United Health Strategic Management

Health Organization

The United Health Group is the largest provider of healthcare services to Americans. According to Forbes (Lorenzetti, 2014), the group had revenue of $130.5 billion in 2014. United is the largest health insurer, and has a health services arm as well, Optum, which provides around one-third of the group's total revenue. United has net income of $5.62 billion in 2014 and served an estimated 85 million people. While the company's revenues have been growing quickly, the net income has been more stable, highlighting in particular that the tax burden has increased on the company, as gains in operating income have been slow to translate into gains in net income (MSN Moneycentral, 2015).

Competitive Strategy

Part of United's competitive strategy is that is has diversification of services. The company has two divisions: UnitedHealthcare and Optum. UnitedHealthcare is the company's health care services and insurance provider. This group has a diverse client base that includes a full range of payers -- Medicaid, employee-sponsored plans, military personnel and the international health marketplace. Optum is a health information provider and pharmacy benefit management company (UnitedHealthgroup, 2015). United therefore targets a number of markets within health care, in theory leveraging its knowledge and experience in different areas to gain some synergy. There is some vertical integration in this structure as well, which can be important for things like cost savings, but also for the development of senior management talent. For the most part, however, people within United grow within their existing company. There is separation between United and Optum in particular, such that opportunities to move around may not be that commonplace outside of senior management.

One of the major challenges that any health care firm can expect to have in the coming years is to find the staff needed to scale up demand. Between the aging of the baby boomers and the influx of new patients under the Affordable Care Act. The company has examined its best practices from states where it has successfully scaled up its operations -- it cites on its website Kentucky and Arkansas -- as part of its strategy is to benchmark against success and then utilize those strategies nationwide.

United's growth strategy has identified several key issues for the company's attention going forward, in addition to the increase in coverage: children's health, chronic conditions, IT & innovation, primary care, rural health and specialty pharmacy. Each of these is a focus area because it represents an area of the business that is changing. While in general health care is a mature industry, there is little doubt that innovation, demographic shifts, government policy changes and general modernization are all resulting in changes to the industry. One consequence of this is that the company has an overall strategy plan to address these issues. Each individual issue may affect one, or more, of the core businesses for United, but the company's strategy is developed at the highest levels of the organization. That means that when there is modernization of Medicare and Medicaid, for example, that modernization may affect different companies within United, but United's strategy will begin at the overall corporate level, so that there is consistency and coordination of its response to the changes (United Health Group, 2015).

The company has been able to increase revenues at a fairly rapid rate over the past five years, a reflection that it has been able to scale up its operations, and take thereby advantage of the overall growth in the health care industry. The company has been able to grow more rapidly than the S&P 500, a function of both industry growth and firm success within that context. This shows that by adding capacity, and seeking to attract the best workers, United Health has a good strategy that is sustainable over the long run. For example, as baby boomers age they need more prescriptions, a business that Optum is in. The pharmacy benefit management business has been a significant source of growth for United, highlighting the value of having a diversified strategy (Japsen, 2015). The company has specifically cited the value it sees from its "comprehensive whole person approach that integrates data, information, analytics and clinical care insight to support care treatments and compliance" (Japsen, 2015).

Conclusion