UnitedHealth (UNH) is unfortunately caught in a federal investigation just as the company prepares to release its second-quarter fiscal 2025 results on July 29. The health insurance company is under intense scrutiny and faces multiple challenges, including a criminal investigation by the U.S. Department of Justice (DOJ) related to its Medicare billing practices, particularly regarding how it uses doctors and nurses to increase government payments. The news dragged UNH stock down 4.8% on July 24.
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For Q2, Wall Street expects UNH to report adjusted earnings per share (EPS) of $4.48, significantly lower than the prior-year period’s figure of $6.80. On the other hand, Q2 sales are expected to jump nearly 13% year-over-year to $111.56 billion.
What Is the Controversy About UNH’s Billing Practices?
The DOJ’s probe focuses on UnitedHealth’s HouseCalls program, which sends nurses to patients’ homes to document diagnoses, resulting in higher Medicare Advantage payments. Former employees have told investigators that the company encouraged capturing lucrative diagnoses through testing and patient visits.
A report by The Guardian indicated that UnitedHealth secretly paid nursing homes financial incentives to reduce hospital transfers of sick residents, allowing UNH’s nurses and doctors to conduct more home visits. Critics claim this process may have delayed or denied necessary hospital care and even caused patient harm.
However, UnitedHealth has denied these allegations, stating that the allegations about blocking hospital transfers are “verifiably false.” Instead, the company claims that their approach to nursing homes improved health outcomes, while reducing unnecessary hospitalizations.
The DOJ officially announced its investigation on July 24, and UNH acknowledged that it is fully cooperating. UnitedHealth asserts confidence in the integrity of its Medicare Advantage program and has initiated third-party reviews of its practices in response to the investigations.
Is UNH Stock a Buy Ahead of Earnings?
UnitedHealth is embroiled in controversy over Medicare billing and nursing home hospitalization policies, leading to legal probes, stock declines, leadership changes, and reputational challenges. Year-to-date, UNH stock has lost 44.3%.
Owing to these issues, analysts remain divided on UnitedHealth’s long-term outlook. On TipRanks, UNH stock has a Moderate Buy consensus rating based on 18 Buys, five Holds, and one Sell rating. Also, the average UnitedHealth price target of $353.43 implies 26.9% upside potential from current levels.
