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WellCare to send $35.2 M to U.S. Attorney

By Carol Gentry
8/19/2008 © Florida Health News

Wall Street analysts predicted the share price of WellCare Health Plans Inc. would move up Tuesday in the wake of its announcement Monday night that it will turn over $35.2 million immediately to the U.S. Attorney's Office.

McDonald
While the Tampa-based company could still face government-imposed penalties or fees and must cope with civil and possibly criminal sanctions, the amount is considered moderate by Wall Street standards -- "only" $35 million, as Oppenheimer's Carl McDonald put it -- indicating the final toll of the nine-month Medicaid fraud investigation will not be crippling, he said. 

"If the government is willing to agree to such a small amount, the likelihood of WellCare being put out of business because of this investigation seems remote," he said. "It seems to us that there is now more than enough evidence to conclude that a catastrophic outcome is very unlikely for WellCare,"

The agreement appears to be driven by WellCare's internal investigation by a Special Committee of the Board, said Matt Borsch of Goldman Sachs. The payment "is likely an effort to help put the company on a better footing to negotiate a formal settlement for the still pending federal and state investigation," Borsch said

Borsch
The payment represents WellCare's "best estimate" of what  it owes Florida for underspending on mental-health services for Medicaid patients for the years 2002 through 2006, the company reported in a filing with the Securities and Exchange Commission. The money will be transmitted to the Financial Litigation Unit of theU.S. Attorney's Office, the statement said. Other parties that signed the agreement with the Tampa-based company were the Florida Attorney General's Medicaid Fraud Control Unit and the Agency for Health Care Administration (AHCA), Florida's Medicaid parent agency. 

WellCare's statement makes no reference to Healthy Kids, a public-private program that helps Florida's working families buy sliding-scale coverage for their children. Healthy Kids is going through an independent audit to see whether WellCare owes it money, too.
 
Florida law requires Medicaid HMOs to spend at least 80 percent of their mental-health and substance-abuse payments on services to patients, with no more than 20 percent allocated for administration, marketing and profits. Healthy Kids' contract with HMOs requires 85 percent of payments go to patient care.

The WellCare statement said that $24.5 million will be made available to federal and state authorities immediately, while $10.7 million will be held in escrow pending resolution of claims. It added that further payments could be required as time goes on, and that this agreement isn't necessarily the last word in the investigation.
 
WellCare, Florida Medicaid's largest HMO contractor, has been under scrutiny since federal and state law-enforcement agents raided its campus on Oct. 24, carrying out computers and boxes of documents. The raid was triggered by a whistleblower complaint.

Carol Gentry can be reached at (727) 410-3266 or carol.gentry@FloridaHealthNews.org.