The reason behind the decline in UnitedHealth's stock value today.
UnitedHealth Group, the parent company of the nation's largest health insurer and various other health-related businesses, is under investigation by the U.S. Department of Justice (DOJ). The investigation centered around UnitedHealth's Medicare billing practices, specifically focusing on the company's approach to recording diagnoses that result in extra payments for its Medicare Advantage plans.
According to unnamed sources cited by The Wall Street Journal, the DOJ is looking into UnitedHealth's practices at physician groups it owns, suspecting potential encouragement for inappropriate diagnoses leading to increased Medicare payments. This investigation adds to existing concerns surrounding UnitedHealth, which is currently facing an antitrust probe and regulatory pushback over its planned $3.3 billion acquisition of Amedisys.
Investors reacted negatively to the news, causing UnitedHealth shares to plummet by 9% as of 10 a.m. Eastern. Major Medicare Advantage insurers like Humana and CVS Health also experienced stock drops following the announcement. However, some analysts believe the stock decline is an overreaction to the news, with most assigning buy-equivalent ratings to UnitedHealth Group.
As the healthcare industry remains a crucial market, UnitedHealth Group's significant role within it may suggest lasting potential for long-term investors. Nevertheless, given the company's current circumstances, investors might be advised to remain cautious in their approach to UnitedHealth's stock. Despite the ongoing investigation and its impact on the stock price, Morningstar maintains a fair value estimate of $590 per share, indicating some undervaluation in UnitedHealth Group's shares.
Reportedly, the investigation into UnitedHealth's Medicare billing practices by the DOJ has expanded to include the finance aspect of their business, specifically focusing on potential payments made due to inappropriate diagnoses at physician groups owned by UnitedHealth. The investigation into UnitedHealth's practices might give smaller players in the investing world an advantage, as some analysts see the stock decline as an overreaction and are assigning buy-equivalent ratings to UnitedHealth Group. Under a microscope due to the ongoing investigation, UnitedHealth's financial reports for investing purposes should be analyzed with extra care to fully understand the potential risks and opportunities.
