UnitedHealth Faces Multiple Shareholder Lawsuits Over Medicare Billing Investigations
UnitedHealth Group is currently facing multiple shareholder derivative lawsuits following reports of a Department of Justice (DOJ) criminal investigation into its Medicare billing practices. These lawsuits, filed in the U.S. District Court for the District of Minnesota, allege breaches of fiduciary duty, insider trading, unjust enrichment, and violations of the Securities Exchange Act by senior executives and board members, including returning CEO Stephen J. Hemsley and former CEO Andrew Witty. The allegations stem from claims of inflated coding practices within UnitedHealth's Medicare Advantage program, which purportedly resulted in billions of dollars in excessive reimbursements that significantly affected the company's reported financial performance and stock price.
The initial DOJ inquiry reportedly started last summer, with UnitedHealth publicly denying notification of any such investigation. However, shareholders argue that executives failed to disclose ongoing investigations and continued aggressive coding tactics despite previous warnings and existing False Claims Act litigation related to improper coding practices dating back to 2016. These coding strategies involve the use of software that suggested rarely diagnosed, high-reimbursement medical conditions during in-home assessments, thereby driving increased Medicare payments.
The shareholder complaints also highlight significant stock repurchase programs undertaken by UnitedHealth between 2022 and 2024, costing approximately $7.3 billion, during which time some executives sold shares potentially benefiting from artificially inflated stock prices. The litigation underscores concerns about corporate governance, transparency, and fiduciary responsibilities during periods of regulatory scrutiny.
UnitedHealth is navigating substantial reputational and financial challenges, with anticipated second-quarter earnings reports and revised guidance expected to reflect current uncertainties. The recent resignation of former CEO Andrew Witty and the appointment of Stephen Hemsley, who emphasizes a return to disciplined management, mark notable leadership changes amidst ongoing legal and regulatory pressures.
This situation is significant for insurance professionals and stakeholders monitoring regulatory compliance, risk management, and corporate governance in large health insurers. It highlights the intricate relationship between Medicare billing practices, regulatory oversight, and shareholder activism in influencing company operations and market performance.