Examiner’s Optum Reporting Cited in Landmark Complaint

This is the 17^th installment in an investigative series, launched in December 2022, about CareMount/Optum/UnitedHealth and broader concerns about corporate medical care.

Class Action Status Sought Against UnitedHealth; Allegations Include Insider Trading, Fraud, and Monopolistic Practices

By Adam Stone

“Just when I thought I was out, they pull me back in.”

That famous line from the Michael Corleone character in “The Godfather Part III” jumped to mind last week when a little bird came calling, chirping in my ear about a potentially landmark legal development.

As many of you know, Hudson Valley patients were alerted in the fall of 2021 that CareMount Medical had joined Optum Health (a UnitedHealth subsidiary), a transition that has since wreaked havoc in our local medical care system, as it has in markets across the United States.

Some who followed my year-and-a-half probe into corporate sick care know that I stepped away from that reporting and all other regular column writing in May, needing to shift my attention back to the demands of newspaper ownership.

Since then, I’ve been contacted time and again by sources new and old, urging a resumption of the series given the disruption wrought by the profits-over-patients culture plaguing the U.S. medical industry.

I promised myself I wouldn’t return to it until I caught my breath.

But then that especially well-informed little bird came to sing an especially newsworthy song last week.

The Latest

Here’s the scoop: On Oct. 4, the California Public Employees’ Retirement System (CalPERS), the nation’s largest state public pension fund with more than two million members and over $500 billion in assets, filed an amended complaint against UnitedHealth, the largest health care insurer on the planet, after being appointed as lead plaintiff in July.

Back in May, the City of Hollywood Firefighters’ Pension Fund had initiated a securities fraud complaint against UnitedHealth Group, citing key corporate figures: Stephen Hemsley, chair of the company’s Board of Directors; Andrew Witty, chief executive officer; and Brian Thompson, CEO of UnitedHealth subsidiary UnitedHealthcare.

The proposed shareholder class action claimed that the company failed to disclose the reopening of an antitrust investigation by the U.S. Department of Justice (DOJ) related to its acquisition of a health care data company.

It also alleged that top executives sold more than $100 million in shares while aware of the investigation, prior to its public disclosure in my reporting, and subsequent coverage in The Wall Street Journal and other national outlets.

CalPERS, in its consolidated complaint, seeks a jury trial against UnitedHealth and its key executives. The complaint alleges major damages stemming from purchases of the company’s common stock, influenced by alleged insider trading.

“When our members’ investments are harmed by alleged corporate misconduct, we will take appropriate action to seek restitution and encourage better governance and oversight at companies in which we are significant investors,” CalPERS General Counsel Matthew G. Jacobs told me in a statement over the weekend.

The plaintiff also describes a widespread scheme by the corporate behemoth to inflate revenues and manipulate the medical industry, citing violations of federal securities law.

The public pension fund, as the lead plaintiff, seeks to represent a class of investors who purchased UnitedHealth Group, Inc. common stock between Sept. 22, 2021, and Feb. 27, 2024.

CalPERS’ legal team is vying to have the lawsuit certified as a class action.

‘Abuse of Power’

Significantly, the architects of the case appear to be seeking structural reform – accountability and oversight – not just a payday.

UnitedHealth, with a market value exceeding $550 billion (surpassing even the GDP of mid-sized nations like Austria or Nigeria) might not be able to settle this matter by just cutting a fat check, despite its vast resources.

The complaint cites as evidence, in various legal exhibits, my exposés in this series, as well as stellar reporting from The Wall Street Journal and STAT News.

Represented by the renowned Robbins Geller Rudman & Dowd LLP, known for its expertise in significant securities litigation, the complaint cites a theory of the case focused on UnitedHealth’s alleged “abuse of power.”

“The underlying fraud allegations here are marked by seriousness and pervasiveness,” Bobby Henssler, a partner at Robbins Geller Rudman & Dowd, told me in prepared remarks late last week. “The suit alleges that UnitedHealth misled investors by, among other things, concealing its pattern and practice of improper ‘upcoding’ in the company’s Medicare Advantage business and failure to maintain necessary network firewalls.”

Legal papers claim the defendants “engaged in a scheme and wrongful course of business which was designed to, and did, artificially inflate the Company’s revenues, earnings, and stock price.”

Beyond the media reports, the complaint also includes assertions that were researched and corroborated independently by the law firm, through a review of public documents, statements from company insiders and other available information.

“When our members’ investments are harmed by alleged corporate misconduct, we will take appropriate action to seek restitution and encourage better governance and oversight at companies in which we are significant investors.”  – CalPERS General Counsel Matthew G. Jacobs.

In quoting from my reporting, the legal action notes a scene I spotlighted in my earlier coverage: A troubling January 2024 meeting between Optum executives and health care professionals where nurses were guided on how to add additional diagnosis codes to patient charts.

“The March 18, 2024 The Examiner News report also included inside audiotapes, evidencing UnitedHealth management coaching nurses to add unsupported diagnoses during chart reviews,” the complaint states.

Filed in the U.S. District Court for Minnesota, where the multinational corporation is headquartered, the complaint accuses UnitedHealth and its executives of engaging in illegal practices that misled investors, defrauded the government and exploited the company’s market dominance to stifle competition.

The filing emphasizes how the defendants “formulated, implemented, and oversaw an illegal, company-wide upcoding gambit.”

A UnitedHealthcare corporate media contact did not reply to my request for comment as of press time.

Examiner Reports

One of my reports from earlier this year detailed Optum’s alleged process to deceive the Centers for Medicare & Medicaid Services (CMS), as described in interviews I conducted with a federal whistleblower who had also filed an official government complaint.

Nurses reviewed patient charts to resurrect past chronic conditions, adding unsupported diagnoses that had not been detected by primary health care providers, the whistleblower described.

An offshore coder would then submit claims to CMS based on these dubious entries, the public pension fund’s complaint states.

The plaintiff cites mid-2024 reports from The Wall Street Journal and STAT News detailing widespread fraudulent practices at UnitedHealth, including claims that the company collected billions from Medicare for untreated conditions, with a Wall Street Journal analysis showing that in 2021 alone UnitedHealth received $8.7 billion in taxpayer funds for diagnosis codes that were never treated by doctors.

“Doctors around the country have described panicked calls from UnitedHealth members who noticed alarming new diseases listed on their medical chart that their doctor never mentioned,” the complaint states.

The media reporting also described the company using its vast network of doctors and clinics to maximize profits at the expense of patient care.

Code Red

The legal action, which could have far-reaching implications for the industry, alleges that UnitedHealth deliberately inflated its Medicare Advantage payments by “upcoding,” a practice in which unwarranted diagnosis codes are added to patient records to increase government reimbursements.

“At the core of Defendants’ scheme was their carefully orchestrated plans and procedures to inflate the fees UnitedHealth collected from the government by deliberately ‘upcoding’ – or adding unwarranted diagnosis codes – across its massive member population,” the complaint explains.

UnitedHealth used several strategies, including incentivizing doctors and nurses to misdiagnose patients, particularly through its HouseCalls program, according to the complaint.

“UnitedHealth’s HouseCalls program was specifically designed to conduct health risk assessments in members’ homes to generate unsupported diagnoses of serious and chronic medical conditions in order to boost Medicare Advantage payments from CMS,” the complaint maintains.

These visits allegedly allowed nurse practitioners to perform home assessments and leverage software “specifically programmed to recommend lucrative diagnoses and unreliable medical devices.”

‘Change’ You Can’t Believe In

The pension fund’s complaint also highlights UnitedHealth’s acquisition of Change Healthcare in 2021, a $13 billion deal the plaintiffs say allowed the company to obtain competitor data, positioning it to further manipulate the industry.

In fact, the acquisition provided UnitedHealth access to information from competitors “including pricing structures, claims data, and billing practices,” the complaint asserts.

And it’s not like regulators didn’t know the risks with the Change Healthcare deal at the time.

Grave industry concerns were immediate, and the DOJ filed an antitrust lawsuit to block the deal.

However, UnitedHealth successfully argued that it had robust internal firewalls to protect sensitive information.

“The underlying fraud allegations here are marked by seriousness and pervasiveness.”  – Bobby Henssler, partner at Robbins Geller Rudman & Dowd.

But the company’s assurances about its data protections were false, the complaint states, noting how “the firewalls UnitedHealth described to the court and the public were illusory – they simply did not exist.”

And what happened next?

“The lack of firewalls and lax security also ultimately led to the largest security breach in the history of the United States healthcare system, which hackers achieved simply by acquiring a working username and password,” the legal action declares.

UnitedHealth revealed in February that a ransomware group exploited vulnerabilities in Change Healthcare’s security, compromising one-third of all patient records in the United States, the complaint explains.

Throwing Stones

A Stone’s Throw column I published on Feb. 26 revealed that the DOJ notified the corporation of a nonpublic investigation into the company’s antitrust practices in October 2023, a fact I learned from local sources, confirmed through first-hand correspondence.

“The new Justice Department inquiry, reported earlier by the Examiner News, a news organization based in New York’s Hudson Valley, is partly examining Optum’s acquisitions of doctor groups and how the ownership of physician and health-plan units affects competition, according to the people with knowledge of the matter,” stated a Feb. 27 Wall Street Journal piece headlined “U.S. Opens UnitedHealth Antitrust Probe.”

Previously concealing information about the inquiry from investors and the public, senior executives had taken immediate action after learning of the probe last fall, selling more than $100 million of their own UnitedHealth stock “at artificially inflated prices as the market and other investors remained unaware of the new federal antitrust investigation,” the complaint details.

The Wall Street Journal’s story, as cited in the complaint, noted that the DOJ was focusing on UnitedHealth’s Medicare billing practices and its anti-competitive behavior, including leveraging its dominant position to squeeze competitors and secure billions in unwarranted payments.

Industry analysts and investors then expressed grave concern that the DOJ investigation would expose the scope of the company’s unhealthy practices.

A significant drop in UnitedHealth’s stock followed, with the price declining more than $27 per share, falling from $525.32 on Feb. 26 to $498.28 on Feb. 28, the complaint references.

“The decline…served to remove artificial inflation from the price of UnitedHealth common stock, and was the direct and foreseeable consequences of the revelation of the relevant truth concealed by Defendants,” the complaint argues.

‘Monopoly on Steroids’

Lawmakers have taken notice of the mounting allegations, with figures as politically diverse as U.S. Sen. Elizabeth Warren, a liberal Democrat from Massachusetts, and Rep. Buddy Carter, a conservative Republican from Georgia, calling for further scrutiny.

Warren described UnitedHealth as a “monopoly on steroids,” while Carter echoed calls to “bust up” the company.

“Because UnitedHealth has bought up every link in the healthcare chain, it’s in a position to jack up prices, squeeze competitors, hide revenues, and pressure doctors to put profits ahead of patients,” Warren has stressed.

Several lawmakers have also called for an insider trading investigation into UnitedHealth’s executives related to the stock sales during the DOJ probe.

“Based on the highly suspicious stock sales by Hemsley and others, Senator Warren and 16 other lawmakers sent a letter urging the SEC to open an insider trading investigation,” the complaint points out.

Local Angle

Thankfully, my exit from regular reporting hasn’t spoiled our ability to cover the corrosive impact of Optum’s entry into the region.

As timing would have it, just this week Examiner Editor-in-Chief Martin Wilbur prepared a piece about the latest local development.

We learned that Optum notified about 75 local lab staff and other related personnel on Sept. 30 that they would be laid off after the company contracted out the work to Quest Diagnostics, part of an alleged union busting effort by Optum.

Despite anecdotal evidence of recent operational improvements under local leadership and the commendable efforts of dedicated doctors and other staff, the deeper, systemic issues in our health care system remain uncontained in the area.

It seems difficult to rein in at the local level given the parent company’s all-consuming pursuit of profit above all else, which often comes at the expense of patient care.

While the filing of the public pension fund’s complaint won’t be a quick panacea by itself, it is a momentous scene in this movie.

A pat, uncomplicated happy ending is unlikely, given the vast web of factors that have upended our health care system.

And the claims against UnitedHealth paint a grim picture.

But there is a silver lining: the increased scrutiny has illuminated the depth of the alleged corporate misconduct.

With this broader awareness, reasonable stakeholders should agree that the status quo is unacceptable, possibly paving the way for meaningful reform in the months and years ahead.

Let’s hope this legal action marks a key step toward accountability and change.

– Adam Stone is publisher of Examiner Media.

(To read the full complaint, click here).