Shares of UnitedHealth experienced a significant decline on Friday following a report by The Wall Street Journal indicating that the U.S. Department of Justice (DOJ) is investigating the company’s Medicare billing practices. The Minnesota-based insurer’s stock fell 7.2%, making it the poorest performer in the Dow Jones Industrial Average. This drop contributed to an almost 11% decrease in value over the week, marking its most substantial weekly decline since 2020.
According to sources familiar with the matter, the DOJ is scrutinizing UnitedHealth’s protocols for recording diagnoses that could result in additional payments for its Medicare Advantage plans. Medicare Advantage plans are managed by private insurers who receive a fixed rate from the government and cater to seniors seeking benefits beyond those provided by traditional Medicare. Following the news, shares of other major Medicare Advantage insurers also declined. Humana, which relies heavily on Medicare Advantage, dropped over 5%, while CVS Health and Elevance Health fell more than 2% and 1%, respectively.
The civil investigation is distinct from a separate antitrust probe by the DOJ, which has also taken legal action to block UnitedHealth’s acquisition of home health firm Amedisys due to antitrust concerns. Shares of Amedisys dipped approximately 0.7% on Friday.
In response, UnitedHealth stated that the Journal had reported “misinformation” about its Medicare Advantage program. The company emphasized that the government routinely assesses plans associated with the program. “We are not aware of the ‘launch’ of any ‘new’ activity as reported by the Journal,” UnitedHealth said. “We are aware, however, that the Journal has engaged in a year-long campaign to defend a legacy system that rewards volume over keeping patients healthy and addressing their underlying conditions.” The company strongly denied any fraudulent practices.
The DOJ did not respond to requests for comment from CNBC. This investigation adds to the scrutiny faced by UnitedHealth, the largest private health insurer in the U.S., which has already been in the spotlight following the tragic shooting of Brian Thompson, then-CEO of UnitedHealth’s insurance unit, late last year.
Despite the declines, several Wall Street analysts view the market reaction as an overreaction. Most analysts covering the stock maintain buy-equivalent ratings, according to LSEG. “We are skeptical that this purported investigation will result in a material fine and/or change in business practice that justifies today’s stock decline,” commented KeyBanc’s Matthew Gillmor.
— news from CNBC