UnitedHealth aims to reassure investors as profits plunge, DOJ investigates its Medicare business

Additionally, Insurer reports earnings

Moreover, At the same time, The Dow component has seen its price cut nearly in half since mid-May, with the stock on pace for its worst year in more than a decade, after earnings in its flagship Medicare gram and Optum Health physician practices plummeted

That led to the abrupt resignation of former CEO Andrew Witty, forcing the company to reinstate ex-CEO Hemsley to replace him and suspend earnings guidance

On top of that, the company is facing criminal and civil Department of Justice investigations into its Medicare billing practices

As UnitedHealth faces challenges on multiple fronts, it sits in a "perfect storm," said Mizuho Securities analyst Ann Hynes

Now, investors want to know how Hemsley plans to steer the company out of the whirlwind, after assuring them last June that "we're humbly determined to earn back your trust and your confidence. "Here are three key things investors will be looking for from the company's earnings report

However, Analysts expect UnitedHealth to post adjusted full-year earnings of $21. 26 per, according to consensus estimates from LSEG

In contrast, "Anything below $18 — that would be viewed as a negative by the street," Hynes saidRBC Capital analyst Ben Hendrix has set his estimate above consensus at $23

Furthermore, 36, but said Wall Street remains bearish on UnitedHealth (an important development) (which is quite significant). "While we base our more optimistic outlook on management's assertion that Medicare Advantage remains fitable with the 3% low-end of target MA margin in sight for 2026, clients we've spoken to have expressed concern over continued margin compression in OptumHealth and accelerating (medical cost) trend in core Medicare Advantage," he wrote in a note earlier this month

Moreover, Medicare Advantage and Optum Health outlookAnalysts are also focused on how the company plans to stabilize its physician practice unit, Optum Health, amid market uncertainty

For years, it helped UnitedHealth outperform its peers in its flagship Medicare Advantage gram, by leveraging its 90,000 employed or affiliated doctors to treat patients on UnitedHealth's own plans. "Investors with duration were in United really for the power of … Optum Health, the power of United steering their own Medicare Advantage members, extracting considerable margin that they hadn't been able to before," said Baird analyst Michael Ha

Additionally, But in the first quarter this year, Optum Health saw a sharp decline in fits, amid market uncertainty

Additionally, Analysts said the plunge was due in part to a Biden-era change in Medicare reimbursement standards known as V28, which is making it harder for insurers and doctors to bill for extra services, in today's market environment

Mizuho's Hynes said prior billing coding rules left a lot more room for plans to add billing codes related to chronic conditions, such as overall heart conditions, which would vide a higher risk score and reimbursement rate

Under the new V28 rule the billing codes are more specific, closing loopholes that could boost reimbursement. "V28 is very black and white, so you don't have that kind of ability to add codes, and a lot of codes are removed," she said, adding that has now "led to a structural shift in margins for Optum Health

Nevertheless, "But Ha noted the V28 changes began in 2024, at a time when seniors started utilizing more care

Many of UnitedHealth's Medicare Advantage competitors made adjustments over the last year to address the shift

Meanwhile, The sudden collapse of Optum Health margins in the first quarter appears to have caught UnitedHealth off guard, in today's market environment. "I think it's an example of misexecution

What the re reveals is analysis suggests that y knew the headwind heading into the year and even well before then, but for one reason or another couldn't find the offset," Ha said

On the other hand, "We're still confident that Optum Health and United can recover and rebuild unit economics, but we think over the next one to two years, it may potentially worsen (fascinating analysis). "Legal and regulatory issueswatch now1:1401:14UnitedHealth says it is facing DOJ investigation over Medicare billing practicesSquawk BoxThe company got out ahead of the earnings report on Thursday, acknowledging in an SEC filing that its Medicare gram billing practices face criminal and civil bes by the Department of Justice

Conversely, UnitedHealth said the company is cooperating the with the investigations, first reported by the Wall Street Journal (quite telling)

It also noted that in March, a court-appointed special master ruled in the company's favor in a case involving similar allegations brought by the DOJ during the first Trump administration

Additionally, Hynes believes investor concern over the DOJ bes has been overblown. "The stock is trading the government's going to kick them out of Medicare and Medicaid, and the lihood of that is zero, in my view," she said

At the same time, "It will bably end up with them writing a check and doing a Corporate Integrity Agreement … that's what has happened in the past. "But the shooting death of UnitedHealth executive Brian Thompson last December, which secutors allege was carried out by a gunman who was motived by insurance denials, unleashed a groundswell of public criticism of health insurers' practices

Former whistleblower Wendell Potter, who has criticized industry practices after a career at Cigna, said the pressure on large insurers UnitedHealth ly will not cease

In contrast, Regulatory scrutiny in Congress has increased on both sides of the aisle, as Washington grapples with high health and drug costs in Medicare, Medicaid and other government health grams

Moreover, "A lot of the members of Congress who are doctors or Republicans, some are pharmacists, and they see firsthand the heavy hand of these companies," said Potter, president of the Center for Health and Democracy, given current economic conditions

Furthermore, "And so you're seeing interest by Republicans, and I've not seen that before. "In June, UnitedHealth announced that it had hired third party auditors to conduct a review of the company's practices in health insurance and pharmacy benefits services, in an effort "to vide our stakeholders transparency and confidence" in the company's practices, given current economic conditions

The company told CNBC it will not have many details to offer that audit during the second-quarter earnings call

This tells us that does not expect the review to be until the end of the third quarter of this year.