Why Is UnitedHealth Stock Trading Lower On Thursday?

UnitedHealth Group Inc. UNH stock is trading lower on Thursday in reaction to a media report on a possible investigation for criminal Medicare fraud.

The Wall Street Journal reported, citing people familiar with the matter, that the healthcare-fraud unit of the Justice Department’s criminal division is overseeing the investigation, which has been active since at least last summer. 

UnitedHealth’s latest annual securities filing says the company “has been involved or is currently involved in various governmental investigations, audits and reviews,” and flags involved agencies including the Justice Department.

It doesn’t specifically mention the criminal, civil and antitrust probes on which the Journal has reported.

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In a statement on Wednesday, the company said, “We have not been notified by the Department of Justice of the supposed criminal investigation reported, without official attribution, in the Wall Street Journal today.”

“We stand by the integrity of our Medicare Advantage program,” the company statement continued.

On Tuesday, UnitedHealth CEO Andrew Witty abruptly announced his resignation and suspended its fiscal year 2025 guidance.

The insurance giant has garnered immense attention following the murder of its insurance unit CEO, Brian Thompson, in New York.

Luigi Mangione, the alleged perpetrator, pleaded not guilty to murder and weapons charges. Police found shell casings at the scene with the words “deny,” “defend,” and “depose,” commonly associated with insurance industry strategies for handling claims and disputes.

According to a media report in February, the Justice Department reportedly launched a civil fraud investigation into UnitedHealth’s Medicare billing practices.

The WSJ reported that Medicare paid substantial sums to UnitedHealth based on diagnoses added to patients’ records, some of which doctors said were irrelevant or undocumented.

In March, a Special Master recommended granting UnitedHealth’s motion for summary judgment in a False Claims Act (FCA) case, concluding that the government lacks evidence to support its allegations.

In April, UnitedHealth got some relief when the Federal Trade Commission (FTC) paused the formal complaint against three major pharmacy benefit managers (PBMs) for allegedly engaging in unfair and anti-competitive practices that have inflated the list price of insulin medications.

Analyst Reaction:

• Keybanc maintains UnitedHealth with an Overweight rating, lowering the price target from $575 to $450.
• Baird maintains UnitedHealth with an Outperform rating, lowering the price target from $510 to $356.
• BofA Securities downgrades UnitedHealth from Buy to Neutral and lowers the price target from $560 to $350.
• Morgan Stanley maintains UnitedHealth with an Overweight rating, lowering the price target from $563 to $374.
• Wells Fargo maintains UnitedHealth with an Overweight, lowering the price target from $677 to $351.
• Oppenheimer maintains UnitedHealth with an Outperform rating, lowering the price target from $600 to $400.
• Deutsche Bank maintains UnitedHealth with a Buy, lowering the price target from $521 to $362.
• JP Morgan maintains UnitedHealth with an Overweight, lowering the price target from $525 to $405.

Price Action: UnitedHealth stock is down 7.83% at $283.88 during the premarket session at the last check on Thursday.

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