UnitedHealth Group's stock price plummeted nearly 13% amid allegations of falsifying diagnoses, prompting an investigation by the U.S. Department of Justice

The U.S. Department of Justice has launched an investigation into UnitedHealth Group, causing its stock price to drop nearly 13% during trading, followed by a slight rebound.

On Friday, comprehensive media reports indicated that the U.S. Department of Justice has initiated a civil fraud investigation into UnitedHealth Group, "the largest health insurance group in the United States," focusing on whether UnitedHealth has falsified some diagnostic information in its billing practices, as these diagnoses could lead to higher payments from the government for its Medicare Advantage plans.

Medicare Advantage is a health insurance program provided by the U.S. government for individuals aged 65 and older or certain low-income populations, operated by private companies (such as UnitedHealth, Anthem, etc.). The government allocates funds to these companies, which provide comprehensive medical services, including hospitalization, outpatient care, and medications, to insured individuals. These companies charge a fixed monthly fee based on the health status of the insured.

When an individual joins a Medicare Advantage plan, the private company receives payments from the government based on the insured's diagnostic conditions. If the insured has complex health issues, the government pays more due to higher medical needs. Therefore, private companies have an incentive to "optimize" diagnoses, such as by adding conditions that were not actually treated, making the patient's health record appear more complex, thus obtaining more government funding.

As a result of this news, UnitedHealth Group's stock price plummeted over 10%, dragging down the Dow Jones Industrial Average, as UnitedHealth is the second-largest component of that index. Since the murder of UnitedHealth CEO Brian Thompson in Manhattan in early December last year, the stock price has fallen nearly 25%.

Long-standing Concerns Gain Attention

This is not the first time the company has been accused of suspected fraud. In December last year, media reports indicated that Medicare had paid UnitedHealth billions of dollars, some of which involved questionable diagnoses:

1. Patients examined by UnitedHealth Group doctors saw a significant increase in high-reimbursement diagnoses after joining the company's Medicare Advantage plan, which are very favorable for obtaining higher government payments.

2. Doctors reported that UnitedHealth trained them to record diagnoses that would generate more revenue, including some they considered irrelevant or ambiguous.

3. The company also used software to suggest diagnoses and incentivized doctors to consider these suggestions by offering bonuses, among other measures.

4. Last summer, UnitedHealth was accused of adding diagnoses to patient records that had not been treated by doctors, which alone triggered an additional $8.7 billion in federal payments in 2021.

Recently, U.S. Department of Justice attorneys have interviewed the doctors mentioned in these reports.

In addition to this investigation, UnitedHealth faces multiple troubles, such as the Department of Justice suing to block UnitedHealth's acquisition of home health company Amedisys on antitrust grounds. At the end of last year, the then-CEO of the company's insurance division, Brian Thompson, was murdered in New York, leading to a surge of online complaints about the U.S. healthcare system Famous investor Bill Ackman stated on social media platform X: "When you find two cockroaches, you can almost be sure there are more. I expect that many whistleblowers have already provided their evidence to the government and will encourage more to do so."