Bernstein's Reaction to DOJ Investigation of UnitedHealth Group (UNH)

Bernstein SocGen Group analyst Amir Farahani reiterated an Outperform rating and $697.00 price target on UnitedHealth Group (NYSE: UNH).

The analyst commented: "WSJ reported this morning that DOJ has launched an investigation into UNH Medicare billing practices. According to the article DOJ lawyers have contacted at least three doctors and a nurse practitioner who were named in WSJ previous articles on UNH alleged practice. The attorneys were specifically interested in “the company software that suggested diagnoses and the role of a UnitedHealth manager who she said urged her to make new diagnoses beyond what doctors had treated”. UNH stock is down ~8% in pre-market on this news.

Our initial reaction: We see DOJ inquiry as adding policy overhang to MA exposed companies. The ultimate impact of this may be further reductions in extra benefits for MA members over time, as industry margins in MA are already breakeven. This will cause even further price discipline in this product. We do not see this issue as impacting Medicaid or Employer business lines.

The key issues here:1) are conditions diagnosed which do not exist; 2) are conditions identified through a lab test or other proof; and 3) ensuring the risk adjustment formula appropriately values different conditions. The likely solution is a combination of changes to risk adjustment formula/ process (some of which has happened), and Audits to identify any fraudulent diagnoses."

For an analyst ratings summary and ratings history on UnitedHealth Group click here. For more ratings news on UnitedHealth Group click here.

Shares of UnitedHealth Group closed at $466.42 yesterday.

You May Also Be Interested In

• Viking Holdings (VIK) PT Raised to $82 at Mizuho
• loanDepot receives NYSE non-compliance notice over stock price
• CoVolt Power files for proposed IPO