UnitedHealth Group’s (UNH) stock fell more than 11% during premarket trading, after The Wall Street Journal reported the Justice Department had launched a civil investigation into the company’s Medicare billing practices.
Following the report, shares were trading at around $443.53.
The investigation examines how UnitedHealth records diagnosis that leads to increased payments from Medicare Advantage. Medicare Advantage is a privately administered version federal health program for seniors.
According to the report the government is scrutinizing whether or not the insurer’s physicians groups have engaged practices that inflate reimbursements.
The Justice Department’s decision comes amid growing concerns about the rising cost of Medicare Advantage.
In a report from 2024, congressional Medicare advisers emphasized the “urgent need” for a major revamp of the program’s payments system, which, they believe, is susceptible to manipulation.
This investigation is a further challenge for the company, as the DOJ has also attempted to block UnitedHealth’s $3.3 billion purchase of Amedisys(NASDAQ:AMED), over antitrust concerns.
UnitedHealth’s Buyout Program
Separately, UnitedHealth launched a voluntary buyout for some employees of its UnitedHealthcare division.
The Voluntary Separation Program (or VSP) is for workers in the Benefits Operations Unit.
Sources told CNBC that employees who resign before March 3 will be offered a financial package. Those who decline will either keep their current job or be transferred to a similar role.
The internal memo, seen by CNBC, indicated that the buyout applied to full-time and half-time employees across four subdivisions, including corporate, consumer operations and core services.
UnitedHealth has not revealed the total number employees who have been offered buyouts. However, the program is reported to affect up to 30,000 workers.
A spokesperson for the company stated that this initiative aims to ensure UnitedHealth’s employees are well-positioned in order to serve their customers effectively.
Sources have stated that if a company fails to meet a certain target for resignations, it may be forced to lay off employees.
Bernstein reaffirm Outperform rating
Lance Wilkes and other Bernstein analysts reaffirmed on Friday their Outperform Rating on UnitedHealth Group, (NYSE: UNH), with a price target of $697,000.00.
Analysts noted that UnitedHealth’s diversified model, including its Optum segment which focuses on value based care, positions it for continued growth.
Analysts said that the buyout program is in line with UnitedHealth’s overall cost-cutting strategies.
The company is expecting a modest rise in operating costs for 2025.
Analysts predict that the company’s operating expense ratio will decrease by 1.5% in this year and an additional 1.0% in 2025.
UnitedHealth’s cost cutting measures focus primarily on its core health insurance company, UnitedHealthcare. Improvements are expected in areas such as claims processing, customer service and other operational aspects.
Optum Insights, Optum Health and Optum Health Value-Based Care are expected to continue receiving investment as UnitedHealthcare undergoes changes aimed at improving efficiency.
This post UnitedHealth Group stock falls 11% as DOJ probes Medicare Billing may be modified as new developments unfold.
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