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07/05/2010

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WellCare: We have a deal, $137.5M

By Mike Wells
6/25/2010 © Health News Florida

WellCare Health Plans has announced a preliminary $137.5 million settlement with
the federal government that, if executed, would halt investigations into allegations of
accounting fraud.

The Tampa-based provider of Medicaid and Medicare services has been under
official investigation since October 2007.

WellCare made the settlement announcement on Thursday

in an SEC filing, which outlined its agreement with the civil
divisions of the U.S. Department of Justice and the U.S.
Attorney’s Offices for the Middle District of Florida and
Connecticut.

The preliminary settlement is subject to approval of an

executed written agreement. Upon its execution, the
company would pay the government over a period of up to
36 months, plus interest at the prevailing Medicare Trust
Fund rate.

The settlement includes an acceleration clause that requires immediate payment of

any remaining balance in the event WellCare is purchased or experiences a change
in control during the payment period. If such a transition occurs within three years of
the signing of the agreement, and the associated costs exceed certain thresholds,
the company would have to pay another $35 million.

The filing states that the settlement would include about $23 million owed to the
Florida Agency for Health Care Administration as a result of Medicaid overpayments
WellCare received between August and October 2005.

These overpayments were the result of a change that AHCA made in its pay
structure on medical benefits for newborns. WellCare said it previously had recorded
this liability and that it had been in discussions with AHCA about the overpayment for
some time.

WellCare previously paid $80 million to settle federal and state criminal probes into
allegations that it had defrauded Florida benefits programs for low-income adults and
children of $40 million by misstating what it actually spent on care.

After 200 state and federal agents raided its Tampa headquarters in the fall of 2007,
WellCare fired its top three executives, restated more than three years of earnings to
correct payment errors and blamed the accounting problems on its former
executives. They have not been criminally charged.

The newly announced $137.5 million settlement is separate from the $80 million
payment, said WellCare spokeswoman Amy Knapp. She declined to discuss the
agreement beyond that.

WellCare is a major player in Florida's Medicaid system. The company's 2009 annual
report says that almost one-fourth of its members are from Florida: 425,000 on
Medicaid and 114,000 on Medicare.

As of April, WellCare's Healthease and Staywell HMOs combined to enroll nearly

355,000 Medicaid recipients — or about one-third of all enrolled in such
plans, according to a state report. AHCA said WellCare received $914.5 million from
Florida Medicaid last year.

--Mike Wells is an independent journalist in Tampa. Questions or comments

may be sent to Editor Carol Gentry.

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