Optum is reducing its workforce, which will significantly affect parts of its business related to Medicare Advantage plans for nursing home and assisted living residents.
Workforce Reduction Details
Multiple industry sources and anonymous posts on an online message board related to the layoffs at Optum, the healthcare services arm of UnitedHealth Group (NYSE: UHG), have confirmed the workforce reductions. Optum offers technology, pharmacy care services, a pharmacy benefit manager, and various direct healthcare services. It is a significant player in providing care delivery and coordination for Medicare Advantage Institutional Special Needs Plans (I-SNPs) catering to nursing home residents. As of 2019, Optum served over 1,800 skilled nursing facilities (SNFs) and over 70,000 plan members nationwide.
Scale and Scope of the Optum Layoffs
The recent layoffs at Optum involve hundreds of employees across various company segments. According to multiple news reports, Optum is discontinuing its virtual care business, which Endpoints first confirmed. Harrison Frist, CEO of NaviHealth, is also stepping down from his role in Optum's Home and Community Care business. Optum acquired NaviHealth for about $1 billion in 2020, but the platform has been controversial and is central to a legal dispute involving claims denials related to nursing home services.
Impact on I-SNP and IE-SNP Business
Optum's I-SNP and Institutional Equivalent Special Needs Plans (IE-SNP) businesses have been significantly affected. IE-SNPs cater to individuals who need long-term care but can remain at home, often in group homes or assisted living residences. Sources revealed that approximately 20% to 30% of a 400-person workforce in this division have been laid off, a fact reflected in message board posts. The layoffs include senior leaders in clinical roles and lower-level employees. Additionally, Optum is suspending its IE-SNP business in all but four states.
Company Response and Future Plans
In a statement to Skilled Nursing News (SNN), an Optum spokesperson neither confirmed nor denied the layoffs and other changes within the Senior Community Care division. The spokesperson highlighted that Optum had over 19,000 open positions, many of which are available for telecommuting. "We are committed to providing patients with a robust network of providers for virtual urgent, primary, and specialty care options," the spokesperson said. "We continually review the capabilities and services we offer to meet the growing and evolving needs of our businesses and the people we serve. As always, we will support affected team members with job placement resources and seek to deploy them where possible to any open roles within the company."
Market Dynamics and Competition
Over the past two decades, Optum has held a dominant market position, but competition in the I-SNP and IE-SNP space has increased. Competitors like American Health Plans, Longevity, and PPHP (Provider Partners Health Plan) have emerged, capitalizing on nursing home providers' growing interest in taking direct ownership of I-SNPs rather than contracting with larger insurance companies.
Despite the increased competition, Optum remains a crucial player in the sector. As of the end of 2023, Optum had an estimated 66,000 members, while other companies in the space combined had 52,000 members.
Conclusion
The Optum layoffs mark a significant shift in the company's operations, particularly in its Medicare Advantage plans for nursing home and assisted living residents. Reducing the workforce and suspending services in several states indicate a strategic realignment in response to evolving market conditions and increased competition. As Optum navigates these changes, it remains focused on supporting affected employees and maintaining a robust service network for its members.
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