Once Again, UnitedHealth Is Under Investigation by the DOJ

Will this lawsuit yield any significant changes to the insurance behemoth?

UnitedHealthcare is in the hot seat once again, this time for fraudulent Medicare Advantage billing practices, placing the health insurance giant under a civil fraud investigation by the Department of Justice. Specifically, the Department of Justice (DOJ) is evaluating the company’s protocols for recording diagnoses that can result in extra payments for the company’s Medicare Advantage plans, according to a report by The Wall Street Journal (WSJ). Additionally, UnitedHealth is also under fire for pursuing employee buyouts and potential layoffs.

As the saga continues, here's what to know.

This Time Around

A report by the WSJ revealed that UnitedHealth employed aggressive tactics to push lucrative patient diagnoses. Sources at the WSJ said doctors working for UnitedHealth said they were trained to document higher revenue-generating diagnoses, even if they were not treating them. Further, the insurer is accused of using software to suggest additional conditions and allegedly were even offered financial incentives to clinicians who agreed to code these additional diagnoses.

Pushing back, UnitedHealth said it wasn’t aware of the start of any new coding or diagnostic activity as the paper reported. Moreover, it criticized the WSJ’s report and posted a statement on its website saying: "Any suggestion that our practices are fraudulent is outrageous and false."

UnitedHealthcare business, part of UnitedHealth Group, covers more than 7.8 million people, making it the nation's largest provider of Medicare Advantage plans.

A Muddled Industry

Medicare Advantage was introduced to the American public as an avenue to save money by allowing private insurers to manage Medicare benefits more efficiently. But now, it's turned into a bloated program that has eaten up federal dollars far more than traditional Medicare ever did,   resulting in a $140 billion overpayment to private insurers.

United has faced at least 12 lawsuits in the past seven years, accompanied by dozens of reports. This is also not UnitedHealth's first investigation for Medicare Advantage practices. In fact, the insurer is one of many exposed for fraudulent billing practices.

"Even as lawsuits and government reports pile up, the industry continues to report massive profits. And UnitedHealth isn't alone—other major insurers, including Humana and Cigna, have also faced accusations of inflating Medicare bills," wrote Wendell Porter, former vice president of Cigna and advocate for health insurance payment reform.

Other Voices

Also caught up in UnitedHealth's legal challenges is billionaire Bill Ackman, CEO of Pershing Square Capital Management. Earlier this month, Ackman, a globally prominent investor, publicly offered to cover the legal fees for a Texas physician in a dispute with UnitedHealth Group over her claims that the insurer pulled her out of a surgery to justify the patient's care.

Later at the request of  UnitedHealth, Ackman 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 magnified on social media were false. Ackman stated that he has no position in UnitedHealth.

An earlier post of Ackman's called on the U.S. Securities and Exchange Commission to investigate UnitedHealth and suggested that the insurer's "profitability is massively overstated due to its denial of medically necessary procedures."

Sen. Chuck Grassley, R-Iowa, is another figure calling for the insurer to be closely looked at for its billing practices.

The WSJ reported that Sen. Grassley sent a letter to UnitedHealth CEO Andrew Witty asking for a closer look at how the company handles Medicare Advantage billing. Grassley's letter argued that "the apparent fraud, waste, and abuse at issue is simply unacceptable and harms not only Medicare beneficiaries, but also the American taxpayer," according to WSJ.

Stock dips

UnitedHealth's stock has taken a deeper dive since the news of the investigation broke, although it has begun to slightly rebound since; company shares dropped 9% last Friday.

Some Wall Street analysts have expressed skepticism that the DOJ probe would yield any significant changes, given that the alleged practices in question are not likely unique to UnitedHealth.

UnitedHealth Group is the biggest healthcare conglomerate in the United States based on revenue. It touts more than $420 billion market cap, and it is the nation's largest private insurer. Cigna and Humana have both been under scrutiny for their MA billing as well, and those company stocks also took a dip.

The Bigger Picture

UnitedHealth's stocks might have decreased slightly, but the insurer has been in a downturn since December last year, when UnitedHealthcare CEO Brian Thompson was murdered in New York City. The horrific tragedy left the industry, and the country at large, shocked. But the shock was also countered by a widespread outpouring of consumer resentment for the insurance giant, highlighting the contention placed on healthcare insurers, and UnitedHealth specifically, for denying care.

UnitedHealth is also still grappling with the fallout from a massive cyberattack on its subsidiary Change Healthcare. The event compromised the protected health information of about 190 million individuals, and UnitedHealth has paid out more than $3 billion to providers affected as well as a $22 million ransom to the attackers. Witty was probed at a Senate hearing last spring for the cyberattack, with senators from all sides questioning the size of the insurer and how much power it holds.

The current civil fraud lawsuit is just a drop in the bucket of what UnitedHealthCare has faced for its practices and how it interacts with patients and the industry. Throughout all of this, one thing is certain: change must be implemented. What the change will be and whether it will be able to reign in UnitedHealth is unclear.