Regulators Broaden Scrutiny of UnitedHealth’s Financial Ties

UnitedHealth Group Inc. is under a broader-than-expected criminal investigation by the U.S. Justice Department that extends beyond its Medicare Advantage billing practices to include its prescription benefit management operations and how the company reimburses its affiliated physicians. The probe, now revealed to scrutinize business practices at UnitedHealth’s pharmacy benefit manager Optum Rx and physician reimbursement structures, highlights the increasing regulatory pressure on the health insurance giant. While no allegations of wrongdoing have been made by the Justice Department, the investigation signals growing concerns over potential conflicts of interest and improper financial arrangements within the firm.

According to sources familiar with the matter, the Justice Department’s criminal division has been examining the business practices of Optum Rx, a top-three pharmacy benefit manager in the U.S., and its physician payment mechanisms for some time. These practices are now part of the broader inquiry, suggesting a deepening interest in the company’s operations beyond Medicare fraud. The firm’s pharmacy benefit unit, which managed $133 billion in revenue last year, plays a crucial role in the company’s business, managing prescription drug coverage for both UnitedHealthcare and external clients.

The company has consistently maintained that it has “full confidence in its practices,” as stated in a July filing with the SEC, responding to both civil and criminal Justice Department probes. UnitedHealth has emphasized its history of regulatory compliance and cited a favorable outcome in a long-running Medicare fraud case. In March, a court-appointed special master ruled that the Justice Department lacked evidence to support a $2 billion overbilling claim. The firm also noted favorable audit results from the Centers for Medicare and Medicaid Services as part of its broader defense against allegations.

The ongoing investigations are occurring amid a difficult period for UnitedHealth, which has seen significant financial setbacks this year. The company missed its earnings targets for the first time in over a decade and cut its forecast. In response, the firm’s leadership has undergone a major shakeup, including the return of former CEO Stephen Hemsley to the helm. Hemsley has introduced a new board committee, the “public responsibility committee,” aimed at increasing oversight of regulatory and reputational risks, including those related to its pharmacy benefits management practices.

In addition to the criminal probe, the Justice Department is also pursuing a separate civil fraud investigation into the company’s Medicare billing practices. The U.S. Federal Trade Commission has also filed a lawsuit accusing UnitedHealth and two rival pharmacy benefit managers of colluding to drive up insulin prices, which the company has dismissed as “baseless.” These legal challenges add to a broader regulatory and public scrutiny of the health insurance industry, particularly in the areas of cost control and transparency.

UnitedHealth’s share price has declined by approximately 40% this year, outpacing the industry average, as investors remain cautious about the company’s ability to navigate its current challenges. With rising medical costs, regulatory pressure, and leadership changes, the firm faces a complex and uncertain path forward, with no clear timeline for a return to profitability.

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