Shares of UnitedHealth Group experienced a significant drop of over 13% on Thursday, driven by news of a criminal investigation by the Department of Justice into possible Medicare fraud. The focus of the investigation is reportedly on the company’s Medicare Advantage practices, although specific details regarding the allegations remain unclear, according to a report by The Wall Street Journal.
In response to the investigation news, UnitedHealth Group issued a statement claiming that the Department of Justice has not informed them about the probe and described the media coverage as “deeply irresponsible.” The company maintains that it stands by the integrity of its Medicare Advantage program.
This scrutiny marks the second time this year that the insurer’s Medicare Advantage business has faced federal attention. Earlier in February, it was reported that the DOJ was already conducting a civil investigation into allegations that UnitedHealth inflated diagnoses to secure additional payments for its Medicare Advantage plans.
The Medicare and retirement segment, which includes the Medicare Advantage service, is crucial for UnitedHealth Group’s revenue, generating $139 billion in sales last year. The recent news follows the unexpected departure of CEO Andrew Witty, who will be succeeded by former CEO Stephen Hemsley.
This year has proven challenging for UnitedHealth Group, as its shares have declined approximately 49%, with the company losing over $300 billion of its $600 billion market capitalization in just a month. Mizuho health-care equity strategist Jared Holz cautioned that there’s a risk of the company being removed from the Dow Jones Industrial Average unless it demonstrates greater operational consistency.
Additionally, UnitedHealth faced a tumultuous 2024, marked by a historic cyberattack, unexpected medical costs, and turmoil following the tragic murder of UnitedHealthcare’s CEO Brian Thompson. These combined challenges have significantly impacted investor confidence in the company.
While this news paints a concerning picture for UnitedHealth’s immediate future, it remains to be seen how the company will navigate these allegations and whether it can regain investor confidence in the long run.