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WellCare expects to pay $50M more

By Carol Gentry
5/12/2009 © Health News Florida

 In addition to the $80 million announced last week by the U.S. Justice Department, WellCare Health Plans Inc. said it expects to pay at least $50 million more to settle the government’s civil case and other lawsuits over Medicaid fraud.

Today the Tampa company must make a payment of $25 million, under terms of the agreement filed May 5 to avoid prosecution. It has already paid $35.2 million; it owes $18.8 million by the end of the year.

Then on Wednesday, the company must pay $152 million to settle a five-year-old loan. The company says that’s not a problem; officials say they have $241 million in cash, enough to handle all the payments.

Company officials made the statements in Monday’s earnings call with analysts following release of its first-quarter report, which showed a net loss of $37 million. A year ago, it had reported net income of $1.3 million.
Without the costs associated with the investigations, the company would have reported a profit of $12.3 million, it reported. Total revenues for the quarter were about $1.8 billion.

The earnings call, WellCare’s first in almost two years, proved disappointingly bereft of details to some analysts. Oppenheimer’s Carl McDonald described it in a note this morning:

“Following WellCare over the last year and a half has been like wandering around a maze in the pitch black…(while the company was) fighting for its life with regulators. The hope in the market was that the first-quarter earnings report and subsequent conference call would be the time at which management flipped the switch, and enlighten us all as to the status of the business. Instead, we got a dull flashlight with a low battery.”
The market expressed disapproval by sending the stock down 7 percent following the call. As analysts pointed out, a Fortune 500 publicly-traded company can’t very well remain mum.

The company contracts with Medicare and state Medicaid programs to provide health services. Membership at the end of March was about 2.46 million, as the company gained Medicaid members in Hawaii but dropped some in Ohio and Connecticut.

WellCare reported medical spending was greater than expected for two of its products, Medicare Private Fee-For-Service (PFFS) and prescription drug plans. On the call, company officers said they will hike premiums on the drug plans for 2010 to address that problem. They announced May 4 they will drop PFFS at the end of this year. 

--Contact Carol Gentry at 727-410-3266 or by e-mail.