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WellCare charged with fraud

By Carol Gentry
5/5/2009 Health News Florida

WellCare Health Plans Inc., Florida's largest Medicaid HMO contractor, was charged with felony health fraud Tuesday and has agreed to pay $80 million to defer prosecution, U.S. Attorney A. Brian Albritton announced. His office will appoint a monitor to keep an eye on the company's compliance with the law for 18 months.

The Tampa company used a subsidiary to hide $40 million that belonged to Florida Medicaid and Florida Healthy Kids, he said, and was supposed to have been spent on mental-health and substance-abuse treatment. The other $40 million that WellCare will have to pay is called a "civil forfeiture" -- essentially, punishment.

The fraud was carried out by personnel who are no longer with the company, he said. No individuals were named, but he said the investigation is continuing and did not rule out the possibility of high-level individual indictments later on. 

The charges and agreement for deferred prosecution -- an alternative to criminal indictment -- were filed with U.S. District Court in Tampa on Tuesday morning, just before Albritton appeared at a press conference for the announcement.

Albritton attributed the motive to "greed, the desire for more profit." He declined to say how high in the company the knowledge of the fraud went. 

The top three executives at WellCare at the time the investigation began two years ago all resigned in early 2008, shortly after it became public: President, CEO and Chairman Todd Farha, CFO Paul Behrens and General Counsel Thaddeus Bereday. 

At the press conference, Albritton was flanked by a gaggle of officials representing agencies that participated in the investigation, including Steven Ibison, Special Agent in Charge of the FBI's Tampa Division; Christopher B. Dennis, Special Agent in Charge of the U.S. Department of health and Human Services' Office of Inspector General; and Lt. Carol Conroy of the Medicaid Fraud Control Unit in the Florida Attorney General's office.

The chief prosecutors in the case, Assistant U.S. Attorneys Jay Trezevant and Anthony Porcelli, answered some of the questions.

Trezevant said WellCare used a "phantom" subsidiary, Harmony Behavioral Health, to hide the fact that the company's Medicaid HMOs, HealthEase and StayWell, weren't spending as much money as they were supposed to on patients' treatment. Under the terms of their contracts with Medicaid and Florida Healthy Kids Corp., the HMOs were supposed to pay the unspent money back. 

"Harmony was created to disguise what they actually spent," Trezevant said.

The investigation became known in late October 2007 when 200 agents of the FBI and other agencies raided the Tampa campus of WellCare, carting off laptops and file boxes. Two months later, a mid-level manager, Gregory West of Tampa, pleaded guilty to conspiracy to defraud Medicaid, but that plea remained sealed until last October. He has not yet been sentenced.

In the wake of the raid, WellCare's board of directors -- which includes former Florida Gov. Bob Graham -- formed its own investigative committee and hired separate counsel. Within weeks, Farha, Behrens and Bereday were out, and a former WellCare executive, Heath Schiesser, was installed as president.  The board also appointed an executive chairman, Charles G. Berg.

Last summer, WellCare executives filed statements admitting the company overbilled the state and paid about $35 million in restitution.
WellCare has cooperated fully with the investigation, Albritton said, and if it abides by the requirements in the deferred prosecution agreement, it will not be prosecuted in court and will not have a criminal conviction on its record. He said prosecutors gave a lot of thought to the matter before offering the deal, but decided it was fair for several reasons: Those responsible were no longer employed there, and prosecution would force WellCare out of business, which would hurt people who weren’t responsible, including shareholders, employees and patients.

In addition to the $35 million already refunded, WellCare will pay an additional $25 million within five days, according to the agreement. It will pay the remaining $19.5 million by Dec. 31, 2009. 

The agreement between the company and prosecutors will be in effect for 3 years. If the company maintains its compliance, Albritton said, "we will drop the charges. If not, charges will proceed."

He said he hoped other health-care companies will learn a lesson and not just put their compliance plans on a shelf to gather dust. "This is a wake-up call for the corporate community," he said.

The end of the uncertainty sparked interest in the company's stock, which had fallen from a high of $128 just before the raid to as little as $6 afterward.  The news completely overshadowed another development about WellCare, announced Monday: It decided to drop one of its profitable Medicare Advantage products -- private fee-for-service plans -- at the end of this year, rather than wait until the end of 2010, when new rules imposed by Congress will make the PFFS plans harder to run and less profitable.

Analysts had scratched their heads over why WellCare would willingly drop 110,000 customers worth nearly $20 million in pretax income a year before it had to. But on Tuesday, spokeswoman Amy Knapp explained that focusing on its other Medicare products will help it get back in the good graces of the Centers for Medicare and Medicaid Services.

CMS ordered WellCare to stop enrolling new members in early March until further notice. The agency said WellCare had generated more complaints from beneficiaries about access to treatment and drugs and other administrative issues than almost any other contractor.

--Carol Gentry can be reached at 727-410-3266 or by e-mail at