UnitedHealth Group (UNH) stock fell out of the gate Friday, dragging the blue chip Dow Jones Industrial Average down with it. Weighing on the shares is a report in The Wall Street Journal that indicated the Justice Department is investigating the insurance company's Medicare billing practices.
The investigation is probing UnitedHealth's handling of diagnosis records that increase payments to its Medicare Advantage plans, including those from physician groups it owns, The Wall Street Journal article stated, citing people familiar with the matter.
The news comes after several Wall Street Journal investigations, including a December report that revealed UnitedHealth-employed doctors significantly increased lucrative diagnoses for patients after they joined the company's Medicare Advantage plans.
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Doctors told The Wall Street Journal that they were trained by UnitedHealth to document revenue-generating conditions, some of which they found "obscure or irrelevant."
Furthermore, a July report from The Wall Street Journal found that UnitedHealth added diagnoses for untreated conditions, leading to $8.7 billion in extra federal payments in 2021. This included some diagnoses from in-home visits by nurses working for its HouseCalls business unit.
The Justice Department has not confirmed the investigation. In a statement, UnitedHealth said, "The Wall Street Journal continues to report misinformation on the Medicare Advantage (MA) program," and that "any suggestion that our practices are fraudulent is outrageous and false."
Is UnitedHealth stock a buy, sell or hold?
UnitedHealth has lagged the broader market over the past 12 months, down 2% on a total return basis (price change plus dividends) vs the S&P 500's 25% gain. Still, Wall Street is overwhelmingly bullish on Dow Jones stock.
According to S&P Global Market Intelligence, the average analyst target price for UNH stock is $637.24, representing implied upside of roughly 40% to current levels. Additionally, the consensus recommendation is a Strong Buy.
Financial services firm Morgan Stanley has an Overweight rating (equivalent to a Buy) and a $610 price target on the blue chip stock.
"United's model is enhanced via vertical integration with its OptumRx pharmacy benefit manager (PBM) platform, which is one of the three largest PBMs in the country," wrote Morgan Stanley analyst Erin Wright in a January 17 note. "With a large lead in breadth of services offerings and considerable exposure to government businesses, UnitedHealth is well positioned for any potential changes in the U.S. healthcare system."
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