WellCare Health Pays $80 Million to Settle Medicaid Fraud Probe

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May 6, 2009 Wednesday 04:40 PM EST

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WellCare Health Pays $80 Million to Settle Medicaid Fraud Probe

Fran Lysiak

TAMPA, Fla.

WellCare Health Plans Inc. has agreed to pay $80 million to settle an investigation by federal and state authorities alleging it defrauded the Florida Medicaid and Florida Healthy Kids programs by $40 million between mid-2002 through 2006 by falsely inflating what it spent on medical services.

According to a statement from U.S. Attorney A. Brian Albritton of the Middle District of Florida, the agreement allows WellCare to avoid a fraud conviction on the charges if it complies with the agreement.

WellCare must consent to a civil forfeiture of $40 million; pay another $40 million in restitution to the Florida Medicaid and Healthy Kids programs and retain and pay an independent monitor who will review WellCare's business operations and report on its compliance, Albritton's office said.

Heath Schiesser, WellCare's president and chief executive officer, said in a statement the company is "pleased to have reached this resolution. Over the past year, the company has developed a comprehensive compliance program that will provide a solid foundation for WellCare's future."

WellCare (NYSE: WCG), with about 2.5 million members in the United States, provides managed-care services exclusively for government-sponsored health insurance programs such as Medicare and Medicaid.

In October 2007, more than 200 special agents and investigators with the Federal Bureau of Investigation, the U.S. Department of Health and Human Services/Office of Inspector General, and the Florida Attorney General's Medicaid Fraud Control Unit executed a federal search warrant at the health insurer's headquarters in Tampa.

WellCare later said it thought the investigations focused on the relationship of the company's Florida health plans with its behavioral health subsidiary, Harmony Behavioral Health (BestWire, Jan. 29, 2007).

According to the U.S. attorney's office, WellCare "engaged in several fraudulent strategies to avoid returning unspent money to the Florida health care programs." Mostly, the health insurer established the subsidiary, Harmony Behavioral Health Inc. to which it funneled a portion of the money it received from its contracts with the Florida Agency for Health Care Administration, which oversees the Medicaid program, and the Florida Healthy Kids program, the prosecutor said.

"WellCare, however, fraudulently reported money that went to Harmony as expenditures on services," the U.S. attorney's office said.

WellCare said it already paid $35.2 million of the $80 million in August 2008. It said it will pay $25 million within five days of the entry of the deferred prosecution agreement and the remaining $19.8 million no later than December.

Three months after authorities raided the company's headquarters, the top three executives at WellCare, including Todd Farha, chairman, president and chief executive officer, resigned. In addition to Farha, Paul Behrens, chief financial officer, and Thaddeus Bereday, general counsel, resigned from their posts (BestWire, Jan. 29, 2008).

WellCare said it's in resolution discussions with the Civil Division of the U.S. Department of Justice, the Office of Inspector General of the U.S. Department of Health and Human Services and the U.S. Securities and Exchange Commission.

WellCare of Florida Inc. currently has a Best's Financial Strength Rating of C++ (Marginal) based on public data.

(By Fran Matso Lysiak, senior associate editor, BestWeek: [email protected])

May 7, 2009