UnitedHealth Arm Acquires Audax

Optum, the health service arm of UnitedHealth Group Inc. (UNH), has announced its decision to buy a majority stake in Audax Health Solutions, Inc. Audax, through its digital offerings, offers customer-friendly health management solutions.

The terms of the deal have been kept under wrap.

Following the acquisition, Audax will continue to be managed by its founder and present CEO, Grant Verstandig, along with the chief financial officer at UnitedHealth, David Ko (the former COO of Zynga [ZNGA]) and his experienced team of executives.

Despite being in operations for only 3 years since its inception, Audax boasts of a number of strategic tie ups which include health plans, distribution partners, employers, care providers and condition-management companies. It has also collaborated with companies like Fitbit, Polar, Withings and BodyMedia. These tie ups have enabled Audax to extend its innovative digital offering to multitudes of people in order to facilitate health management.

Optum – in partnership with Audax – will help expand the latter’s product technology on a wider platform to support consumers’ needs for integrated benefit selection, wellness and health care administration. This, in turn, will ease health management for patients as well as UnitedHealth members.

UnitedHealth’s tie up with Audax reflects the company’s goal of reaching out to greater number of people and make healthcare both manageable and affordable for them, given the rising awareness toward healthcare and fitness.

The Optum division provides UnitedHealth with clear diversification benefits and is a jewel in the company’s crown. For the full-year 2013, Optum's operating earnings of $2.3 billion grew 61% year over year and was up 84% over 2011, the baseline year. Fourth-quarter 2013 operating earnings increased 43%.

Optum reached its 6% operating margin target 2 years early in 2013 and has now established a new target called “8 by '16,” under which it aims at an 8% operating margin by 2016. Optum expects strong top and bottom-line growth in 2014, with operating earnings in the range of $3.1 billion to $3.2 billion and revenues between $45 billion and $46 billion.

Audax has already tied up with another health insurer, Cigna Corp. (CI) to help consumers set up online health plans. With technology gaining focus under the Affordable Healthcare Act, we expect other players in the sector, like Aetna Inc. (AET) and Humana Inc. (HUM) to follow suit.