Article Summary
UnitedHealth shares fell after a Guardian report accused the company of making secret payments to nursing homes to reduce hospital transfers. This report is an addition to the troubles faced by the healthcare conglomerate, including a criminal investigation for potential Medicare fraud, the abrupt departure of CEO Andrew Witty, and the withdrawal of its 2025 forecast. The company has denied the allegations, stating that the U.S. Department of Justice declined to pursue the matter after a multi-year investigation.
What This Means for You
- Be cautious with UnitedHealth investments in the light of ongoing investigations and negative publicity, which may impact the company’s earnings growth and stock price.
- Stay informed about potential changes in leadership and how the new CEO plans to address the current challenges and lead the company through the crisis.
- Consider the impact of higher medical costs, pressure on drug pricing, and potential Medicaid funding cuts on UnitedHealth’s recovery journey.
- Monitor the development of the criminal investigation, as any negative outcomes could lead to further financial consequences for the company and its shareholders.
Original Post
(Reuters) – UnitedHealth shares fell in premarket trading on Wednesday after a Guardian report that the company made secret payments to nursing homes to reduce hospital transfers added to the troubles of the healthcare conglomerate.
The alleged action, part of a series of cost-cutting tactics, has saved the company millions, but at times risked residents’ health, the Guardian reported, citing an investigation.
UnitedHealth said in response that “the U.S. Department of Justice investigated these allegations, interviewed witnesses, and obtained thousands of documents that demonstrated the significant factual inaccuracies in the allegations.”
The company also said in an emailed statement that the DoJ declined to pursue the matter after reviewing all the evidence during its multi-year investigation.
The company’s stock has taken a beating after the Wall Street Journal recently reported that the U.S. Department of Justice had begun a criminal investigation into the company for potential Medicare fraud, which followed CEO Andrew Witty’s abrupt departure and the withdrawal of its 2025 forecast last week.
On Wednesday, UnitedHealth shares fell more than 8% before paring losses and were last down 3% at $311.59.
Separately, HSBC downgraded the stock to “reduce” from “hold,” and cut the price target to a street-low of $270.
“New CEO has an opportunity to start on a clean(er) slate, but we see risks to earnings growth along with policy overhang,” HSBC analysts wrote in a note.
The company named former CEO Stephen Hemsley to the top job, counting on his experience to turn around the healthcare giant and steer it through the current crisis.
The brokerage said higher medical costs, pressure on drug pricing and its pharmacy benefit management unit, OptumRx, and a potential Medicaid funding cut, can upset the company’s recovery journey.
UnitedHealth has grappled with several major challenges over the last 12 months, including a cyberattack at its tech unit that affected some 190 million people, a report of an investigation into its Medicare billing practices, and an unexpected surge in medical costs that has hurt its bottom line.
“The news is only seemingly getting worse for UnitedHealth,” said Sahak Manuelian, managing director, global equity trading at Wedbush.
“This is kind of a tough situation for investors to come in and have any kind of confidence in putting money to work, so we’ll have to kind of wait and see how this plays itself out, unfortunately,” Manuelian said.
(Reporting by Sriparna Roy in Bengaluru; Additional reporting
by Twesha Dikshit in Bengaluru; Editing by Anil D’Silva)
Key Terms
- UnitedHealth
- Secret Payments
- Nursing Homes
- Medicare Fraud
- Criminal Investigation
- New CEO
- Medicaid Funding Cut
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