By Sriparna Roy (Reuters) – UnitedHealth shares fell more than 6% on Wednesday after the UK’s Guardian newspaper reported the company made secret payments to nursing homes to reduce hospital transfers, adding to the woes of the healthcare conglomerate. The alleged action, part of a series of cost-cutting tactics, has saved the company millions, but […]
Health
UnitedHealth falls on report it secretly paid nursing homes to reduce hospital transfers
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By Sriparna Roy
(Reuters) – UnitedHealth shares fell more than 6% on Wednesday after the UK’s Guardian newspaper reported the company made secret payments to nursing homes to reduce hospital transfers, adding to the woes of the healthcare conglomerate.
The alleged action, part of a series of cost-cutting tactics, has saved the company millions, but at times risked residents’ health, the Guardian reported, citing an investigation.
The allegations add to the negatives that have hurt UnitedHealth, following a cyberattack at its Change Healthcare unit, reports of criminal and civil probes on company’s practices and the departure of CEO Andrew Witty, who resigned as director on Wednesday.
Shares have stumbled all year, losing more than 39%, compared with a 0.6% decrease for the Dow.
UnitedHealth said in response that “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 the DoJ declined to pursue the matter after reviewing all the evidence during its multi-year investigation.
Reuters has not independently verified the article’s allegations.
“The news is only seemingly getting worse for UnitedHealth,” said Sahak Manuelian, managing director, global equity trading at Wedbush.
“This is kind of a tough situation for investors to come in and have any kind of confidence in putting money to work, so we’ll have to kind of wait and see how this plays itself out, unfortunately.”
Separately, HSBC downgraded the stock to “reduce” from “hold,” and cut the price target to a street-low of $270.
The brokerage said higher medical costs, pressure on drug pricing and its pharmacy benefit management unit, OptumRx, and a potential Medicaid funding cut can upset the company’s recovery.
The company is now counting on the experience of Stephen Hemsley, who returned as CEO to steer it through the current crisis.
“Hemsley has the experience and leadership attributes that the company needs to restore credibility and right the ship,” said James Harlow, senior vice president at Novare Capital Management.
(Reporting by Sriparna Roy in Bengaluru; Additional reporting by Twesha Dikshit and Christy Santhosh in Bengaluru; Editing by Anil D’Silva)