WellCare Health Plans has spent the past five years in the doghouse, trying to live down evidence of massive Medicaid fraud against Florida and eight other states.
Now, the Tampa-based company has a clear field ahead, Wall Street analysts say. Criminal charges that have been pending since 2009 have been dropped, and a settlement of $137.5 million for governments and whistleblowers is now official.
Florida's share of the settlement will be more than $54 million, Attorney General Pam Bondi announced on Wednesday. The state's Medicaid and Healthy Kids programs already received a total of $80 million as restitution and penalty for the criminal charges.
But that was yesterday. This is today, with mega-profits on the horizon, maybe even a buyout.
"It's conceivable that the company could double its revenues in the next couple of years," said Tom Carroll, an analyst at Stifel Nicolaus who closely follows WellCare.
WellCare specializes in Medicaid and Medicare products, with 2.6 million enrollees. Florida and other states are moving their Medicaid recipients into managed-care plans on a massive scale, as soon as federal health authorities give the go-ahead.
In addition, millions more will be eligible for Medicaid if the federal Affordable Care Act survives the Supreme Court case that Florida filed, contesting its constitutionality. A ruling is expected in June.
"With or without the federal Medicaid expansion, WellCare has a huge revenue opportunity over the next few years," CITI analyst Carl McDonald wrote in a report on the company this week.
McDonald estimates that the federal Medicaid expansion would add $1.3 billion in revenue for WellCare. But that's dwarfed by $35 billion up for grabs as state Medicaid programs move patients into private managed care.
WellCare would have to win only a couple of bids to more than make up for the federal expansion, McDonald said.
While $137.5 million sounds like a lot of money, the company had $6.1 billion in revenue last year and has more than $300 million in cash on hand, according to the analyst's note. Also, the settlement will be paid in installments, instead of one lump sum.
McDonald says the company could easily have revenues of $13 to $14 billion by 2014.
About two weeks ago, the major whistleblower in the case against WellCare agreed to sign the settlement after holding out for years. Sean Hellein, who had been a financial analyst for the company and then helped the FBI gather evidence, is to receive $21.75 million.
For more background, see"Last obstacle cleared in WellCare fraud settlement."
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