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Investing.com -- The US Justice Department (DoJ) has opened a civil fraud investigation into UnitedHealth’s Medicare billing practices in recent months, the Wall Street Journal (WSJ) reported on Friday, citing sources with knowledge of the matter.
UnitedHealth (NYSE:UNH) shares tumbled more than 8% by 09:54 ET (14:54 GMT) following the US market open.
Per the report, the investigation is focused on how the company records diagnoses that increase Medicare payments to its Advantage plans, including at physician groups owned by UnitedHealth.
In response, UnitedHealth said in a statement that the WSJ has reported “misinformation” about its Medicare Advantage program, emphasizing that the government routinely evaluates plans associated with the program.
“We are not aware of the ‘launch’ of any ‘new’ activity as reported by the Journal. We are aware, however, that the Journal has engaged in a year-long campaign to defend a legacy system that rewards volume over keeping patients healthy and addressing their underlying conditions,” UnitedHealth said in the statement. “Any suggestion that our practices are fraudulent is outrageous and false.”
RBC Capital Markets analysts said the WSJ’s report is "unsubstantiated."
They believe the market reaction to the article "is likely overdone given what we expect is a long-date probe with an extended timeline to any resolution, much like the
DOJ’s anti-trust probe reported by the WSJ this time last year."
Last year, a series of WSJ reports revealed that Medicare had paid the company billions of dollars based on questionable diagnoses. The report noted that Justice Department attorneys interviewed medical providers named in the articles as recently as January 31.
Under the Medicare Advantage program, insurers receive fixed payments from the federal government to manage enrollees’ benefits. The reimbursement amounts increase when patients are diagnosed with specific conditions, creating a financial incentive for insurers to document more diagnoses.
The latest probe adds to growing scrutiny of UnitedHealth, a $400 billion company that operates the country’s largest health insurer along with a vast network of healthcare businesses, including physician groups, a pharmacy-benefit manager, and data and technology services.
This civil investigation is reportedly separate from the Justice Department’s ongoing antitrust probe into UnitedHealth, which the WSJ reported on last year. The DOJ has also sued to block the company’s $3.3 billion acquisition of home-health provider Amedisys (NASDAQ:AMED), citing antitrust concerns.
UnitedHealth has previously defended its Medicare billing practices, saying they improve diagnostic accuracy, comply with audits, and ultimately benefit patients.
In December, the WSJ reported that an analysis of billions of Medicare records showed a significant increase in high-value diagnoses for patients treated by UnitedHealth-employed physicians after joining the company’s Medicare Advantage plans.
Some doctors said the company trained them to document revenue-generating conditions, including those they felt were unnecessary or irrelevant. UnitedHealth also used software to suggest potential diagnoses and provided financial incentives to encourage their inclusion, according to the report.