UnitedHealth Group (NYSE:UNH) just took a heavy hit, with shares plunging nearly 9% at 12.17pm today, after reports surfaced that the U.S. Justice Department is investigating its Medicare billing practices. The civil fraud probe is digging into whether the company inflated diagnoses to secure higher government payments for its Medicare Advantage plans. This comes at a time when regulatory pressure on the industry is already mounting, and investors aren't taking any chances. UnitedHealth pushed back, saying the report contains misinformation, but with rival insurers like Humana (NYSE:HUM) and CVS Health (NYSE:CVS) also seeing declines, the sell-off signals broader concerns about the Medicare Advantage system.
Beyond this latest legal headache, UnitedHealth is already battling an antitrust lawsuit from the DOJ aiming to block its $3.3 billion acquisition of home health provider Amedisys. The company is also feeling the heat over its pharmacy benefit manager, OptumRx, as regulators investigate its role in rising healthcare costs. Meanwhile, insiders say UnitedHealth's insurance unit is offering buyouts and weighing layoffsmoves that suggest pressure is mounting across its operations. Analysts are split on the fallout; some argue the stock's nosedive is an overreaction since Medicare Advantage accounts for just 15% of the company's insurance business, but others warn the legal uncertainty could be a drag for months.
At the core of the DOJ's case is a long-standing criticism of Medicare Advantage itselfinsurers getting bigger payouts for adding more diagnoses, sometimes with little direct medical basis. Reports indicate UnitedHealth pushed physicians to document extra conditions, even rewarding them for it, leading to billions in additional federal payments. If the investigation gains traction, it could reshape not just UnitedHealth's future but the entire industry's approach to Medicare billing. Investors now have to weigh whether this is just another regulatory skirmish or the beginning of a larger crackdown that could upend the sector.
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