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UnitedHealth's (NYSE:UNH) stock skid lately with The Justice Department's healthcare-fraud unit quietly opening a review of UnitedHealth's Medicare Advantage arm, according to the Wall Street Journal.
Regulators are zeroing in on whether the insurer leaned on kickbacks or upcoding patient data to juice federal payments. No surprise, the shares tumbled 15% on the initial news and slipped another 8% in after-hours trading, with a further 7% drop in the premarket.
This latest investigation piles onto a string of headaches. UnitedHealth surprised the market with a sudden CEO shake-up this week, and back in February the same DOJ division was reportedly poking around similar Advantage practices. To top it off, shareholders are suing, claiming UnitedHealth downplayed fallout from the tragic murder of its former CEO, Brian Thompson. Through it all, the company maintains it hasn't received any formal criminal notice and insists its Medicare Advantage program is rock-solid.
Why does it matter? A formal DOJ finding could bring stiff fines, force carve-outs of profitable business lines and cast a long shadow over future earnings forecasts. With UnitedHealth insisting it's in full compliance, investors will be watching closely for any official chargesand for signs that the share price, which has yet to find its bottom, might finally stabilize.
The stock has dropped sharply over the past three months, falling nearly 49% to $269.16 as of May 15. The steepest decline happend in mid-April and the loss of confidence appears sustained, with no signs of recovery on the chart.
This article first appeared on GuruFocus.