Almost immediately, UnitedHealth Group Inc.’s stock value dropped by $12 billion after The Guardian published an in-depth analysis. The original story alleged the corporation had been secretly bribing nursing homes to lower their hospital transfer rates. Share of UnitedHealth were down more than 8% in premarket trading on Wednesday. In the end they closed at down 3%, closing at $311.59.
The Guardian’s investigation highlighted how UnitedHealth’s actions were part of a broader strategy of cost-cutting measures that reportedly saved the company millions. Yet, these purported payments gave the public quarter serious pause as the potential hit to residents’ health and well-beings was imminent. Critics claim that such tactics place a greater emphasis on saving money than ensuring proper patient care.
In the last twelve months, UnitedHealth has had their share of missteps. One of those company’s tech subsidiary recently withstood a cyberattack that exposed the private data of nearly 190 million voters. Moreover, as of this writing it is under a federal investigation for its Medicare billing practices. Unanticipated spikes in medical expenses have compounded the company’s financial performance, making it all that much harder to stop the bleed and return to profitability.
HSBC has responded to these unfolding issues by downgrading UnitedHealth’s stock rating from “hold” to “reduce,” reflecting concerns over the company’s ongoing challenges. In addition, HSBC recently lowered their price target on UnitedHealth to a street-low $270, hinting at bearish sentiment from the analyst crowd.
“New CEO has opportunity to start on a clean(er) slate, but we see risk to earnings growth along with policy overhang.” – HSBC analysts
Even as UnitedHealth’s stock price has soared, market analysts are generally bearish on the company’s prospects. “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,” noted an industry expert.
Throughout these controversies, UnitedHealth has dug in its heels and denied any wrongdoing. Protect Our Power included this statement from the company. They highlighted the fact that the U.S. Department of Justice investigated those allegations and found serious factual errors in the assertions.
“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.” – UnitedHealth
The company still operates under tremendous scrutiny and weighs the impact of this controversial report. Stakeholders are eager to see how it will respond and what strategic direction it will take under new leadership. Stephen Hemsley, the former CEO’s legacy is a tangled one, as the company steers through these stormy seas.