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By Amina Niasse
NEW YORK (Reuters) -UnitedHealth Group investors, stunned by missteps at the once predictable healthcare giant, are warily expecting strategic changes in its Medicare Advantage health insurance business over the next year.
On Wednesday, the Wall Street Journal reported that UnitedHealth was the subject of a criminal probe at the Justice Department, just one day after the company withdrew its financial outlook and said Group CEO Andrew Witty was leaving.
The blows are eroding the allure the healthcare behemoth once held for investors.
UnitedHealth shares fell 14% in afternoon trading on Thursday to $274.35, near a five-year low. Shares had already plunged 18% on Tuesday, even as the company tried to assuage Wall Street concerns in a conference call. They are down 46% this year.
"Given that the investor call earlier this week was so brief and had a lack of detail, investors are on the lookout for another shoe to drop," said James Harlow, senior vice president at Novare Capital Management. The firm owns shares of UnitedHealth.
The DOJ criminal probe concerns the company's billing practices in its Medicare Advantage unit for older adults and people with disabilities, the Journal reported. UnitedHealth has said in regulatory filings that investigations, audits and reviews by a dozen different government agencies are underway.
UnitedHealth said in a Wednesday statement that it had not been notified of a criminal probe. "We stand by the integrity of our Medicare Advantage program," the company added.
Investors said they expect the company to turn around its profit outlook in 2026, at the earliest.
Exiting less profitable markets where it sells Medicare Advantage plans for people aged 65 and older and making health insurance plan design changes to offer access to lower-cost healthcare providers and a focus on cheaper generic drugs, rather than pricey branded ones, could be under consideration at UnitedHealth, said Jeff Jonas, a portfolio manager at Gabelli Funds.
Even after fixing plan issues, investors will likely need to price in a legal settlement that could cost the company over $1 billion, said Jonas.
And traditional cost-management measures that insurers have historically deployed, such as the use of prior authorizations and claim denials, have come under public and legislative criticism since the killing of UnitedHealthcare executive Brian Thompson last December, Jonas added.
In a first-quarter earnings call, the company noted that specialty care visits had generated higher costs after patients saw providers who are part of its Optum health services unit.