UnitedHealth under antitrust investigation by DOJ: reports

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UnitedHealth is under investigation by the Department of Justice over antitrust concerns, according to reporting by the Examiner News and the Wall Street Journal.

Over the past few weeks, investigators have been inquiring about UnitedHealth’s effect on competition in sectors where the company operates, according to the reports, which cite sources familiar with the matter.

Those aren’t few. UnitedHealth touches nearly every corner of the healthcare industry, running the largest private health insurer in the U.S., a sizable physician network, a major billing and data analytics business and one of the largest pharmacy benefit managers in the country.

Investigators are particularly interested in the relationship between UnitedHealth’s insurance business, UnitedHealthcare, and Optum, its health services arm that includes doctor’s offices, according to the WSJ.

The investigation of the massive healthcare conglomerate illustrates regulators’ growing concerns about the anticompetitive effects of vertical consolidation, when insurers acquire physician practices or other providers.

The DOJ is gathering facts and has not alleged any wrongdoing. UnitedHealth and the DOJ both declined to comment Wednesday morning.

The investigation

Regulators are interested in whether Optum’s acquisition of doctor’s offices could be creating anticompetitive effects for consumers and other providers, according to the WSJ.

Optum has been quietly acquiring physician practices for years. The division owns or is affiliated with 90,000 physicians, executives disclosed during UnitedHealth’s investor day in November. That’s a 10th of all doctors in the U.S.

As Optum has grown, so too have concerns that UnitedHealthcare might favor its physician sites, directing members to owned providers to keep more of the healthcare dollars in-house. UnitedHealthcare could give its own providers better rates, hurting other doctors in the area or restrict rival insurers’ access to Optum facilities, shrinking their networks.

UnitedHealthcare covers 53 million people across a variety of insurance plans.

UnitedHealth executives have said that UnitedHealthcare and Optum operate independently and do not exclude competitors from their respective businesses. However, experts have long pointed to the company’s considerable scale in the market pressure it can exert on other companies.

UnitedHealth is currently being sued by a nonprofit group of hospitals and doctors in California over allegedly using its market power to try and force them to agree not to compete for primary care physicians.

An estimated third of Optum’s primary care physician footprint is financially controlled by the company, Jefferies analyst David Windley said in a Tuesday note.

That represents about 7% of U.S. primary care physicians — a small number by antitrust standards, though Optum doctors could be concentrated in specific markets, Windley said.

For example, Optum acquired Northwest Physician Network in Washington state in 2017, and now has more than 1,700 primary care physicians heavily concentrated in select counties, according to Windley.

“We acknowledge that [UnitedHealth] can influence providers with both the carrot (Optum) and the stick ([UnitedHealthcare]) across both [Medicare Advantage] and commercial portfolios,” Windley wrote. “Whether it rises to the level of reducing competition is difficult to determine.”

The DOJ is also looking into another element of UnitedHealth’s vertical consolidation that can make the strategy very lucrative for insurers. Payers are motivated to acquire physician practices because their parent company can essentially pay itself for providing care, allowing them to sidestep regulations capping how much in members’ premiums they can retain as profit.

The DOJ is also investigating UnitedHealth’s Medicare billing practices, including how the company documents patients’ sicknesses, according to the WSJ.

Upcoding, a practice where insurers exaggerate members’ illnesses to garner higher reimbursement from government programs, is rampant in Medicare’s private insurance program. A number of large insurers including Cigna, CVS and Kaiser Permanente have faced government audits, been sued or shelled out millions of dollars to settle allegations of overbilling in the past few years.

The investigation is not UnitedHealth’s first tangle with regulators. The DOJ sued to block Optum’s acquisition of healthcare technology provider Change Healthcare in 2022, arguing the buy would give UnitedHealth access to sensitive information about its rivals and create near-monopolistic control of some claims processing tools.

The challenge was unsuccessful.

The DOJ is also currently investigating UnitedHealth’s proposed acquisition of home health provider Amedisys. Amedisys received a second request for information from regulators about the $3.3 billion deal in August.

Regulators also asked UnitedHealth for more information about its $5.4 billion acquisition of Louisana-based home health company LHC Group in 2022, but ultimately opted not to challenge the deal.

It’s not surprising that UnitedHealth often finds itself in the target of antitrust regulators, given it’s the largest healthcare company in the U.S., with $372 billion in revenue and $23 billion in profit last year.

Regulators have also been more aggressively cracking down on anticompetitive business practices, and the healthcare sector is a priority for investigations, according to an executive order President Joe Biden signed in 2021.

Shares of UnitedHealth fell to their lowest level since September after news of the investigation broke.

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