The U.S. Department of Justice (DOJ) is ramping up its scrutiny of UnitedHealth Group, America’s largest health insurer, launching a civil fraud investigation concerning its Medicare billing practices related to the company’s Medicare Advantage plans. The investigation, first reported by The Wall Street Journal, has shocked the market, with UnitedHealth’s stock dropping nearly 9% shortly after the news broke.
At the heart of the matter is how UnitedHealth records patient diagnoses, which can trigger additional payments from the government to the company's Medicare Advantage plans. These raised payments can create significant profits, which has led to allegations of questionable diagnostic practices. The DOJ's investigation coincides with previous reports detailing concerns over how Medicare paid UnitedHealth billions due to these suspicious diagnoses.
“The government regularly reviews all MA plans to assure compliance and we consistently perform at the industry’s highest levels on those reviews,” said UnitedHealth Group, trying to quell fears among investors.
The company firmly denied the allegations, with statements like “any suggestion the practices are fraudulent is outrageous and false.” Yet, behind this public front, the DOJ has been interviewing medical providers linked to the dubious billing practices, with follow-up inquiries occurring as recently as January 31.
According to the Wall Street Journal, the investigation sheds light on wider issues as it examines how the company has benefited from using Medicare billing rules to its advantage. This includes claims from multiple doctors—who worked within UnitedHealth’s network—who have detailed their training focused on generating revenue through specific diagnoses. They recounted practices where the company utilized software to suggest conditions for billing and rewarded physicians for adhering to these often-questionable practices.
James Harlow, senior vice president at Novare Capital Management, indicated the uncertainty stemming from the investigation is weighing heavily on share prices. “Investors are selling because it creates an unknown that's hard to quantify,” he noted, emphasizing the challenges faced by UnitedHealth during this tumultuous time.
Adding to the complexity of the situation, UnitedHealth is also grappling with serious operational challenges. The DOJ's examination is separate from its earlier antitrust probe related to the company, which saw the department block UnitedHealth's $3.3 billion acquisition of home health company Amedisys last year.
The challenges have only intensified since December 4, when Brian Thompson, who was CEO of UnitedHealthcare’s insurance business, was fatally shot in New York. This distressing event led to heightened discussions about UnitedHealth’s practices and the broader frustrations surrounding the U.S. healthcare system.
Compounding the pressure, there has been public backlash against the insurer's claim denial practices. This scrutiny may affect even the company’s operational decisions, as recent reports suggested UnitedHealth is offering buyouts to employees and considering layoffs within its benefits unit.
While UnitedHealth claims only 15% of members within its insurance business are covered by Medicare Advantage, this downturn has prompted analysts to speculate if the volatility is justified. Julie Utterback from Morningstar commented on the potential overreaction to these events, indicating the prevailing fear surrounding the investigation may not translate to long-term profitability issues.
The DOJ holds longstanding lawsuits against UnitedHealth connected to its Medicare practices, with one scheduled for trial later this year. Concurrently, lawmakers and the Federal Trade Commission have intensified their focus on pharmacy benefit managers, including UnitedHealth's OptumRx, as they try to understand their role contributing to increasing healthcare costs.
With tensions rising around the Medicare filing schemes and the investigation looming large, UnitedHealth’s next steps will be closely watched by investors, regulators, and the public alike. The healthcare giant remains at the intersection of scrutiny and systemic reform, prompting questions about transparency and ethical practices in Medicare billing across the board.