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Thursday, Wolfe Research analysts maintained an Outperform rating and a $501.00 price target on UnitedHealth Group (NYSE:UNH) stock, despite the company being under investigation by the Department of Justice for potential criminal Medicare fraud. The probe, active since at least last summer, focuses on UnitedHealth’s Medicare Advantage billing practices, particularly concerning its Med Advantage business. The healthcare giant, currently valued at $279 billion, has seen its stock decline by 47% over the past six months, trading near its 52-week low. According to InvestingPro analysis, the stock appears undervalued at current levels, with 14 additional exclusive insights available to subscribers.
The Department of Justice’s criminal division, which has historically concentrated on doctor and laboratory practices, is now examining UnitedHealth’s Optum unit’s coding practices. Although details of the investigation are limited, a previous Wall Street Journal report from February highlighted a new civil fraud investigation into the company’s practices for recording diagnoses that lead to additional payments to its Medicare Advantage plans.
In response to the February report, UnitedHealth stated it was unaware of any new activities initiated by the Department of Justice and remarked that government reviews of Medicare Advantage plans are routine. Additionally, despite being the largest Medicare Advantage plan in the industry, UnitedHealth did not have any contracts chosen for audit by the Centers for Medicare & Medicaid Services (CMS) during the most recent risk adjustment data validation (RADV) audits for payment year 2018.
Wolfe Research’s analysis indicates that UnitedHealth’s risk scores are approximately 4% above the industry average for 2023, and only marginally higher than its closest peer for traditional Medicare Advantage and Dual Eligible Special Needs Plans. The firm also expects the gap between UnitedHealth’s risk scores and the industry average to close, noting that both UnitedHealth and its peers have indicated facing above-average reimbursement and risk score pressure.
The ongoing investigation into UnitedHealth’s Medicare Advantage billing practices adds to the scrutiny the healthcare industry faces over billing and reimbursement processes. However, the outcome and timing of any potential legal actions remain uncertain, as the Department of Justice has not provided specific details regarding the scope or direction of the investigation. Despite these challenges, UnitedHealth maintains a strong overall financial health score of 2.9 out of 5 according to InvestingPro metrics, with particularly high marks in profitability and relative value measures.
In other recent news, UnitedHealth Group’s recent earnings and revenue developments have garnered significant attention. JPMorgan revised its price target for UnitedHealth to $405, citing leadership changes and the suspension of 2025 guidance. The firm now projects a 2025 adjusted earnings per share (EPS) of $22.26, with expectations of 10% year-over-year EPS growth by 2026. Meanwhile, Cantor Fitzgerald maintained an Overweight rating with a $440 price target, highlighting UnitedHealth’s strong position in the government insurance market. KeyBanc also adjusted its price target to $450, maintaining an Overweight rating but expressing concerns over recent cost accelerations. Additionally, Raymond (NSE:RYMD) James downgraded UnitedHealth from Strong Buy to Market Perform, following the withdrawal of 2025 guidance and a CEO change. The firm adjusted its EPS estimates for 2025 and 2026, reflecting increased medical loss ratios. UnitedHealth is also under investigation by the Justice Department for potential Medicare fraud, focusing on its Medicare Advantage business practices.
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