According to a Wall Street Journal (WSJ) report, the United States Department of Justice (DOJ) has reportedly opened an investigation into UnitedHealthcare’s Medicare billing practices. The civil fraud investigation examines how the company records diagnoses that trigger extra payments to its Medicare Advantage plans, including within physician groups owned by the insurance giant.
The company allegedly recorded false diagnoses for illnesses that patients never received treatment for, immediately prompting large lump sum payments. WSJ states these practices resulted in an extra $8.7 billion in payouts. Medicare Advantage plans are privately run versions of the government’s Medicare program primarily for those 65 and over. These plans receive lump-sum payments from the federal government to manage enrollees’ benefits, with payments increasing when certain diagnoses are recorded. WSJ suggests this system creates an incentive to diagnose more diseases.
This investigation comes amid growing scrutiny of Medicare Advantage plans across the healthcare industry. In recent years, several major insurers have faced similar allegations regarding diagnosis coding practices. Industry experts note that the risk-adjustment payment model, while designed to compensate insurers fairly for treating sicker patients, has been criticized for potential vulnerabilities to manipulation through selective documentation practices.
UnitedHealthcare, the nation’s largest provider of Medicare Advantage plans, covers more than 7.8 million patients. Its parent company, UnitedHealth Group, is the biggest health-care conglomerate in the U.S. based on revenue and its more than $420 billion market cap. The article cites WSJ’s previous January report detailing a yearslong investigation of UnitedHealthcare’s alleged tactics to secure extra payments. On February 21, UnitedHealthcare published a statement calling the report misinformation and the claims “outrageous and false.” The DOJ has declined to comment on the potential investigation.
Healthcare policy analysts point out that Medicare Advantage enrollment has grown substantially over the past decade, now covering approximately 48% of all Medicare beneficiaries nationwide. This growth has placed increasing pressure on insurers to maintain profitability while competing for market share in the lucrative senior healthcare segment.
Following the report’s publication on Friday, the company’s shares plummeted by 7%, resulting in a $30 billion loss in market value. UnitedHealthcare shares have dropped by over 20% within the last three months during a turbulent year for the company. Financial analysts suggest this volatility reflects broader investor concerns about potential regulatory changes to Medicare Advantage reimbursement formulas and heightened government oversight of the program.
In December, CEO Brian Thompson was fatally shot in midtown Manhattan while en route to an annual investor meeting. After a five-day manhunt, 26-year-old Luigi Mangione was taken into custody on state murder and federal terror charges, pleading not guilty to all charges at his first court appearance last Friday. If convicted, Mangione faces life imprisonment for state charges and potentially the death penalty for federal charges, with arraignment set for mid-March.
In the weeks following the shooting, a wave of criticism against insurance companies and the U.S. healthcare system emerged online, during which company shares dropped $100 in value.