Report that unitedhealth secretly paid nursing homes to cut hospital transfers sees stock plunge

UnitedHealth shares fell more than 4% on Wednesday after the UK’s Guardian newspaper reported that the company made secret payments to nursing homes to reduce hospital transfers, adding to

the woes of the health care 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 litany of negatives that have hurt UnitedHealth in the last several months, following a massive cyberattack at its Change

Healthcare unit, reports of criminal and civil investigations into the company’s practices, including one for Medicare fraud, and the abrupt departure of CEO Andrew Witty last week. 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 also said in an emailed statement that the

DOJ declined to pursue the matter after reviewing all the evidence during its multiyear investigation. EXPLORE MORE 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,” Manuelian said. 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 journey. The company is counting on the experience of Stephen Hemsley, who returned as CEO to steer it through

the current crisis. “We believe 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.