UnitedHealth Group (UNH) is facing scrutiny over its Medicare billing practices, with the U.S. Department of Justice (DOJ) launching a civil fraud investigation into the company’s methods for recording diagnoses that result in additional payments for its Medicare Advantage plans, according to a report by The Wall Street Journal on Friday.
Following the news, UnitedHealth’s stock dropped nearly 9% during Friday morning trading. Both the DOJ and UnitedHealth have not immediately responded to requests for comment regarding the investigation.
In Medicare Advantage plans, private insurers receive fixed payments from the U.S. government to manage the healthcare of enrollees. However, these payments increase if patients are diagnosed with specific conditions. The Wall Street Journal reported last year that Medicare had paid UnitedHealth billions of dollars based on diagnoses that were questionable. In December, the publication analyzed Medicare records and discovered that patients treated by doctors employed by UnitedHealth exhibited a significant increase in high-value diagnoses after transitioning to the company’s Medicare Advantage plans.
Several physicians informed the Journal that they had been instructed to document diagnoses that would generate higher revenue. They further claimed that the company utilized software that suggested medical conditions and incentivized doctors with bonuses to consider these diagnoses.
Justice Department attorneys have been actively investigating these claims, interviewing medical providers named in the Journal’s reports, with the most recent interviews taking place on January 31.
This investigation is separate from another ongoing DOJ antitrust probe into UnitedHealth. Additionally, last year, the Justice Department blocked the company’s planned $3.3 billion acquisition of Amedisys, a home healthcare provider.
UnitedHealth Group operates as the parent company of UnitedHealthcare, the largest health insurer in the U.S., as well as Optum, its pharmacy benefit management division, which oversees a vast network of medical practices.
The investigation follows a particularly difficult period for the company. One of its subsidiaries, Change Healthcare, recently suffered a significant cyberattack. Additionally, UnitedHealth’s insurance division faced intense public criticism over its practices of denying insurance claims, particularly in the wake of the murder of UnitedHealthcare CEO Brian Thompson.