UnitedHealth Group stock tumbled again Wednesday on reports that the insurer secretly paid nursing homes to reduce hospital transfers.
The alleged payments saved UnitedHealth millions, but at times risked residents' health, according to the Guardian, which cited corporate and patient records, public records, court files and interviews with insiders, as well as two whistleblower declarations submitted to Congress this month.
UnitedHealth denied the allegations in a statement.
"The U.S. Department of Justice investigated these allegations, interviewed witnesses, and obtained thousands of documents that demonstrated the significant factual inaccuracies in the allegations," the company said. "After reviewing all the evidence during its multiyear investigation, the Department of Justice declined to pursue the matter."
But on today's stock market, UnitedHealth Group stock sank 5.8%, closing at 303.
UnitedHealth Group Stock Hammered
JPMorgan analysts said the sell-off was "overdone."
UnitedHealth focuses on rates of hospital admissions per 1,000 patients, or APK, at nursing homes, they wrote in a note. This is a common way to evaluate a facility's ability to manage care and avoid costly hospitalizations. Rewarding low APK facilities reflects an approach to value-based contracting.
"Decisions around hospitalization are challenging, and while there are anecdotes cited in the article relating to UNH and nursing facilities navigating the go/no-go hospitalization decisions, we do not think that structure that reward low APK facilities are drivers of broad-based inappropriate behavior."
It's no secret that medical costs have been on the rise. But Gabelli Funds portfolio manager Daniel Barasa says the issues related to costs are largely fixable. Still, the recent negative headlines "will probably continue to be an overhang on the stock in the near term."
He acknowledges that there is "certainly a lot of waste in the health care system."
"There are valid reasons for why insurers would want to incentivize care providers to keep patients away from the hospital," he said in an email to Investor's Business Daily. "A lot of the care that takes place in costly settings like hospitals can be done at home or in nursing homes, which are less expensive."
Mounting Issues For UnitedHealth
The most recent allegations add to a bevy of news that has hammered UnitedHealth Group stock over the last month.
In April, the health insurer missed first-quarter earnings views and slashed its full-year guidance.
Shares plummeted nearly 18% on May 13 after Chief Executive Andrew Witty resigned for personal reasons. That led UnitedHealth to withdraw its already lowered outlook. The company cited a trend of accelerating medical costs.
Two days later, reports of a DOJ investigation into Medicare fraud sent UnitedHealth Group stock down nearly 11%.
UnitedHealth Group stock was the worst performer on the Dow Jones Industrial Average after the stock market opened Wednesday. Shares have a poor IBD Digital Relative Strength Rating of 8, putting them in the lowest 8% of all stocks in terms of 12-month performance.
On a year-to-date basis, UnitedHealth shares have fallen more than 36%. This makes UnitedHealth Group stock the worst performer in IBD's 13-company Medical-Managed Care industry group.
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