UnitedHealth shares sank on Friday after The Wall Street Journal reported that the insurer's Medicare billing protocols are under investigation by the U.S. Department of Justice.
Shares of the Minnesota-based company slid 7.2%, making it the worst performer in the Dow Jones Industrial Average. That pushed the stock down nearly 11% for the week, marking its biggest weekly drop since 2020.
The investigation is focused on UnitedHealth's Medicare billing practices, people familiar with the matter told the Journal. Specifically, the Department of Justice is evaluating protocols for recording diagnoses that can lead to extra payments for the company's Medicare Advantage plans, the report said.
Medicare Advantage plans are offered by private insurers who are paid a set rate by the government. The plans manage health care for seniors looking for extra benefits not covered in traditional Medicare. Shares of other major Medicare Advantage insurers fell in sympathy to UnitedHealth on Friday.
Shares of Humana, which is far more dependent on Medicare Advantage than its rivals, fell more than 5%. CVS Health and Elevance Health dropped more than 2% and 1%, respectively.
This civil probe is separate from a Justice Department antitrust probe, the people told the Journal. The department has also sued to stop UnitedHealth's acquisition of home health firm Amedisys, citing antitrust concerns. Amedisys shares are down about 0.7% in trading on Friday.
UnitedHealth said in a statement that the Journal has reported "misinformation" about its Medicare Advantage program. The company said the government regularly evaluates plans tied to the program.
"We are not aware of the 'launch' of any 'new' activity as reported by the Journal. We are aware, however, that the Journal has engaged in a year-long campaign to defend a legacy system that rewards volume over keeping patients healthy and addressing their underlying conditions," UnitedHealth said in the statement. "Any suggestion that our practices are fraudulent is outrageous and false."
The DOJ did not respond to CNBC's request for comment.
This investigation is the latest driver of attention on the blue-chip company, which is the largest private health insurer in the U.S. A gunman killed Brian Thompson, then-CEO of UnitedHealth's insurance unit, in New York City late last year when the executive was in town for the company's investor day. The shooting unleashed a flood of online complaints about U.S. health care.
With Friday's declines, the stock is down more than 7% year to date. That builds on the loss of nearly 4% recorded in 2024.
Multiple Wall Street analysts described Friday's slide as an overreaction to the news. Most analysts who cover the stock have buy-equivalent ratings, according to LSEG.
"We are skeptical that this purported investigation will result in a material fine and/or change in business practice that justifies today's stock decline," KeyBanc's Matthew Gillmor told clients.
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