MW These three healthcare stories are spooking investors. But they shouldn't worry.

By Ciara Linnane

Headlines on cuts to Medicare Advantage and new Justice Department probe of UnitedHealth have investors focused on the wrong things, analyst says

Healthcare investors spooked by recent headlines on cuts to Medicare Advantage and a new Justice Department probe of UnitedHealth Group Inc.'s billing practices are worrying about the wrong thing.

That's according to Raymond James analyst Chris Meekins, who highlighted those two stories, plus research on a new coronavirus lineage written by scientists at the Wuhan Institute of Virology, as three topics that have created angst among investors, "that we believe are not worthy of worry at this time."

UnitedHealth's stock $(UNH)$ fell 7.7% Friday, after the Wall Street Journal reported that the Justice Department had launched a civil investigation into UnitedHealth's Medicare billing practices.

UnitedHealth said it was not aware of the launch of any new activity by the Justice Department and that the Wall Street Journal continues to report "misinformation" on the company's Medicare Advantage plan.

"Any suggestion that our practices are fraudulent is outrageous and false," UnitedHealth said in a statement.

Meekins said that, based on Raymond James' checks and conversations with experts, "this appears to be part of DOJ's broader look at UNH and nothing new.

"One would be hard-pressed to find a company the size of UNH that is not under investigation for something. In many of these types of investigations, companies settle and pay a fine creating a one-time hit," the analyst wrote in a Monday note to clients.

As for Medicare Advantage overall, headlines circulating Friday suggested Republicans could use the program as a potential way to pay for other planned cuts, suggesting around $10 billion a year, or $100 billion over 10 years, are under consideration.

"Based on all of our conversations thus far in DC, there are no serious discussions about cutting MA from Republicans," Meekins wrote.

But current coverage suggests talks on a range of topics even though there are no serious discussions taking place, he added.

"Even if these cuts were on the table, which we do not believe they are at this point, that would amount to around a 2% cut to current MA spending," the analyst wrote.

As for the latest report on COVID-19, published in the Feb. 18 version of the journal Cell, Meekins does not believe it's an item worthy of concern for three reasons. First, key infectious-disease experts in the Raymond James network do not believe the report of a new lineage is an item of concern. Second, the WIV has previously performed extensive research into coronaviruses such as this one, and this discovery is not especially noteworthy in the context of its prior research and what we know about coronaviruses. Finally, there are no known human cases.

"There are plenty of things to be concerned about related to health policy, as we have extensively written about; however these three are not worthy of the attention they received, in our view," said Meekins.

In his last research note published Feb. 18, Meekins highlighted staff layoffs across health agencies such as the Food and Drug Administration, the Centers for Medicare and Medicaid Services, the National Institutes of Health, the Centers for Disease Control and Prevention and the Administration for Strategic Preparedness and Response.

The Associated Press has reported that some 5,200 new employees are to be fired across the HHS after the Trump administration opted to take advantage of the ability to remove probationary federal employees from their positions.

"The impact is hard to quantify as it is difficult to know the exact roles they had and whether others can or will take on those responsibilities. Our view is this will have an impact on the workings of these agencies and on public companies who need these entities to work efficiently," Meekins wrote.

UnitedHealth's stock rose 0.6% early Monday, pulling other health insurers higher with it. Humana Inc.'s stock $(HUM.UK)$ was up 0.6% after closing down 5.7% on Friday, CVS Health Corp.'s stock $(CVS)$ was up 0.5% after closing down 2.5% Friday. And Elevance Health Inc.'s stock (ELV) was up 0.2% after closing down 1.4% Friday.

Read now: UnitedHealth Medicare Advantage bombshell exposes $83 billion in government waste

-Ciara Linnane

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February 24, 2025 07:44 ET (12:44 GMT)

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