UnitedHealth Stock Falls 9% Amid DOJ Medicare Probe

UnitedHealth’s stock dropped 9% to under $460 after the DOJ announced a civil fraud investigation into the company’s Medicare Advantage billing practices. You’ll find the healthcare giant strongly denies allegations of improper documentation for federal payments, calling them “outrageous and false.” The probe comes as Medicare Advantage payments jumped 30% from 2022 to 2023. The investigation’s impact extends beyond UnitedHealth, potentially reshaping the entire healthcare insurance landscape.

Shares of America’s largest health insurer plummeted Friday after reports surfaced that the U.S. Department of Justice has launched a civil fraud investigation into UnitedHealth Group‘s Medicare billing practices. The stock market reacted swiftly to the news, sending UNH shares tumbling nearly 9% to below $460, marking a significant blow to the healthcare giant amid intensifying healthcare regulations.

The DOJ’s probe centers on allegations that UnitedHealth, which serves over 7.8 million Medicare Advantage members, may have improperly recorded patient diagnoses to secure additional payments from the federal government. Under the Medicare Advantage program, insurers receive lump sum payments that can increase based on documented patient conditions, raising concerns about potential padding of diagnoses for financial gain. These concerns are particularly significant given that Medicare Advantage payments saw a 30% increase from 2022 to 2023, reaching $12.8 billion.

Federal investigators allege UnitedHealth inflated patient diagnoses to boost Medicare Advantage payments, affecting millions of members nationwide.

UnitedHealth has strongly rejected these allegations, with a company spokesperson calling them “outrageous and false.” The insurer maintains it’s unaware of any new investigative activity and points to its consistent high performance in government compliance reviews. The company also faced accusations of training doctors to document specific diagnoses that would generate additional revenue. However, the market’s reaction suggests investors are taking the probe seriously, especially given the company’s dominant position in the Medicare Advantage market.

The investigation’s impact rippled through the healthcare sector, affecting other Medicare Advantage insurers like Humana, whose shares also declined. The market impact was particularly severe, with UnitedHealth experiencing a stock decline since December that erased over $100 in share value. This development comes at a challenging time for UnitedHealth, which is already grappling with rising medical costs and increased care utilization that have surprised analysts despite better-than-expected fourth-quarter profits.

The timing is particularly sensitive for UnitedHealth, which is still recovering from December’s tragic shooting of UnitedHealthcare CEO Brian Thompson and the subsequent public outcry against private healthcare industry practices. The company’s stock has struggled to regain momentum, having fallen from over $600 to its current levels, with a year-to-date decline exceeding 9.4%.

The DOJ’s investigation could potentially reshape the Medicare Advantage landscape, as it may lead to expanded oversight and stricter compliance requirements for all participating insurers. For UnitedHealth, valued at approximately $400 billion, the stakes are particularly high given its market leadership position and the significant role Medicare Advantage plays in its business model.

While this isn’t a criminal investigation, the civil fraud probe could still have substantial implications for UnitedHealth’s operations and financial performance. The company faces mounting pressure from rising care use and Medicare Advantage rate cuts, making the timing of this investigation particularly challenging for the industry leader.

As investors digest these developments, the focus will likely remain on how UnitedHealth navigates this regulatory scrutiny while maintaining its market position and addressing concerns about its billing practices. The outcome of this investigation could have lasting implications for both the company and the broader healthcare insurance industry’s approach to Medicare Advantage program participation.