UnitedHealth Group's shares ascend following Berkshire Hathaway's revelation of its investment in the health insurance company
Berkshire Hathaway Invests in Troubled UnitedHealth Group
Berkshire Hathaway, the conglomerate led by legendary investor Warren Buffett, has made a significant investment in UnitedHealth Group Inc., the nation's largest provider of Medicare Advantage plans. The move comes amidst ongoing investigations into UnitedHealth's Medicare business.
UnitedHealth Group, based in Minnesota, runs a growing Optum business that provides care and technology support. However, it has been under pressure in recent quarters due to rising care use and rate cuts. In April, the company's stock plunged due to a spike in health care use, leading to the resignation of former CEO Andrew Witty and the withdrawal of the company's forecast entirely in May, citing higher-than-expected medical costs from new Medicare Advantage members.
Moreover, federal officials have launched a civil fraud investigation into how UnitedHealth Group records diagnoses that lead to extra payments for its Medicare Advantage plans. The company has contacted the Department of Justice after reviewing media reports about investigations into certain elements of its business.
The federal investigation is reportedly investigating how UnitedHealth Group used doctors and nurses to gather diagnoses that bolster payments. This investigation was first reported by The Wall Street Journal in February.
Despite these challenges, Berkshire Hathaway saw an opportunity. The conglomerate purchased around 5 million shares of UnitedHealth Group last quarter, with a value of approximately $1.57 billion. The stock of UnitedHealth Group surged before the market open on Friday in response to Berkshire Hathaway's purchase.
Berkshire Hathaway's filings are closely followed by many investors due to their interest in Warren Buffett's moves. However, the filing does not specify who at Berkshire Hathaway handled the investment in UnitedHealth Group. Ted Weschler and Todd Combs also pick stocks for Berkshire, but they usually manage smaller portfolios, and Combs also serves as Geico's CEO.
Warren Buffett, as the CEO of Berkshire Hathaway, is generally responsible for making key investment decisions. However, with his eventual retirement from the CEO role (though not from the company), the investment in UnitedHealth Group might have been influenced or handled by other key figures at Berkshire Hathaway.
While Greg Abel is set to succeed Buffett as CEO, the investment decisions are typically made by Buffett himself or in consultation with his investment team. Therefore, while Greg Abel is crucial for the company's future direction, the recent investment in UnitedHealth Group was likely handled by Buffett, possibly in consultation with other key investment managers.
It's worth noting that the decision-making process at Berkshire Hathaway often involves Buffett's close associates and investment experts, ensuring that such significant investments are not made in isolation.
UnitedHealth Group is currently dealing with federal criminal and civil investigations involving its Medicare business. The company's stock has mostly shed value since December, following the fatal shooting of UnitedHealthcare CEO Brian Thompson. Despite the recent surge, UnitedHealth's stock has lost roughly half its value in the past year.
As Warren Buffett prepares to retire as CEO of Berkshire Hathaway at the end of the year, the investment in UnitedHealth Group marks a significant move for the conglomerate. The outcome of the ongoing investigations into UnitedHealth's Medicare business will undoubtedly impact the value of this investment.
- Science might play a role in the ongoing federal investigation of UnitedHealth Group, as the investigation is reportedly investigating how the company used doctors and nurses to gather diagnoses that bolster payments.
- The investment in UnitedHealth Group, despite the ongoing investigations and the company's recent stock decline, could potentially have implications for Berkshire Hathaway's business and finance sectors, as UnitedHealth Group runs a growing health-and-wellness and Optum business.
