Stock of the day: UnitedHealth drops 13% on report DOJ is investigating Medicare billing practices

The move:

UnitedHealth Group
stock tumbled as much as 13% to $438.50, exceeding the lows reached in December following Luigi Mangione’s
alleged murder
of UnitedHealthCare CEO Brian Thompson.

The chart:

Why:

The sell-off was sparked by a report from
The Wall Street Journal
that said the Justice Department launched an investigation into the company’s Medicare billing practices.

The civil fraud investigation was reportedly launched in recent months, and revolves around the health insurance giant’s practice of recording diagnoses that trigger additional payments to its Medicare Advantage plans, including at physician groups owned by the insurance giant.

In the Medicare Advantage system, insurance companies lump-sum payments from the federal government to manage the Medicare benefits of their members. These payments increase when patients are diagnosed with certain diseases, thereby potentially incentivizing insurers to identify additional illnesses.

The Journal had
previously reported
that Medicare paid UnitedHealth billions of dollars for questionable diagnoses.

In a statement, UnitedHealth Group called the report “misinformation” and said it was “not aware of the ‘launch’ of any ‘new’ activity as reported by the Journal.”

“Any suggestion that our practices are fraudulent is outrageous and false,” UnitedHealth Group added.

The stock pared its losses to about 9% following the statement.

What it means:

With health insurance premiums skyrocketing over the past decade, United and other providers have faced increased scrutiny from the public.

United was in the news in December when
Luigi Mangione allegedly shot and killed
UnitedHealthCare CEO Brian Thompson in New York City.

For UnitedHealth Group, the parent company of UnitedHealthCare, this Justice Department probe is one of several.

In February 2024, it was reported that the Justice Department was investigating the company for antitrust violations. In addition, the Justice Department sued UnitedHealth to block its planned $3.3 billion buyout of Amedisys on antitrust grounds.

There’s some question about whether the new Trump administration will continue to pursue prior investigations, as
recent actions have proven to be friendly
to companies that regulators were investigating in the Biden era, and Trump’s campaign platform included promises of lighter government regulation of US companies.