UnitedHealth Faces Investigation, Stock Plunges Over 8%
New York (January 2023) - UnitedHealth Group (UNH) experienced a significant setback in trading on Friday, with its stock plummeting over 8% in early trading. The decline was attributed to reports that the Department of Justice (DOJ) is investigating the company's Medicare Advantage insurance business.
According to the Wall Street Journal, the civil fraud investigation centers on UnitedHealth's practices for recording diagnoses, which potentially impacts payments received from the Centers for Medicare and Medicaid Services (CMS). CMS provides lump sum payments to private insurers in exchange for alternative Medicare coverage.
UnitedHealth responded to the report on Friday, vehemently denying any wrongdoing. "The Wall Street Journal continues to spread misinformation about the Medicare Advantage (MA) program," the company stated. "We consistently rank among the highest in industry reviews by the government, which regularly audits all MA plans."
The company also expressed unawareness of any new DOJ activity. However, this marks the sixth trading day this year and the second this week that UnitedHealth's stock has declined. Earlier this week, reports emerged of the company offering buyouts to employees in its UnitedHealthcare health insurance business, with layoffs considered if buyout targets are not met.
Over the past year, UnitedHealth has faced other challenges. In 2022, the company was the victim of a major cybersecurity attack affecting over 190 million individuals. Moreover, the DOJ has been investigating the company's potential breakup, and the Federal Trade Commission (FTC) may block its latest acquisition.
The combination of these pressures has contributed to a decline in UnitedHealth's market cap, which currently stands at $460 billion. This represents a notable shift from its previous high-growth trajectory, when the company was considered a frontrunner to become the first trillion-dollar healthcare firm.