UnitedHealth’s rough stretch continues, with buyouts, a reported DOJ probe and a 23% drop in three months

UnitedHealthcare is in hot water again as the insurance giant grapples with a reported government investigation of its Medicare billing practices, pursues employee buyouts and potential layoffs, and clashes publicly with billionaire Bill Ackman.

Those developments in recent days extend a tumultuous past year for its parent company, UnitedHealth Group, marked by the killing of a top executive, a costly cyberattack against its subsidiary and high medical costs in its insurance arm. UnitedHealth Group is the biggest health-care conglomerate in the U.S. based on revenue and its more than $420 billion market cap, and UnitedHealthcare is the nation’s largest private insurer. 

Shares of UnitedHealth Group have tumbled more than 20% over the last three months.

The stock also closed 7% lower on Friday following a report about the probe, which was first reported by The Wall Street Journal. The Department of Justice has launched a civil fraud investigation in recent months into UnitedHealth’s billing practices for its Medicare Advantage plans, according to the newspaper.

The probe specifically examines whether diagnoses were routinely made to trigger extra payments in those plans, including at physician groups the insurer owns, the Journal said. It comes after a series of articles from the newspaper last year, which reported that Medicare paid UnitedHealth billions of dollars for questionable diagnoses. 

Medicare Advantage plans are offered by private insurers who are paid a set rate by the government to manage health care for seniors looking for extra benefits not covered in traditional Medicare. Those plans have been a source of high medical costs across the broader insurance industry over the last year.  

In a statement, UnitedHealth called the Journal’s reporting “misinformation” and said the company consistently performs at the industry’s “highest levels” when it comes to government compliance reviews of Medicare Advantage plans

“Any suggestion that our practices are fraudulent is outrageous and false,” the company said.

In a research note Friday, RBC Capital Markets analyst Ben Hendrix called the reported investigation an “incremental overhang” but emphasized it will likely be a “lengthy process and unlikely in our view to result in material financial headwinds in the near term.” He pointed to a probe the DOJ launched last year into the company’s subsidiary Optum Rx for potential antitrust violations, which will similarly have an extended timeline before any resolution. 

Reports about the probe came two days after CNBC first reported that UnitedHealthcare is offering buyouts to employees and could pursue layoffs if resignation quotas aren’t met. The move comes as the company tries to cut costs through efforts like leveraging digital technology. 

And earlier this month, Ackman, one of the world’s most prominent investors, publicly pledged to cover the legal fees for a Texas doctor in a dispute with UnitedHealth Group over her claims that the company pulled her out of an operation to justify a patient’s care.

Ackman, who is CEO of Pershing Square Capital Management, later took down a post on X that was critical of the insurer after lawyers for UnitedHealth told him that the doctor’s claims that he had amplified on social media were untrue. Ackman said he has no position in UnitedHealth. 

One of his earlier posts on the dispute called on the U.S. Securities and Exchange Commission to investigate the company and suggested that the insurer’s “profitability is massively overstated due to its denial of medically necessary procedures.”

That’s similar to the public blowback the company faced after the killing of UnitedHealthcare CEO Brian Thompson in December. It unleashed a wave of pent-up anger and resentment toward the insurance industry and renewed calls for reform to prevent denials of care.

UnitedHealth is also still grappling with the fallout from a cyberattack on its subsidiary Change Healthcare, which processes medical claims. The cyberattack compromised the protected health information of around 190 million people, and UnitedHealth has paid out more than $3 billion to providers affected.

UnitedHealth has said it became aware of the cyberattack a year ago to the day Friday.