SAC Capital Advisors LP and Viking Global Investors LP are being questioned by Senator Charles Grassley in his review of a possible leak of a U.S. government decision on payment reimbursements to health insurers.
Grassley, an Iowa Republican, sent letters yesterday to the investment firms, asking about their dealings with “political intelligence” firms that try to predict government decisions. A Height Analytics LLC report on April 1 told clients more than 40 minutes before the official announcement that the U.S. would reverse plans for a Medicare Advantage rate cut.
Shares of Humana Inc. (HUM:US), UnitedHealth Group Inc. (UNH:US) and other insurers soared after the report. Trades by Andreas Halvorsen’s Viking hedge fund company and Steven A. Cohen’s SAC “raise questions regarding the transmission of political intelligence from Washington, D.C. to Wall Street,” Grassley said in his letter. He cited a Wall Street Journal report that the two firms traded in health stocks before the Medicare decision.
A spokesman for New York-based Viking declined to comment on Grassley’s letter. Jonathan Gasthalter, a spokesman for Stamford, Connecticut-based SAC, also declined to comment.
Justin Simon, an analyst at Height Analytics in Washington, sent a note to clients about 20 minutes before the market close on April 1 that said “a deal has been hatched to protect Medicare Advantage rates.” Companies including Humana and UnitedHealth offer the plans as an alternative to the government-run Medicare program for the elderly and disabled.
Simon made his call after reviewing other reports on the topic and talking with lobbyists working on the issue. One of those lobbyists, former Grassley aide Mark Hayes of the firm Greenberg Traurig LLP in Washington, told Simon that “very credible sources” had said the government would reduce the payment cut, according to e-mails obtained by Bloomberg.
Humana, which gets more of its revenue from Medicare than any other insurer, jumped about 8.6 percent after Simon’s note was issued. Hayes’s clients included Humana, which severed its relationship with Greenberg after Grassley began his probe.
Grassley hasn’t found that Hayes or Simon received advance notice of the decision from government officials. Both Greenberg and Height have said their employees did nothing wrong. Height terminated a contract with Greenberg for Hayes to advise its analysts on April 19, after Humana fired the firm.
Greenberg said April 22 it would no longer represent “political intelligence” firms.
The U.S. Centers for Medicare and Medicaid Services, the agency that runs Medicare, and the inspector general for the Health and Human Services Department are also investigating whether there was a leak of the Advantage decision. Spokesmen for the two agencies didn’t immediately respond to e-mails today asking about the status of their investigations.
Medicare officials decided two weeks before the official announcement that they would change a key calculation that helps determine Advantage rates, according to Grassley.
SAC, which oversees $15 billion in assets, reached a $602 million conditional settlement last month with the U.S. Securities and Exchange Commission of claims the firm and one of its units profited from illegal tips about a drugmaker received by former portfolio manager Mathew Martoma. That case is unrelated to the Medicare Advantage review Grassley is conducting.
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