Lots of stuff in the monopoly round-up. The merger boom is back with Charter buying Cox, Apple again refused to comply with a court order, and there’s a new antitrust lawsuit against the dialysis duopoly. Plus a lot more.

I’ll start with two events at the biggest health care company in America, UnitedHealth Group, a corporation so reviled that large numbers of Americans cheered when one of the firm’s executives was assassinated in December.

First, UHG’s CEO, Andrew Witty, abruptly resigned, shortly after the company reported worse than expected earnings due to their patient pool being especially sick and costly to take care of. It’s a company that doesn’t miss earnings projections to Wall Street, so this miss was notable; the resignation of the CEO is doubly unnerving to investors. Second, the Wall Street Journal reported that the firm is under criminal investigation for allegedly cheating the government out of Medicare money. The stock, which had been a Wall Street darling at roughly half a trillion dollar value, is down 50% this month alone.

Why do these events matter? Well, UHG is a great metaphor for the U.S. health care system, both growing in sync with bad policy and spurring it along. It is the biggest health insurer in America, one of the biggest pharmacy benefit managers, the biggest employer of doctors, a large health software and clinical services provider, a major payment network (Change), and a significant health-focused bank. Last year alone UnitedHealth bought or created 250 subsidiaries, over the last five years that number is likely in the thousands. It is also government-funded, with 40% of its revenues coming from the state, at $140 billion last year, mostly Medicare Advantage. In many ways, UnitedHealth Group is a metaphor for our bloated and corrupt corporate economy.

UHG should be a very profitable business. According to the government think tank MedPAC, the government program that pays UHG to serve Medicare enrollees, Medicare Advantage, overpays its vendors roughly $100 billion a year. I calculate that UGH, based on its share of Medicare Advantage, probably gets between $16-24 billion of overpayments. These overpayments come from insurers trying to only take patients who aren’t as sick, so there’s less to pay out. At the same time, Medicare Advantage insurers get paid more to cover sicker people, so they often “upcode” their patients to suggest they are sicker than they are.

Ripping off Medicare Advantage is just the biggest cash grab, not the only one. Indeed, this company is built on what seems to be sordid ways to to skim. The scandals go back decades. In the early 2000s, its CEO resigned for stock manipulation. In 2009, UHG subsidiary Ingenix, was caught stealing from patients. In 2014, a UHG subsidiary was at the center of the controversy over the botched rollout of Healthcare.gov, the federal ACA enrollment portal, for which the company received more than $55 million in contracts. In 2021, it got caught for defrauding Medicare, twice. A judge in 2019 ripped UHG medical directors for being “deceptive” under oath and discriminating against those seeking mental health and substance abuse treatment. After it bought the Change Health payment network in 2022, it got hacked in 2024, and then extended predatory loans to doctors who had cash flow problems due to something it caused.

There are so many scandals that my organization set up a UnitedHealth Abuse Tracker, and it’s just dozens and dozens of corrupt, deceitful, or illegal acts, such as lying to doctors, patients, or the government, just in the last few years. It is known for overcharging, deceit, and denying care.

Beyond the nakedly corrupt acts, UHG is also trying or has monopolized a whole set of markets. For instance, the FTC has put out two separate reports just on pharmaceutical benefit managers, including OptumRx, which is a UHG subsidiary, for extracting billions in overpayments for drugs. The Antitrust Division has been investigating UnitedHealth Group for monopolization for years. It blocked multiple acquisitions, and is litigating against a home health and hospice purchase. I routinely get notes from doctors, patients, and pharmacists who tell me about aggressive monopolistic behavior, like steering of patients to its own doctors, violations of privacy laws, and coercive tactics towards pharmacists.

But the oddity of all of these scandals is that UHG is not that profitable. Sure it makes money. It had annual revenue of $400.3 billion last year, and $34 billion of profit. That’s a bunch in absolute terms, but in terms of profit margin, it’s fairly thin compared to monopolies like Google, especially because of how lavish its public subsidies are. What’s going on? If there’s so much scandal, and so much monopolization, doesn’t that produce, you know, money? Where’s the money going? If its profits were showing up to investors, you’d get more than a sub-10% profit margin.

I suspect the answer is that the money is going to the various insiders in and around the corporation itself, and doesn’t show up on the public balance sheet. To understand what’s happening with UHG, and why the stock collapsed, it helps to use the image of an iceberg. An iceberg is a big chunk of ice in the ocean, often broken off from a glacier. While you can usually see an iceberg on the surface, what you see is deceptive; 87% of an iceberg’s mass is below water. And that’s how to understand the cash flow of an immensely complex and regulated company like UnitedHealth Group. The revenue and profit are what you see on the surface, but most of what’s happening is outside the view of investors.

After all, what kind of skills do you need to assemble a company largely based on corrupt financial manipulation? You need people good at what comes close to stealing. As venture capitalist Paul Graham put it, “C-level execs, as a class, include some of the most skillful liars in the world.” Do you think those people are happy to steal for a living on behalf of investors, aka someone else? The answer is of course not.

Let’s put it more nicely. If you pay bonuses to a whole set of executives who know how to get around regulations, and do so based on aggressive unrealistic growth targets, they will try their hardest meet those targets, one way or the other, if not through legitimate growth then through manipulative games. And UHG is so big, and the conflicts of interest are so vast, that various executives could be positioned as a set of scorpions thrown together in a bowl.

Here’s a hypothetical of what’s going on at UHG. Say one executive runs the specialty pharmacy division, so he wants more money spent buying expensive drugs, but that comes out of the bonus of the UHG executive who runs Medicare Advantage, who is in turn trying to cheat the doctor’s at subsidiary Optum, which threatens the bonus of the doctor’s practice executives, who is also fighting the commercial insurer executive trying to deny the surgeries the doctors bill for. The merger team keeps buying, because they get paid to acquire, regardless of whether it makes sense, and the various companies being bought up are stretching their financials, because you know, the merger team at UHG probably doesn’t care.

Then the CEO sets a goal of having as many transactions inside the company as possible, which leads to an aggressive customer acquisition strategy, only those customers are sicker than expected. And those leaders at the center, who are supposed to be refereeing these conflicts, are being lied to by all of their subordinates, while telling a story to investors that there’s a point to buying and throwing all of these lines of business together in the first place. Look! Vertical integration is so efficient. But in truth, there are thousands of different transactions back and forth from UHG’s various subsidiaries to one another, many of which make no sense.

Then layer onto this dynamic intense public and political scrutiny. Over the past few years, there have been many investigations - of its PBM arm, its Medicare billing, its Change Health hack, its financial practices, its monopolistic activities, its acquisitions, and so forth. Executives have likely started getting worried they’ll face liability or even jail time, and so all of the irrational behaviors are freezing up. And the shooting of the United Health Care CEO cannot have helped morale.

At any rate, the core dynamic with UHG may not actually be that it’s some sort of Machiavellian scheme to corner markets in health care, but that it’s so complex, so corrupt, and so conflicted that it could actually just be a house of cards. It’s a bit like a giant corrupt government that way, with every insider having their hands out. The point, though, to Wall Street, is that all the gamesmanship and monopolization isn’t delivering very high profit margins, and never really can.

One of the hard parts of covering monopolies and finance is trying to explain the behavior of these kinds of firms. Companies like Google make sense, it’s a wildly profitable search business which seeks to thwart rivals to protect its ability to print money. Same with Ticketmaster, though the cash is slightly harder to trace. But there are a bunch of companies who don’t make money, or at least, don’t really make the amount you’d think they should make. UnitedHealth Group is one of them. And maybe that’s because all the insiders are stealing so much that they are actually starting to steal from each other.

Come to think of it, that’s not a bad metaphor for what monopolization and fraud does to an economy long-term.

And after the paywall is the full round-up. Last week, we saw an antitrust case drop against the gruesome dialysis duopoly, a merger boom started, firefighters got angry about fire truck monopolization, crypto received their big payoff, and Trump de facto legalized corporate crime with a wave of corporate pardons. And more. Read on for the full round-up...