Why UnitedHealth Stock Is Down Today

The U.S. Department of Justice has reportedly launched an investigation into UnitedHealth Group's (NYSE: UNH) Medicare billing practices.

Investors were shaken by the report, sending UnitedHealth shares down 9% as of 10 a.m. Eastern.

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Under the microscope

UnitedHealth is the parent of the nation's largest health insurer as well as a range of other health-industry businesses including doctors' practices and a pharmacy-benefit manager. The Wall Street Journal, citing unnamed sources, reported Friday that Justice is probing the company's billings.

The report says the government is looking into UnitedHealth practices for recording diagnoses that trigger extra payments to its Medicare Advantage plans, including at physician groups that the insurer owns.

Neither the company nor the Department of Justice had any comment on the report.

Medicare Advantage plans are private insurer plans in which the government pays a fixed amount to oversee Medicare benefits. Payments go up if patients have certain diagnoses, creating a potential incentive for the healthcare provider to diagnose more diseases.

Is UnitedHealth stock a buy?

The investigation is the latest worry for UnitedHealth, which is already facing an antitrust probe and regulatory pushback over its planned $3.3 billion acquisition of Amedisys. UnitedHealth has been pushed to the forefront of the heated debate over soaring healthcare costs and patient care.

UnitedHealth shares are now down 25% in the last three months.

Given the importance of healthcare and UnitedHealth's powerful role in the system, this company should have staying power and might look attractive to long-term focused investors. But with so much uncertainty hanging over the company right now, investors would be wise to stay away from UnitedHealth.

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Lou Whiteman has no position in any of the stocks mentioned. The Motley Fool recommends UnitedHealth Group. The Motley Fool has a disclosure policy.