By Sriparna Roy
(Reuters) – The U.S. Justice Department has launched a probe into UnitedHealth’s Medicare billing practices in recent months, the Wall Street Journal reported on Friday, sending the healthcare conglomerate’s shares nearly 12% lower.
The civil fraud investigation is examining the company’s practices for recording diagnoses that trigger extra payments to its Medicare Advantage plans, the newspaper reported, citing people familiar with the matter.
UnitedHealth said the report contained «misinformation» about its Medicare Advantage plans, pointing to regular reviews by the government to ensure compliance. The company was also unaware of the launch of any new activity by the regulator, it said in a statement.
The Department of Justice (DoJ) did not immediately respond to Reuters requests for comment.
Medicare Advantage plans are offered by private insurers who are paid a set rate by the U.S. government to manage healthcare for older adults looking for extra benefits not covered by regular Medicare.
Shares of other health insurers such as Humana and CVS Health also fell between 3% and 4% in early trading as the report underscored growing scrutiny into the health insurance sector.
«Investors are selling because it creates an unknown that is hard to quantify – its impossible to truly know at this point how the investigation will unfold and what the ultimate impact will be on UNH’s profitability,» said James Harlow, senior vice president at Novare Capital Management.
The company’s margins are already under pressure from rising medical costs in its insurance business.
The reported investigation is the latest in a series of recent setbacks for UnitedHealth.
Its shares have come under pressure after Brian Thompson, the former CEO of its insurance business, was killed on December 4, sparking conversation around frustrations with navigating the U.S. insurance system.
The healthcare conglomerate was also sued by the DoJ late last year to block its $3.3 billion purchase of home health services provider Amedisys Inc.
The DoJ has a long-running lawsuit pending against UnitedHealth over Medicare Advantage, scheduled to go on trial in October.
Lawmakers and the Federal Trade Commission have also been investigating the role of pharmacy benefit managers such as UnitedHealth’s OptumRx, which act as middlemen between drug companies and consumers, in rising healthcare costs.
(Reporting by Sriparna Roy in Bengaluru; Editing by Shailesh Kuber and Devika Syamnath)
