UnitedHealth Group Faces DOJ Investigation Over Medicare Billing Practices

Shares Plummet Amid Concerns of Civil Fraud Investigation

UnitedHealth Group Inc. is currently under investigation by the U.S. Department of Justice (DOJ) regarding its billing practices associated with Medicare, according to sources familiar with the matter. This inquiry has led to a significant drop in the company’s stock prices. The Wall Street Journal first revealed details of the civil fraud investigation, which is examining whether UnitedHealth's practices concerning patient diagnoses result in inflated payments from the government’s Medicare Advantage program.

As a result of the investigation, UnitedHealth’s shares plummeted by 7.2% during trading in New York. Humana Inc., which also operates extensively in the Medicare sector, saw its stock decline by 5.7%. The DOJ has chosen not to comment on the investigation, while UnitedHealth has vigorously defended its practices. The insurer issued a statement emphasizing that it is unaware of any new investigative activities, calling claims of fraudulent behavior “outrageous and false.”

In addition to the Medicare billing investigation, the DOJ has been conducting a broader antitrust investigation into UnitedHealth’s business practices, which commenced during the Biden administration. This probe was initiated due to concerns over UnitedHealth's acquisitions of healthcare providers and data firms. The decisions regarding this investigation will ultimately rest with Gail Slater, Trump's nominee for antitrust chief, who is awaiting Senate confirmation. It remains unclear if the inquiries into Medicare billing are interconnected with the ongoing antitrust investigation.

Morningstar analyst Julie Utterback remarked that the sharp decline in UnitedHealth's share price may represent an “overreaction,” given the relatively minor scale of the company’s Medicare Advantage operations compared to its overall business portfolio. However, she noted that, in the current regulatory climate, there is heightened scrutiny, suggesting that regulators might be more proactive in addressing concerns related to companies perceived as exploiting the system.

The government has been increasingly focused on controlling expenses within the Medicare Advantage framework, a private sector version of the federally managed Medicare program for seniors. An advisory group to Congress on Medicare policy has voiced alarm over potential manipulations of the payment system, indicating an urgent need for significant reforms, as highlighted in a 2024 report.

Currently, over half of Medicare beneficiaries receive their services through Medicare Advantage plans, which receive government payments based on the diagnostic codes submitted by insurers. These codes are intended to reflect the health status of their members, and insurers typically earn higher payments for patients with more serious health conditions. In recent years, the Biden administration has sought to limit payments to Medicare Advantage plans, amid accusations from lawmakers, watchdogs, and whistleblowers regarding the misuse of taxpayer dollars.

UnitedHealth has faced heightened scrutiny recently. In December, Brian Thompson, the head of the insurer's division, was tragically killed as he arrived at an investor conference, prompting public outrage over insurers' tendencies to deny medical care. Luigi Mangione, charged with Thompson's murder, appeared in court for a hearing where his lawyer indicated that federal prosecutors are still deliberating the possibility of pursuing the death penalty.

Earlier this month, UnitedHealth's shares faced additional pressure after billionaire investor Bill Ackman suggested, in a now-deleted post on social media, that the company might have exaggerated its profits after a surgeon reported a disruption in medical care due to a call from the insurer. In response, UnitedHealth stated that an error in the hospital led to the surgeon receiving the phone call, and the company subsequently reported its concerns regarding Ackman’s post to the U.S. Securities and Exchange Commission.