UnitedHealth faces DOJ investigation, buyouts, stock price drop

UnitedHealthcare is in sizzling water once more because the insurance coverage big grapples with a reported authorities investigation of its Medicare billing practices, pursues worker buyouts and potential layoffs, and clashes publicly with billionaire Invoice Ackman.

These developments in latest days prolong a tumultuous previous 12 months for its dad or mum firm, UnitedHealth Group, marked by the killing of a prime govt, a pricey cyberattack in opposition to its subsidiary and excessive medical prices in its insurance coverage arm. UnitedHealth Group is the largest health-care conglomerate within the U.S. primarily based on income and its greater than $420 billion market cap, and UnitedHealthcare is the nation’s largest non-public insurer. 

Shares of UnitedHealth Group have tumbled roughly 23% during the last three months.

The inventory additionally fell 9% on Friday following a report concerning the probe, which was first reported by The Wall Road Journal. The Division of Justice has launched a civil fraud investigation in latest months into UnitedHealth’s billing practices for its Medicare Benefit plans, in line with the newspaper.

The probe particularly examines whether or not diagnoses have been routinely made to set off further funds in these plans, together with at doctor teams the insurer owns, the Journal stated. It comes after a sequence of articles from the newspaper final 12 months, which reported that Medicare paid UnitedHealth billions of {dollars} for questionable diagnoses. 

Medicare Benefit plans are supplied by non-public insurers who’re paid a set price by the federal government to handle well being take care of seniors searching for further advantages not lined in conventional Medicare. These plans have been a supply of excessive medical prices throughout the broader insurance coverage trade during the last 12 months.  

In a press release, UnitedHealth referred to as the Journal’s reporting “misinformation” and stated the corporate constantly performs on the trade’s “highest ranges” in relation to authorities compliance opinions of Medicare Benefit plans

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

In a analysis word Friday, RBC Capital Markets analyst Ben Hendrix referred to as the reported investigation an “incremental overhang” however emphasised it’ll probably be a “prolonged course of and unlikely in our view to end in materials monetary headwinds within the close to time period.” He pointed to a probe the DOJ launched final 12 months on the corporate’s subsidiary Optum Rx for potential antitrust violations, which is able to equally have an prolonged timeline earlier than any decision. 

Reviews concerning the probe got here two days after CNBC first reported that UnitedHealthcare is providing buyouts to workers and will pursue layoffs if resignation quotas aren’t met. The transfer comes as the corporate tries to chop prices by efforts like leveraging digital know-how. 

And earlier this month, Ackman, one of many world’s most distinguished traders, publicly pledged to cowl the authorized charges for a Texas physician in a dispute with UnitedHealth Group over her claims that the corporate pulled her out of an operation to justify a affected person’s care.

Ackman, who’s CEO of Pershing Sq. Capital Administration, later took down a put up on X that was crucial of the insurer after attorneys for UnitedHealth informed him that the physician’s claims that he had amplified on social media have been unfaithful. Ackman stated he has no place in UnitedHealth. 

Certainly one of his earlier posts on the dispute referred to as on the U.S. Securities and Change Fee to analyze the corporate and steered that the insurer’s “profitability is massively overstated as a result of its denial of medically essential procedures.”

That is just like the general public blowback the corporate confronted after the killing of UnitedHealthcare CEO Brian Thompson in December. It unleashed a wave of pent-up anger and resentment towards the insurance coverage trade and renewed requires reform to stop denials of care.

UnitedHealth can also be nonetheless grappling with the fallout from a cyberattack on its subsidiary Change Healthcare, which processes medical claims. The cyberattack compromised the protected well being data of round 190 million folks, and UnitedHealth has paid out greater than $3 billion to suppliers affected.

UnitedHealth has stated it grew to become conscious of the cyberattack a 12 months in the past to the day Friday.