DOJ’s UnitedHealth Investigation Sends U.S. Stocks Lower

Summary

Podcast Summary: WSJ What’s News – "DOJ’s UnitedHealth Investigation Sends U.S. Stocks Lower"

Release Date: February 21, 2025
Host: Alex Osila
Produced by: The Wall Street Journal

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1. Justice Department's Investigation into UnitedHealth Group

Overview:
The episode opens with a significant development in the healthcare sector. The U.S. Department of Justice (DOJ) has initiated a civil fraud investigation into UnitedHealth Group’s Medicare billing practices. This probe focuses on how UnitedHealth records diagnoses that could trigger additional payments to its Medicare Advantage plans.

Key Details:

• DOJ's Focus: The investigation examines whether UnitedHealth inflated diagnoses to receive higher Medicare Advantage payments. This involves questioning former medical providers and contractors associated with UnitedHealth.

• Incentive Structure: UnitedHealth’s Medicare Advantage plans receive lump-sum payments that increase with the number of diagnoses indicating patient illness levels. This structure potentially incentivizes the recording of more diagnoses.

• Allegations: Reports suggest that doctors affiliated with UnitedHealth have been adding diagnoses at significantly higher rates than usual, sometimes under pressure or encouragement from the company.

Notable Quotes:

• Christopher Weaver (Healthcare Reporter) [01:41]:
  “The way United's Medicare Advantage plans work is they get paid basically a lump sum that goes up when people are sicker, creating an incentive to add more diagnoses.”

• Christopher Weaver [02:31]:
  “For a patient, you may not even know what diagnoses are submitted on your behalf by a Medicare Advantage insurer. This is something that largely happens behind the scenes and concerns the kind of taxpayer funded payments that United and other insurers in that market receive.”

Company and DOJ Responses:

• UnitedHealth's Stance: Initially declined to comment, but later stated on their website that they were unaware of the DOJ's actions. They criticized the Wall Street Journal's reporting as a “year-long campaign against Medicare Advantage” and denied any fraudulent practices.

• WSJ's Position: A spokeswoman affirmed, “We stand by our reporting.”

Potential Outcomes:

• Christopher Weaver [03:25]:
  “Civil fraud investigations sometimes go nowhere. Sometimes they result in monetary settlements. Occasionally they've even turned criminal. At this point, it's too early to say where it's going.”

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2. Market Reaction and Stock Performance

Impact on Stocks:

• Following the news of the DOJ investigation, major U.S. stock indexes experienced declines.

• UnitedHealth Stock: Dropped over 7%, significantly impacting the Dow Jones Industrial Average, which fell nearly 750 points (1.7%).

• Other Affected Stocks: Health care giants like Humana and CVS Health also saw declines.

• Overall Index Performance:

  • Nasdaq: Down approximately 2.2%
  • S&P 500: Decreased by about 1.7%

Additional Legal Developments:

• Luigi Mangione Case: A lawyer representing Luigi Mangioni, accused of murdering the head of UnitedHealth’s insurance division, expressed concerns over her client’s treatment as he faces three sets of criminal charges. Mangione’s first court appearance since pleading not guilty did not result in a trial date being set.

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3. Investor and Consumer Sentiment

Investor Outlook:

• Survey Insights: According to the American Association of Individual Investors, for the week ending February 12th, approximately 47% of traders expect stock prices to fall over the next six months—the highest sentiment for over a year.

• Hannah Aaron Lang [05:15]:
  “It's a reflection of just a lot of uncertainties that are floating around right now. We had this deep SE tech rout in January that shook confidence in some of those leading artificial intelligence stocks. We've had persistently stubborn inflation. It's raising questions about the time and size of potential interest rate cuts.”

• Additional Factors Affecting Investors:

  • Inflation concerns
  • Potential interest rate adjustments
  • Policy changes under the Trump administration, including immigration and trade

Consumer Confidence:

• University of Michigan's Index of Consumer Sentiment: Revealed a decline in consumer confidence at the end of February, surpassing economists' expectations. The drop was particularly noted in the purchasing conditions for durable goods, largely due to anticipated price increases from tariffs.

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4. Housing Market Slump

Recent Data:

• National Association of Realtors Report: U.S. home sales in January decreased by 4.9% month-over-month, exceeding the expected decline of 2.6%.

Analysis:

• Economist Insights [07:42]:
  “The rates are really just holding steady at around 7%. And so that's continuing to keep people out of the market. It's also been a cold winter and winter is usually a slow time for home sales.”

• Contributing Factors:

  • Steady high mortgage rates (~7%)
  • Cold winter weather hindering house hunting
  • Despite increased inventory, high prices and mortgage rates deter buyers

Future Outlook:

• Potential for Recovery: Rising inventory provides more options for buyers, potentially increasing negotiation power and affordability.

• Spring Market: Historically the busiest season for home sales, with expectations of increased activity as buyers re-enter the market.

• Impact of Rising Rents [09:00]:
  “A lot of first-time buyers really weigh that rent versus buy cost... rising rents could push more people to consider buying.”

Notable Quotes:

• Nicole Friedman (Housing Market Reporter) [07:42]:
  “So definitely rising inventory is good for buyers. It gives them more options and also gives them a bit more leverage to negotiate...”

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5. Additional Business News

Pharmaceutical Supply:

• FDA Announcement: The shortage of weight loss medications Wegovy and Ozempic has been resolved. Novo Nordisk confirmed that U.S. supply now meets or exceeds both current and projected demand.

Cryptocurrency Regulation:

• Coinbase Update: The Securities and Exchange Commission (SEC) plans to drop its lawsuit against Coinbase, which sought to regulate the exchange as a stock exchange. The dismissal awaits a commission vote expected next week.

• Industry Insight: The SEC appears more conciliatory towards crypto firms, following significant investments by companies like Coinbase in lobbying efforts to influence regulatory perspectives.

Electric Vehicle (EV) Scrutiny:

• Italian Competition Watchdog Investigations: Stellantis, Volkswagen, BYD, and Tesla are under investigation for potentially failing to inform customers about EV battery performance limitations and warranty conditions.

• Company Responses: No immediate comments received from the involved carmakers.

Immigration and Customs Enforcement (ICE) Leadership Change:

• Administration Shake-Up: The Trump administration has removed the acting director of ICE, Caleb Vitello, citing slower-than-expected deportation rates.

• Official Statement: The Department of Homeland Security indicated that Vitello is being promoted, with a new acting director expected to be announced soon.

• Quotes:

  • Administration Official [07:30]:
    “The administration is shaking up ICE's leadership and that it's expected to announce a new acting director soon.”

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6. Spotlight on Chick-fil-A's Operational Innovations

Enhanced Drive-Thru Efficiency:

• Tech Integration: Chick-fil-A has deployed an elite team to optimize drive-thru operations using high-flying drones and kitchen security camera monitoring to identify and resolve bottlenecks.

• Heather Haddon [11:45]:
  “They're willing to look at all kinds of possible solutions to try to speed things up. For these operators who really want to get as many people in and out of their drive-thru as possible and to have as best experience as possible as well.”

Innovative Restaurant Design:

• Atlanta Location Example:
  A new Chick-fil-A restaurant outside Atlanta features a second-floor kitchen that uses a dumbwaiter to deliver food directly to customers, capable of serving approximately 700 cars per hour.

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7. Upcoming Content

• Markets Wrap-Up: Released the following day, providing a comprehensive overview of market movements.

• Building Influence Series: Premiering on Sunday, this special series explores how China has invested over a trillion dollars globally to build alliances and challenge U.S. influence.

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Conclusion

The episode of WSJ What’s News provides an in-depth analysis of the DOJ's investigation into UnitedHealth Group and its broader implications on the stock market. Coupled with insights into the housing market decline, shifting investor and consumer sentiments, and other significant business developments, the episode offers listeners a comprehensive understanding of the current economic landscape. Notable quotes from experts like Christopher Weaver and Hannah Aaron Lang enrich the discussion, ensuring that even those who haven't tuned in can grasp the critical issues affecting markets and businesses today.

Transcript

[Unnamed Student]

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[Alex Osila]

The Justice Department is investigating UnitedHealth pulling down healthcare stocks. Plus new data shows the housing slump continues.

[Economist]

Some economists may have been expecting that the sales decline would be smaller because there's been an increase in inventory in the homes available for sale. But really what we've seen is a lot of buyers are just deterred by these current mortgage rates and the high.

[Alex Osila]

Prices and one fast food chain's high tech way of getting you your sandwiches quicker. It's Friday, February 21st. I'm Alex Osila for the Wall Street Journal. This is the PM edition of what's news, the top headlines and business stories that move the world today. We report exclusively that the Justice Department has launched an investigation into UnitedHealth Group's Medicare billing practices, according to people familiar with the matter. The new civil fraud investigation is examining how the company recorded diagnoses that that trigger extra payments to its Medicare Advantage plans. Here to tell us more is Christopher Weaver, who covers U.S. healthcare companies for the Journal. Chris, break this down a little bit for us. What is the DOJ looking into?

[Christopher Weaver]

Yeah, so what we know now is that attorneys for the DOJ's Civil Division and at the U.S. attorney's Office in Minnesota have questioned a number of medical providers who either used to work for United or had contracts with the company about its practices for recording diagnoses for Medicare billing purposes. The way United's Medicare Advantage plans work is they get paid basically a lump sum that goes up when people are sicker, creating an incentive to add more diagnoses. And as the Journal reported in December, doctors working for United were adding such diagnoses at much higher than usual rates and in some cases say they've experienced various forms of encouragement or even pressure to record diagnoses.

[Alex Osila]

So if I'm a patient with my insurance through UnitedHealth, what could the consequences of this be for me?

[Christopher Weaver]

For a patient, you may not even know what diagnoses are submitted on your behalf by a Medicare Advantage insurer. This is something that largely happens behind the scenes and concerns the kind of taxpayer funded payments that United and other insurers in that market receive.

[Alex Osila]

So for this story, you and other reporters reached out for comment from the DOJ and the Department of Health and Human Services Office of Inspector General, which is also involved in the probe, and they both declined to comment. UnitedHealth also declined to comment, but after the article was released, the company published a response on its website saying it wasn't aware of the Justice Department's actions. It also said the Journal's reporting amounted to a year long campaign against Medicare Advantage and that any suggestion that its practices are fraudulent is outrageous and false. A spokeswoman for the Journal said, we stand by our reporting. Now, Chris, where can an investigation like this one end up?

[Christopher Weaver]

Yeah, civil fraud investigations sometimes go nowhere. Sometimes they result in monetary settlements. Occasionally they've even turned criminal. At this point, it's too early to say where it's going. What we know is that in recent months they began this effort that they've interviewed a number of witnesses named in our articles over the last year as part of this broader investigation the journals conducted of Medicare Advantage companies.

[Alex Osila]

That was WSJ reporter Chris Weaver. Thank you, Chris.

[Christopher Weaver]

Oh, thank you.

[Alex Osila]

Major U.S. stock indexes were down today as investors reacted to the news of the DOJ probe as well as other signs of a lackluster economy. UnitedHealth stock dropped more than 7%. Its high stock price means it has a sizable effect on the Dow, which fell nearly 750 points, or 1.7%. Other health care stocks, including Humana and CVS Health, also sold off. The Nasdaq fell around 2.2% and the S&P 500 dropped about 1.7%. And speaking of UnitedHealth, a lawyer for Luigi Mangioni, man accused of killing the head of the company's insurance arm in December, protested what she said was unfair treatment of her client as he battles three sets of criminal charges. Today's court appearance, a hearing in a state court in Manhattan, was Mangione's first since December, when he pleaded not guilty to murder charges. The judge didn't schedule a trial date. Even setting aside today's performance, investors are getting less sunny about the future of the stock market. According to the latest survey from the American association of Individual Investors, the number of traders who expect stock prices to fall over the next six months reached about 47% for the week ended February 12th. That's the highest level in more than a year. WSJ reporter Hannah Aaron Lang spoke with our YOUR Money Briefing podcast about what's giving investors pause.

[Hannah Aaron Lang]

It's a reflection of just a lot of uncertainties that are floating around right now. We had this deep seek tech route in January that shook confidence in some of those leading artificial intelligence stocks. We've had persistently stubborn inflation. It's raising questions about the time and size of potential interest rate cuts. And we've had this blizzard of headlines coming out of the Trump administration on immigration, on trade policy, on reshaping the federal workforce. And I think investors are still digesting all of that and trying to figure out what will end up having a durable impact on American companies and markets.

[Alex Osila]

To hear more from Hannah, check out this coming Monday's episode of youf Money Briefing. And it's not just investors. Consumers too are getting more pessimistic. New data today in the University of Michigan's Index of Consumer Sentiment showed that consumer confidence tumbled at the end of February to well below January score and weaker than economists expectations. The director of the survey said in particular its gauge of the buying conditions for durable goods. Those are things that are meant to last five years or more, slumped in large part due to fears that price increases related to tariffs are coming soon. Coming up, what could it take to get the housing market going again? That's after the break.

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[Alex Osila]

According to New data out today from the National association of Realtors, US home sales fell 4.9% in January from the month before. That's a much bigger decline than the 2.6% that economists anticipated. Nicole Friedman covers the housing market for the Journal and she's here to give us the big picture. Nicole, this is the latest in two years of very sluggish home sales. We've talked a lot about it on the show. The high prices, the high mortgage rates, low inventory. So even though all that has been going on for a while, last month's decline was bigger than anticipated. Why was that?

[Economist]

So the rates are really just holding steady at around 7%. And so that's continuing to keep people out of the market. It's also been a cold winter and winter is usually a slow time for Home sales people don't like to go house hunting in the snow, in the rain. And also some economists may have been expecting that the sales decline would be smaller because there's been an increase in inventory in the homes available for sale. But really what we've seen is even with that increase in inventory, a lot of buyers are just deterred by these current mortgage rates and the high prices.

[Alex Osila]

So if we take out the weather factor, I guess, could rising inventory be enough to get the housing market going again?

[Economist]

So definitely rising inventory is good for buyers. It gives them more options and also gives them a bit more leverage to negotiate that buyers no longer have to make an offer the same day they see a house. They're not necessarily competing against other buyers. And so that might be enough to make it more affordable or to entice some buyers into the market. And the spring is usually the busiest time for home sales. And so we could also just see more activity because buyers have been waiting for the spring and are going to jump in in the next couple of months.

[Alex Osila]

We noted in this morning's show that rents are rising in much of the country. Could that possibly boost home sales, like maybe push people to buy?

[Economist]

A lot of first time buyers, you know, they really weigh that rent versus buy cost and what am I paying in rent versus what would it cost me to own as rents rise, that is a major factor in pushing renters to say, well, maybe let's buy, even if it's expensive, if we can afford it, then we'd be able to lock in that cost for the next 30 years. So definitely rising rents could push more people to consider buying.

[Alex Osila]

That was WSJ reporter Nicole Friedman. Thank you, Nicole.

[Economist]

Thanks for having me.

[Alex Osila]

In other news, the Food and Drug Administration has declared that the shortage of weight loss medications, Wegovy and Ozempic has been resolved. The company that makes the drugs, Novo Nordisk said the announcement confirms that the U.S. supply of the prescription only drugs now meets or exceeds both current and projected demand. The crypto exchange Coinbase says the securities and Exchange Commission plans to drop a lawsuit against it. The suit had sought to regulate the company as a stock exchange. Dismissing it would require a commission vote, which the company expects to happen next week. The SEC is making peace with crypto firms after Coinbase and others poured millions into helping elect lawmakers who are friendlier to the industry. EV makers are under scrutiny. In Italy, the country's competition watchdog has launched several investigations into the local arms of Stellantis, Volkswagen, BYD and Tesla. It's looking into whether the carmakers failed to inform customers about the limitations of their electric vehicle battery performance and warranties. The companies didn't immediately respond to a request for comment. And we're exclusively reporting that the Trump administration has removed the acting director of Immigration and Customs Enforcement amid frustration. Deportations haven't accelerated faster. That's according to administration officials and other people familiar with the matter. One official said the administration is shaking up ICE's leadership and that it's expected to announce a new acting director soon. A spokeswoman for the Department of Homeland Security said the acting director, Caleb Vitello, is actually being promoted. Efforts to reach Vitello weren't immediately successful. And finally, Chick Fil A is on a mission to get you your sandwich faster. The booming chicken chain has an elite team that it sends out to individual restaurants once it's there. The team uses high flying drones to understand drive thru traffic patterns and it monitors security cameras in the kitchen to find where slowdowns happen. Our restaurant's reporter Heather Haddon says the team uses that footage to help each restaurant up its game.

[Heather Haddon]

So individual operators actually ask this team to come out when they're having some kind of issue or they just want to be more productive. They're all looking to increase sales and the operators are rewarded for doing that. So it's in the operator's interest to actually have this team come out and analyze, you know, where are the bottlenecks in the drive thru is do you need more order takers in the drive thru? Do you need to split up duties in the actual restaurant more efficiently between more people to speed things up? Could you have some kind of access door to get people their food directly from the restaurant into the drive thru. They're willing to look at all kinds of possible solutions to try to speed things up. For these operators who really want to get as many people in and out of their drive thru as possible and to have as best experience as possible as well.

[Alex Osila]

Chick Fil A's insights are also reshaping the way it builds new restaurants. Last summer it opened a location outside Atlanta that has a second floor kitchen that delivers food down to customers through a small elevator. Like a dumbwaiter, it can serve about 700 cars an hour. And that's what's news for this week. Tomorrow you can look out for our weekly markets wrap up what's news in Markets. Then on Sunday we'll have the first episode of our new special series Building Influence where we look at how China spent more than a trillion dollars to make friends around the world and undercut the US that's on what's New Sunday. And we'll be back with our regular show on Monday morning. Today's show is produced by Anthony Banci and Pierre Bienname, with Deputy Editor Chris Sinsley. Michael Laval wrote our theme music. Aisha El Musleam is our development producer. Scott Salloway and Chris Sinsley are our deputy editors. And Falana Patterson is the Wall Street Journal's head of news audio. I'm Alex Osola. Thanks for listening.