Shares of UnitedHealth Group (NYSE: UNH) fell 6.73% on Friday following news of a Justice Department investigation into the company’s Medicare billing practices. The probe centers on how UnitedHealth records patient diagnoses to secure higher payments for its Medicare Advantage plans, including those managed through physician groups it owns.
The investigation started after a series of articles in The Wall Street Journal last year raised red flags about potentially questionable diagnoses. These reports suggest UnitedHealth may have raked in billions of dollars in extra Medicare payments through its billing methods. Sources confirm that Justice Department attorneys have been interviewing medical providers cited in those stories, with the latest talks happening as recently as January 31.
In the Medicare Advantage program, the government pays insurers like UnitedHealth a lump sum to manage enrollees’ healthcare needs. When certain illnesses are diagnosed, the payments increase, providing companies with a reason to document conditions thoroughly. Now, regulators are digging into whether UnitedHealth’s approach went too far, sparking concerns among investors.
The news sent shockwaves through the Medicare Advantage sector. Humana (NYSE: HUM), a company heavily reliant on the program, saw its shares fall more than 4%. CVS Health (NYSE: CVS) and Elevance Health (NYSE: ELV) weren’t spared either, with each declining over 1% as investors grew wary of broader implications.
This civil probe stands separate from another Justice Department effort—an antitrust case aimed at blocking UnitedHealth’s planned acquisition of Amedisys (NASDAQ: AMED), a home health company. Amedisys shares slipped about 0.7% in regular trading on Friday.
UnitedHealth didn’t hold back in its response. The company blasted The Wall Street Journal’s coverage as “misinformation” and denied claims of a newly launched probe.
“We are not aware of the ‘launch’ of any ‘new’ activity as reported by the Journal. 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,” UnitedHealth said in the statement. “Any suggestion that our practices are fraudulent is outrageous and false.”
Wall Street analysts largely dismissed the stock drop as an overreaction. Most analysts who cover UnitedHealth (NYSE: UNH) stock maintain buy-equivalent ratings, according to data from LSEG.
KeyBanc analyst Matthew Gillmor downplayed the sell-off in a note to clients. He said,
“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.”
