The U.S. Department of Justice has joined a former UnitedHealth (UNH) executive in a whistleblower lawsuit against the company alleging that it engaged in "systematic fraud" surrounding risk adjustment payments.
As a result, the company's share price is falling, which analysts say could be reason to buy the company's stock.
The suit was filed in the federal court in Los Angeles back in 2011, but came to light late Thursday when law firm Constatine Cannon LLP announced the Department of Justice joined the suit. Benjamin Poehling, who previously worked as an executive at the company, filed the suit, which has been kept under seal for years. Phillips and Cohen LLP lawyers are also representing Poehling.
As a result, United's stock dropped 3.5% Friday, hitting $157.85 per share.
According to the suit, United "engaged in a widespread scheme to knowingly submit...false claims for payment to the United States by submitting false 'risk adjustment' information to the Centers for Medicare & Medicaid Services." The suit claims that United, through its subsidiary Ingenix, "engaged in systematic fraud" by "submitting tens or hundreds of thousands of false claims for risk adjustment payments" to the federal government.
Ingenix does risk adjustment for the company. According to the suit, United has been engaging in this type of conduct for years.
A number of Medicare Fraud suits have have been filed against health insurers in recent years. Payment rates in Medicare Advantage are based on regional averages for traditional fee-for-service and adjusted according to plan members' risk scores and other variables. Plansreceive higher payments for members with more chronic conditions. The suits allege that health plans have inflated some members' scores in order to collect more funds.