UnitedHealth faces DOJ investigation, buyouts, stock price drop

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

These developments in current days prolong a tumultuous previous yr for its mother or father firm, UnitedHealth Group, marked by the killing of a high government, a expensive cyberattack in opposition to its subsidiary and excessive medical prices in its insurance coverage arm. UnitedHealth Group is the most important health-care conglomerate within the U.S. based mostly 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% over the past three months.

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

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

Medicare Benefit plans are provided by non-public insurers who’re paid a set fee by the federal government to handle well being take care of seniors in search of further advantages not coated in conventional Medicare. These plans have been a supply of excessive medical prices throughout the broader insurance coverage business over the past yr.  

In an announcement, UnitedHealth known as the Journal’s reporting “misinformation” and mentioned the corporate constantly performs on the business’s “highest ranges” relating to authorities compliance opinions of Medicare Benefit plans

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

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

Stories in regards to 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 way of efforts like leveraging digital expertise. 

And earlier this month, Ackman, one of many world’s most distinguished buyers, 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 submit on X that was essential of the insurer after lawyers for UnitedHealth told him that the physician’s claims that he had amplified on social media had been unfaithful. Ackman mentioned he has no place in UnitedHealth. 

One in every of his earlier posts on the dispute known as on the U.S. Securities and Change Fee to analyze the corporate and advised that the insurer’s “profitability is massively overstated as a result of its denial of medically crucial procedures.”

That is much 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 business and renewed requires reform to stop denials of care.

UnitedHealth can 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 info of round 190 million folks, and UnitedHealth has paid out greater than $3 billion to suppliers affected.

UnitedHealth has mentioned it turned conscious of the cyberattack a yr in the past to the day Friday.