The U.S. Department of Justice (DOJ) has launched an investigation into UnitedHealth Group's (UNH, Financial) pricing practices related to Medicare Advantage. This investigation, focused on civil fraud, is separate from an ongoing antitrust probe. Following this news, UnitedHealth's stock fell over 12% in pre-market trading.
The DOJ is examining UnitedHealth's diagnostic recording practices, suspecting the company of gaining undue benefits from the Medicare Advantage program. This program involves a one-time payment from the federal government to insurance companies to manage beneficiaries' healthcare benefits. Payments increase when specific diagnoses are made, incentivizing more diagnoses.
UnitedHealth, a $400 billion market cap company, is the largest health insurer in the U.S. and owns various assets in the healthcare industry, including physician clinics and a large pharmacy benefit management company. Reports suggest that UnitedHealth added untreated disease diagnoses to patient records, leading to an additional $8.7 billion in federal spending in 2021. These diagnoses often stemmed from home visits by nurses from UnitedHealth's HouseCalls division, with each visit averaging an extra $2,735 in costs.
UnitedHealth has defended its practices, claiming they lead to more accurate diagnoses and have performed well in federal audits, benefiting patients. Meanwhile, the federal government is reviewing the costs of Medicare Advantage, with congressional advisors expressing concerns about potential manipulation of the payment system and highlighting the need for significant reforms in their 2024 report.
