UnitedHealth shares feel fallout after cyberattack, antitrust report

Shares in UnitedHealth Group Inc. have moved in the opposite direction of both its industry peers and the wider market since becoming the target of a cyberattack and a reported antitrust investigation.

The healthcare giant's stock has declined 5.8% since Feb. 21, when it announced that the hacking group ALPHV had breached its system, hitting its subsidiary Change Healthcare Inc. particularly hard.

UnitedHealth is also the subject of a US Justice Department antitrust investigation, according to a Feb. 28 report by The Wall Street Journal. The investigation is reportedly looking into the relationships between the company's UnitedHealthcare insurance unit and its Optum Inc. health services arm, which owns physician groups, among other assets.

UnitedHealth's stock decline in the last month was virtually the inverse of the S&P 500 and S&P Insurance index, which posted 5.21% and 4.93% growth during the same period.

While the full extent of any DOJ antitrust investigation remains to be seen, the hack was "the most significant and consequential cyberattack on the U.S. health care system in American history," according to a survey and report conducted by the American Hospital Association Inc, a healthcare industry trade group.

Change subsidiary

The dayslong cyberattack ended with a group of hackers claiming it had stolen 8 terabytes of data from the insurer that could have included a large swath of sensitive records such as medical insurance and health data.

Change Healthcare processes 15 billion healthcare transactions annually and touches one in every three patient records, according to the American Hospital Association report.

"Since this attack, patients have struggled to get timely access to care and billions of dollars have stopped flowing to providers, thereby threatening the financial viability of hospitals, health systems, physician offices and other providers," the report reads.

The healthcare giant was previously targeted by the DOJ over its purchase of Change Healthcare, a challenge that ultimately ended in UnitedHealth's favor.

Long-term impact

In the month since the attack, UnitedHealth has struggled to restore its system, announcing March 15 that it had finally restored Change's electronic payments platform. It took until March 7 to restore 99% of Change's pharmacy network services, according to a UnitedHealth news release.

"We know this has been an enormous challenge for healthcare providers and we encourage any in need to contact us," CEO Andrew Witty said in a March 18 news release.

The long-term impacts of the attack, or lack thereof, remain to be seen, wrote J.P. Morgan analyst Lisa Gill in a March research note.

The most noticeable cash flow impact across facilities and pharmacies should be manageable, Gill said, pointing to efforts by affected parties to switch to alternative claims processing platforms.

"While we were optimistic [first-quarter 2024] results could provide some insight into claims development coming out of 2023 and early 2024 trends (albeit very limited), we believe the Change incident could obfuscate [first-quarter medical loss ratio] assessments, particularly for UnitedHealth," Gill added.

UnitedHealth's share price drop is similar to that of another close-managed competitor, Humana Inc., which is still dealing with fallout from less-than-stellar fourth-quarter 2023 earnings.

While Humana stock declined 5.5% during the same period, Centene Corp. saw a smaller decline of 2.5%. Meanwhile, Elevance Health Inc. and The Cigna Group shares increased 1% and 3%, respectively.