our best practices. A couple just recent I'll end with is the 2016, and I'm looking over at Steve Nelson, CMS audit in which we were recognized for best practices. Another was the 2016 Connecticut Cybersecurity Review, and we were recognized again. So we take great pride. We hold each other individually and as a group responsible for attending and complying with all the compliance.
So thank you for that. Now we have our other team members warmed up a little bit, and we're going to incorporate some of our other management who are sitting, I'm assuming in the front line here since I can't actually see any of them with these lights. But we're going to try to get the whole team in the act here. So John, do you want to go?
Yes. Thank you, Steve. We've got mic runners in the back. Thank you, Theresa.
Thanks. Ralph Jacoby, Citi. I just wanted to understand the HIFI a little bit better, the $0.25 Just help us understand, is that direct bottom line impact of the amount that you essentially couldn't pass through? Or is there some sort of incremental amount that you're sort of plowing into benefits? Thanks.
Mr. Rex?
Sure. And I'll ask Dan Schumacher to elaborate also anything else. But so quick answer is, yes, that is the direct bottom line effect, but it incorporates the offsetting impact of incrementally what we are, as you said, plowing into benefits also in order to create a real stable benefit environment for our members. So kind of net net after tax bottom line, and you see we took pains to take everything to this after tax level today. The way the best way to understand it since of the nondeductible nature of the tax gets confusing when you're sitting up at the operating earnings level.
So that's why we dropped it down that way. Dan, any other comments on that that you'd want to add?
Ralph, I'd just add that in the commercial business, right, you've got a calendar year tax balance against policy year cycle. So that's where you create a little bit of a disconnect. So it's a bit of a damage here in 2016. It's a benefit in 2017. And over the 3 years, it washes out, but that's what creates some of that dislocation.
Thank you. Janice, please. And then Fran, we'll do you next. Anybody in this section with a question?
I was hoping you could elaborate on the growth that you expect in the group commercial risk space. I think you are pointing to $150,000 to $300,000 How much of that do you think is going to come from the small group arena? And maybe more broadly, to what do you attribute your ability to make these market shares in the group insured space that's historically been very price sensitive without seeing maybe the kind of margin degradation that we would we have seen from other companies when they've made market share gains of that sort in the past.
So I think we'll have Dave respond to this, and then you can maybe get Jeff and Dan in the act.
Yes. Well, maybe I'll just say a few top level remarks. And really, it's Jeff Walter, who's positioned the business for what I'll call consistent, steady, deliberate growth in this segment, something that I think has evaded the company up till the more recent past. So specifically, to answer your question, the growth is pretty balanced as it has been really what between what we call small business and key accounts, so the middle market segments as well. We have and then inside those, there's subsegments as well, which we've been pretty deliberate around subsegmenting those markets and developing deliberate strategies to advance the growth of our business.
Over time, and I know you've questioned this some as well, and I think that's a fair request. But over time, what we found is that we gave a lot of growth to the market, particularly when co ops and others came into the marketplace. What we saw was a level of pricing, a lack of disciplined pricing that caused us to lose some membership, call it, 3 years ago or so now. As time has gone on and those pricing strategies have failed, we've seen, particularly in this market, some of that come back to us. So that's what we've been talking about for the last couple of years about the market returning back to us, which is in part what's fueling our growth.
But I think what you saw today from UnitedHealthcare is kind of a broad based agenda around advancing quality, listening better to the consumer, really an intense focus on managing medical costs and providing additional service capabilities and technologies to people so that they become more loyal and more trusting in us. And in turn, we're finding a greater sense of persistency across our business. So that is what is not only helping us to grow in the past couple of years, but also this year. And hopefully, we'll see for the foreseeable future. Jeff?
Thanks, Dave. Good morning, Matt. I would reiterate some
of the
things that Dave said, but think of 3 categories. 1, 1st and foremost, our persistency of existing accounts has reached record levels for us. When you think of the size of the book that we have to manage, just a couple of percentage points in client retention is a huge headwind that we don't have to overcome on a year to year basis. I would reiterate, Dave, we were very disciplined going into the ACA in early 2014 and paid for it in a lot of in membership. If you look back at that earnings call, we took it pretty hard on the chin in a number of markets.
Those markets have come back to us as we've remained disciplined. And the 3rd area, which you may not see as evident, but we started in 2012, 2013, really looking at our portfolio of products in the small business. And we were always known as a very large network, high benefit, high priced premium plan, and recognized as we moved into the new world, we had to have a more a broader price point. So we worked really hard in network design, product design to give us a much broader spectrum of products, particularly in the small end of our businesses, in the fully insured end of that business, to be able to hit price points at appropriate margins and appropriate loss ratios, but to broaden our ability to gather growth at different price points than we had historically been able to.
Thank you. Good question. Fran?
I have a
question about Medicare. Tremendous growth you're expecting in Medicare Advantage. How do I think about the trade off with the UGG WIP and other issues offset by HIF in terms of the ex HIF MLR for Medicare Advantage and also on Medicaid? Are you seeing rate cuts that could impact that loss ratio ex HIF?
That's quite a combination question. Nice job of getting Medicaid into that. Maybe we should start with Steve in terms of the discussion around Medicare.
Sure. Good morning. So just a few comments on the Medicare growth. Maybe some high level drivers. First, it is balanced between group and individual.
So that's an important component and context for which to view the growth and really excited about the fact that we do have strong momentum in both group Medicare Advantage and individual. Also it's driven significantly by better retention. And so that's significant. Obviously, we have a lot of insight and experience with the members that we already have. So that's important in this space.
A couple of drivers though, specifically that we've seen play out during this open enrollment is the market is really reacting favorably to our stable benefits and the value that brings. And when you add on to that, the progress we've made in Starz, that's playing through and resonating really nicely in the market. Also really have engaged our provider and distribution partners differently over the past couple of years and that has really been gaining momentum. And then last, I would just say a lot of investment and you've heard this throughout the morning in the member experience. And that is creating a different kind of dynamic as we talk to seniors about their health care choices, not just about benefits, but about a health care experience.
So those things are all kind of combining together to create some really strong growth. The and maybe I'll just ask Dan to talk about the MLR impacts across Medicare and Medicaid for the health insurance tax. Sounds good?
Perfect. So with respect to the impact, obviously in Medicare, we don't get any premium for it and it's not a medical cost item. So from a Medicare perspective, no impact on the medical care ratio as it relates to the insurer's fee, either it in place or it in moratorium. As we thought about planning our benefits, we looked at it not as a windfall opportunity, but as an opportunity to make meaningful investments in our product portfolio and the benefits that seniors get to realize. And as to Steve's point, certainly showing up nicely in our growth.
On the Medicaid side, it's a pass through. So obviously it has the MLR impacts that John talked about in the Medicaid business. But when you strip that out, you should expect generally stable medical care ratios in our Medicaid business and outside of the the only impact is obviously the insurer's fee and it's wearing off.
Austin, you want to comment on the rate environment in Medicaid?
Sure. Thanks. So really, as we've kind of talked about over the quarters, there's not a real difference in the rate environment. States continue to really be challenged to provide more coverage, higher quality care. We see it as stable, keeping pace with medical.
And so the outlook is much like we've seen in this past year continuing into this next year. We will continue to see as we've talked about the normalization of expansion rate to that 3% to 5% margin. So historically, as we've entered that expansion market, it's been a bit higher on the margin side. We've continued to see that steadily walk down back towards that what we've always expected it to be and perform in that 3% to 5% margin.
And that's in our outlook?
It's absolutely in our outlook.
Thank you. Let's come in the middle here. And while we're handing the mic, I want to tell you this is a very professionally lit stage. And so if you're wondering why is John not calling on me, it's because I can't see who individual people are. We're just going for hands.
All right.
I just got a question on the guidance here because, I guess, John, I've only been to 9 Investor Days, not 20 yet. But I'm used to you guys lowballing guidance and then slowly walking us up. And even with this
What kind of question is this, Kevin?
We'll get there. And even
if you take out $0.25 from HIF and everything else, I mean, you're guiding to 10% to 15% kind of organic earnings growth, sounds like, even though you're only getting 1% from share repurchase instead of the typical 5% you'd normally think of. So this seems like a pretty good guidance to start off with. Is this I haven't heard anything at all about headwinds to 2017.
Is this
a good guidance because you things pretty straightforward? Or is this is there some level of conservatism in here the way that we're used to hearing you guys provide initial conservative guidance?
Well, I might start I'll answer this one. Great idea.
I'm a
little offended on the notion that we think we try to give you a balanced measured view. I think that we don't try to be conservative nor do we try to be unrealistic in terms of our outlook. There have been a rich market for headwinds over the last few years. And I would say that we have less of them, and I think we're being honest and balanced about that. I remain respectful of all the things and all the elements that you are profoundly aware of in the healthcare domain.
It is a complex area. It is one that challenges your execution. There are a number of uncertainties that are so prevalent in the marketplace that they don't even feel like uncertainties anymore. They're just part of the landscape of healthcare. I think we've tried to put those into perspective and the momentum of our businesses we have had growth.
And I think growth is the core element that you're seeing here. We heard Jeff talk about it. You've heard Steve talk about it. You heard Larry and his colleagues talk about it that we are growing across the board, nice, diversified, balanced growth, not excessive in any one area. And there's an accumulative effect of that over time.
So I think you're seeing some of that. We're also seeing hardening of our disciplines around operating costs, maybe beyond some of the spending we've had to do for regulatory and compliance efforts. And so I think those things are coming together in something where we have a little bit more visibility and think that we've given you a balanced view. So I think as we've said in the past, we will always be focused on performing better than what we are offering. We're trying to give you something that you see as reasonably ambitious as well as realistic in terms of how we think we can perform.
And then I'll ask Dave and Larry to comment with respect to growth attributes and performance because you're really talking about the performance of the enterprise.
Let me go first.
Yes.
We kind of look across the enterprise, and I'll focus on Optum for a minute, and we look at certain attributes when we're looking at our growth. And one would be, obviously, our sales pipeline and how that's growing and what's happening there. And that's up about 3 times over last year. So we feel pretty good about the strength of that pipeline. 2nd attribute we look at would be what kind of TCV or total contract value we're getting when it comes to sales and how are we doing.
That's up about 3x as well. So you've got a pipeline that's growing at 3x and you've got actual sales that's growing at 3,000,000 and then we have and you've heard, I think, John and Tammy talk about our backlog of being at $12,600,000,000 that's up about 20 percent. But a lot of these things that we're doing, it's all about relationships, and then we're building these relationships. And we talked a bit about that in our approach. And I think you can see the statistics, you can see the numbers, you can see the outcomes, and we are feeling pretty good and pretty strong across the entity when you look how they're developing.
And we've actually tamped down Optum. Optum's growth rates are a little bit more modest than last year. Obviously, different set of comparisons because of the acquisition dynamics of last year. But I think Optum reflects a really good balanced measurement. UnitedHealth, Dave,
you want
to come? Yes. So maybe the comment I'll make is if you look underneath the performance of the business, look underneath the impact of the headwinds of reform for the past few years, you'd find a comparable or strong rate of growth. It's just been that we've been balancing off against headwinds for quite some time. The other thing you'll notice is that UnitedHealthcare's numbers are, at least on the revenue line, are understated in the fact that we pulled out the HIF, as we call it, the build HIF, if you will.
But in addition, we've had to take out the impact of the individual exchange and individual ACA membership as well, which is extensive. It's 1,000,000 people. So underneath that, you actually have a business that's growing at a double digit rate. So I have no explanation beyond the fact that both of the businesses are growing and growing strong, growing deliberately as well. You see it most pronounced in the government programs space, where I think the opportunities are really afforded to those who can deal with the most complex circumstances the best.
And that's what I think our Medicare business has been tuned to do, dates all the way back to our EverCare roots of this business. We just continue to compound and build upon that over time. And now we've applied those same concepts as we look at the expansion populations and then also dealing with the long term services and supports populations, which are very challenged populations from a health perspective. So utilizing tools like the patient centered care model, a house call, the intense focus on STARZ and the quality that it brings to the marketplace, the alignment of the reimbursement systems, all the way from the consumer through the care provider, all of that is coming together to establish a foundation for growth of this business like it has not seen before. And it just happens to be at a time where the market has been made available.
And our team has done a fantastic job of deliberately pursuing that and achieving the kind of growth that you see here today.
So it's we view it balanced. We continue to view ourselves as prudent. And I think you're seeing the bottom line answer is broad based growth.
Janice, up here, please.
Thank you. Hima Inguwa, Bank of America. John, I attended 6 Investor Days, not 20.
You'll get that.
I thought that's a new trend. You're required to disclose the number before asking a question. Two questions, if I may, please. One is, can you elaborate on your M and A outlook and long standing criteria for acquiring growth? In the past, you indicated the focus to be mainly Optum and assets in international and unregulated markets.
Is that still the case? And then do Anthem, Cigna, Aetna, Humana deals closing or not closing change the way you plan to approach M and A? And then the second question is
Well, I'll deal with that one. We're really not going to comment on transactions of others or activities like that in the marketplace. So we'll just carve that piece of it out. And before you get to the 3rd part of your single question, maybe we'll have John just comment a little bit about, has anything changed in our basic outlooks? And to date, we should have something to offer on this too because it is really this is an area of real core strength.
Yes. So quick answer on that is, so you're correct. Our focus over the past number of years has been on the services business and international in terms of what we're doing from an M and A perspective. Part of that is has to do where we see the opportunity set. You saw a lot unfold on this stage here today to see where we're building our businesses, and those are in services intensive businesses, and that will continue to be the case.
And if you look at kind of our M and A track record 10 years ago and the last 10 years, you will see that shift to a services and international blend. I would expect that to continue, but it's driven in part much by opportunity set, much where we see the growth going forward, markets we're not even in right now, Businesses that are, while they may be multibillion dollar businesses today, for us, are just barely getting started in terms of the opportunity that we see.
And Dave, maybe about broadly our capital allocation disciplines and perspectives?
Yes. So it's been pretty consistent. I think John had a really nice slide, which shows the allocation of capital over time to be about 50% investment, if you will, in both M and A and CapEx, growth CapEx in our business and about 50% really focused on returning dollars to shareholders. And the only real shift that you've seen over time in the more recent past, call it, the last 6 years or so, is we have progressively moved our dividend forward to what I'll characterize as a near market level. And market for us is where we compete for capital, which is more in the Fortune 15 or Fortune 50, excuse me, zone, Fortune 50 zone and the Dow 30 and others.
So that would put you in a zone of about 30% to 35% or so as a dividend payout ratio as a business. As we've extended that and also because of the Catamaran transaction and our interest in moving our debt to total capital back to a 40% zone or lower, we have reduced our share repurchase, and we're only doing enough to hold our share count level. So pretty consistent policies over time.
They'll vary year to year.
A couple of years ago, the extensive investment in Catamaran, I guess, a year ago or so, that extensive investment and maybe a more modest approach this 2016 year.
Fundamentally, no change. And then do you remember the 3rd part?
Yes.
I was hoping you'd forget.
This is easy. So if we do the math, €6,000,000,000 for growth capital and leverage reduction, if I can assume if I back into 40% debt to cap, that leaves about $3,000,000,000 for cash uses towards M and A. Is that fair to assume that for to the extent that there is a larger deal, you would be open to using equity capital? And then I'm obviously asking the question on behalf of bondholders here. Do you expect an uplift from current levels as you pay down debt and reach the 40% in 2017?
Uplift in rating?
Credit ratings, yes.
Thank you.
Again, I don't think our philosophies have ever really changed. And the disciplines around making a thoughtful investment in the right property that adds to the kind of the strategic framework that we have built here, we would engage very broadly in thinking around what could add value to the marketplace, added to the strategic framework of this enterprise. So I don't think that changes in the mix of whether it is cash, equity and so forth. That has, again, has not changed. We've used equity in the past.
We've used cash, so we would be open across the board. In terms of ratings, Dave, I would imagine that we would continue to I think we already have strong ratings.
Do you want to touch on them?
Yes. Let me touch on a couple of things you said. So your math is in the zone here in terms of what you are interpolating here in terms of that potential for in terms of debt pay down. In terms of ratings, I mean, certainly, we've made a we have laid out the framework under which we'd operate when we made the Cadware acquisition and are really kind of sticking to that timetable, I think delivering on it in terms of getting back down to the debt to capital ratios that we committed to. So I think we have been very much in the zone of what the rating agencies would have expected us to do over this time frame, in form a.
We have a strongly rated balance sheet.
And then if I could just add one thing, if you don't mind. Darr, did you have something further?
No. Okay.
So the one thing I'd add is if you look at the last 20 years of M and A, one 175 transactions or so, about $60,000,000,000 of capital, it averages out to be about that level year by year. It just happens to be the case. I guess, what I wanted to say is we're not intensely rigid. I mean, those are in terms of the way in which we kind of manage those types of things. They don't necessarily fall into calendar years as perfectly as you might expect.
So as a result, if we're able to maybe move some things forward or deferred some things back, things will move in and out of this 2017 calendar year as expected. Point being, though, is our intention is to move back to 40% debt to total capital. We've been on that journey since the close of Catamaran transaction. I think we're making very nice progress today, and we'll continue to make progress towards that by the hopefully, by the end of this coming year.
Yes, Fran, I see your hand.
Pete Costa, Wells Fargo. I think I have you all beat on Investor Days for UnitedHealth Group, so we won't talk about those 100 days. But my question goes back to the Medicare Advantage and why your growth is so much there. The is so much there. The Medicare Advantage grew 5% this year, you're showing 20% plus growth for next year.
I understand it's balanced. So I guess if I look at the group side, your commercial fee based business would have grown if it wasn't for the conversions from commercial fee into Medicare Advantage. So I understand that. But of the retail, the individual side of the Medicare Advantage, can you explain to me where you got that membership from? Dan mentioned putting more of benefits of the HIF into benefits this year.
So does that mean you're going to have to pull that back in 2018 if the HIF comes back? And did you steal that business from other Medicare Advantage players? Or did you steal it from traditional Medicare?
I'd like to think of it as competing for and winning. Yes, right. Stealing. We don't like that. But so I think you've got it right.
On the Group MA, I think we have a pretty unique value proposition because we have such a strong base of serving large accounts. We understand that market segment very well. And I think that's fairly unique and distinctive for us among the other large players in this category. So and that trend kind of follows the trend last year as well and the year before where we have won a lot of what the market made available to us. And again, our team did a very nice job executing against that opportunity.
On the individual MA, you have to kind of look at a little bit at the macro forces. So while the HIF is a component, it is a small component of the investment, if you will, invested in benefits. So it's certainly there. It's overshadowed by the effects of things like the effectiveness of the house calls program that Optum puts in place, which reduces ER visits and inpatient days and readmission rates and subacute days as an example. So that reduces our cost structure.
But in addition, the advances on STARZ and the reimbursement associated with that and then using that to stabilize your benefit in your premium base all give rise to this growth. So assuming I didn't completely drain it, Steve, do you have further comments? Yes.
I might jump in because I actually think Steve's already kind of addressed this. But let's start a couple of years ago. I think we were and I think we were very candid with you about being out of position and not pleased with our Medicare business. We took network actions. We were disruptive with respect to stability, the consumer experience, stability in networks, stability in benefits.
To Dave's point, we have been stable in benefits. We have not overachieved by giving economics forward that we know could come back on us. So I think the approach to this in the NPS of that business, that is one of our highest NPS businesses. I think it speaks to retention, where we have had the best retention in that business and Jeff Walters had it in commercial and that we've had in the last probably in our history in terms of duration. So much of this was painful to say, getting our act back together in terms of Medicare.
And the elements that Dave talks about and the dynamics that Optum brings to it, we have more to offer in the space where the seniors see a better, more modern, compelling offering than is available to them in other places. Did I leave anything for you, Steve?
All right,
we'll do 2. You 2 guys right here and then
It's interesting, given the last couple of weeks that spent so little time talking about the changing landscape in Washington. You mentioned it briefly in your comments, Steve. It doesn't sound like your growth outlook near to intermediate terms contingent upon what happens in Washington. Just want to confirm that. And as you assess the landscape, what are the opportunities that you see potentially out there, challenges?
And are you making any recommendations to the new administration?
Okay. So let's start by saying, I think the commentary we started the day with was really to respect the fact that policies may shift over time and that those policies can factor into your health care experience and that we have been thoughtful and respectful of those activities, very well engaged. Corey Alexander is going to be offering a seminar through the course of the afternoon. So I think you'll get a feel for it. And some of our other seminars will also have themes in that, that we have to be attentive, engaged and value added in the debate around changes in healthcare policy.
That being said, and then adjust, I think the elements that came through should be adjust and evolve to respond to that changing landscape. But the underlying themes, the underlying currents of healthcare around creating, as Larry said, a simpler, better consumer experience, taking the complexity out of the healthcare environment. The elements are around giving that consumer a more trusted, more consistent experience, getting costs under control and making the offerings more affordable to them, helping make the health system perform better by engaging more broadly in the spectrum of Optum's offerings, those elements have durability. They're sustaining themselves in the marketplace. They were in motion before the last administration.
They continue to be in greater motion. And I think those things will continue to play on. And those are the themes that we read. And then we will navigate with respect to policies and be value I think to your question, we are very well engaged. Again, facts, research, what works, insights about the marketplace, those elements.
And we will adjust as the marketplace adjusts. And we have a kind of an attitude of whatever comes. And so I would say that's kind of what drives us.
All right.
Thank you. Last question right here.
So similar theme there and I understand the respect for legislation changes over time. But if I think about UnitedHealth Group, the last 8 years have admittedly been focused, John talked about service and international. The 8 years preceding that was a huge allocation of capital to the benefits business, right? And that it's not really 10 years, it's really very specifically those 8 years. And so the market has said in the last couple of weeks, there's a significant increase in the value of the benefits business, but I'm hearing from you that you're not really thinking that.
So do you think the markets got it wrong? Or do you think it's just going to take time for United to digest what that potential change in legislation looks like? And I guess basically the real question is, do we think benefits is going to be a bigger driver over the next, call it, maybe 4 years, potentially 8?
That's an interesting perspective because we have always loved the benefits business. It's the original business. And don't think about them as being mutually exclusive, but think about them clearly as being better together and more dynamic. Together, They are good catalysts for each other. So I don't think about 1 versus the other or one being more favored than the other with respect to kind of legislative.
If you think about the marketplace, they need all of this. They need a modern, progressive, consumer centric, innovative benefits platform, and they clearly need a platform that brings a lot of those same elements to bear to advance the healthcare environment, the system in total, and it's not just limited to the United States. Those elements play out powerfully in global markets. When you think about the NHS, you think about Brazil, you think about any of the social health care markets, they have all the same challenges and needs in terms of more modern, simpler, more consumer friendly benefits and access and a system that works more effectively. So I don't think our perspective on that has changed or had been influenced by what's going on.
We continue to think that we have really great growth prospects if we continue to work on our business and continue to invest in our competencies, our culture, our people and maintain the right perspective in terms of serving social markets.
I'd like to throw in on that. The context of your question may be around capital allocation and the bias towards services in international was not around what the potential future value of 1 versus the other might be. It was more a commentary on the relative level of maturity and development where benefits is well built today. Dave talked in his remarks about continuing to add geographically in areas that make sense. But it was not any comment on relative value between the various pieces.
Steve, have you got some
questions? So we just thank
you for joining us today. We realize it's been a long morning. I hope you will be joining us for lunch. I think you'll find the clinical session to be very provocative and very interesting. I think the takeaways from today are simply this, kind of the coming of age of a strong, diverse, well performing enterprise, as I said earlier, kind of driven by the right things, the right mission, the right culture, strong leadership and a strong leadership team and a great workforce.
We're very restless to take our performance to the next level and those would be in areas of service, in innovation, value, in the quality of our work, and then the growth that comes from that and then in shareholder return, kind of serving the growing needs of an enormous global healthcare marketplace. We're ready to adapt and to evolve to serve those market needs, helping people live healthier lives and making the system work for everyone. We'll be around for the course of the day. Thank you for joining us this morning and we'll look forward to seeing you at lunch.