UnitedHealth faces DOJ investigation, buyouts, stock price drop

UnitedHealthcare is in hot water again because the insurance giant grapples with a reported government investigation of its Medicare billing practices, pursues worker buyouts and potential layoffs, and clashes publicly with billionaire Bill Ackman.

Those developments in recent days extend a tumultuous past 12 months for its parent company, UnitedHealth Group, marked by the killing of a top executive, a costly cyberattack against its subsidiary and high medical costs in its insurance arm. UnitedHealth Group is the largest health-care conglomerate within the U.S. based on revenue and its greater than $420 billion market cap, and UnitedHealthcare is the nation’s largest private insurer. 

Shares of UnitedHealth Group have tumbled greater than 20% during the last three months.

The stock also closed 7% lower on Friday following a report in regards to the probe, which was first reported by The Wall Street Journal. The Department of Justice has launched a civil fraud investigation in recent months into UnitedHealth’s billing practices for its Medicare Advantage plans, in line with the newspaper.

The probe specifically examines whether diagnoses were routinely made to trigger extra payments in those plans, including at physician groups the insurer owns, the Journal said. It comes after a series of articles from the newspaper last 12 months, which reported that Medicare paid UnitedHealth billions of dollars for questionable diagnoses. 

Medicare Advantage plans are offered by private insurers who’re paid a set rate by the federal government to administer health take care of seniors searching for extra advantages not covered in traditional Medicare. Those plans have been a source of high medical costs across the broader insurance industry during the last 12 months.  

In a press release, UnitedHealth called the Journal’s reporting “misinformation” and said the corporate consistently performs on the industry’s “highest levels” on the subject of government compliance reviews of Medicare Advantage plans

“Any suggestion that our practices are fraudulent is outrageous and false,” the corporate said.

In a research note Friday, RBC Capital Markets analyst Ben Hendrix called the reported investigation an “incremental overhang” but emphasized it should likely be a “lengthy process and unlikely in our view to lead to material financial headwinds within the near term.” He pointed to a probe the DOJ launched last 12 months into the corporate’s subsidiary Optum Rx for potential antitrust violations, which can similarly have an prolonged timeline before any resolution. 

Reports in regards to the probe got here two days after CNBC first reported that UnitedHealthcare is offering buyouts to employees and will pursue layoffs if resignation quotas aren’t met. The move comes as the corporate tries to chop costs through efforts like leveraging digital technology. 

And earlier this month, Ackman, one among the world’s most distinguished investors, publicly pledged to cover the legal fees for a Texas doctor in a dispute with UnitedHealth Group over her claims that the corporate pulled her out of an operation to justify a patient’s care.

Ackman, who’s CEO of Pershing Square Capital Management, later took down a post on X that was critical of the insurer after lawyers for UnitedHealth told him that the doctor’s claims that he had amplified on social media were unfaithful. Ackman said he has no position in UnitedHealth. 

Certainly one of his earlier posts on the dispute called on the U.S. Securities and Exchange Commission to research the corporate and suggested that the insurer’s “profitability is massively overstated on account of its denial of medically mandatory procedures.”

That is much like the general public blowback the corporate faced after the killing of UnitedHealthcare CEO Brian Thompson in December. It unleashed a wave of pent-up anger and resentment toward the insurance industry and renewed calls for reform to forestall denials of care.

UnitedHealth can also be still grappling with the fallout from a cyberattack on its subsidiary Change Healthcare, which processes medical claims. The cyberattack compromised the protected health information of around 190 million people, and UnitedHealth has paid out greater than $3 billion to providers affected.

UnitedHealth has said it became aware of the cyberattack a 12 months ago to the day Friday.