Whistleblower Says Penalties Could Surpass $1 Billion

WellCare Health Plans, a Tampa-based HMO, filed a report of a Preliminary Settlement reached with the Civil Division of the U.S. Department of Justice, plus the Civil Divisions of the U.S. Attorney’s Office for the Middle District of Florida, and for the State of Connecticut, to settle their pending inquiries, on June 24, 2010. The settlement seeks to bring a close to a whistleblower case that has gone on for over three years, including over a year when the whistleblower even wore a hidden wire for federal agents, to gather evidence of possible criminal misconduct by WellCare. The Preliminary Settlement is still unsigned by all parties, as of this writing, and is therefore still subject to change.

A day after the filing by WellCare, U.S. District Judge James S. Moody Jr. ordered the case filed by the whistleblower unsealed. The 20-count False Claims Act complaint was filed, a former WellCare senior analyst, who wore the wire enabling federal investigators to collect more than 1,000 hours of audio and video surveillance. Subsequent allegations included schemes to avoid returning overpayments WellCare received from Medicare, several state’s Medicaid programs, inflated reinsurance payments, and efforts to disenroll Medicaid beneficiaries whom the company considered unprofitable, all totalling $400 million to $600 million.

Since any whistleblower is entitled to receive 15 to 25 percent of any settlement, it is easy to see why a whistleblower would have a strong incentive to see that the penalties against WellCare increased.

The complaint cites examples of alleged fraud, in a St. Petersburg Times article, the whistleblower’s attorney refers to WellCare’s actions as “fraudulent, insensitive and arrogant practices,” including a celebratory dinner held in honor of the WellCare employees, alleged to have successfully disenrolled 425 infants, saving WellCare $6.9 million in expenses.

The complaint cites several other examples of fraudulent activities by WellCare, quoting the dollar amounts involved, some dating back to 2002, in several states, including Connecticut, Illinois, Florida, Georgia, Hawaii, Louisiana, and New York.

WellCare has no commercial clients. All its customers are state Medicaid programs (seven total), plus the Centers for Medicare and Medicaid Services (CMS). WellCare’s largest client is the Florida Medicaid program, with more than 450,000 enrolled. Florida reportedly paid over $1.7 billion to HMOs in 2006, with WellCare receiving almost $850 million, half of the total.

One of the more alarming statements cited was allegedly made by the WellCare CFO, during an August 2006 meeting, while discussing the fact that the State of Florida had overpaid WellCare $23.6 million, due to fact that WellCare changed their reporting methodology, thereby reporting a “calculated” premium received, rather than the actual amount received by WellCare from the state. According to the complaint, the CFO stated “that [overpayment] is for the State to figure out and we [WellCare] will never report it on our financial statements.” (see pg. 25 of the Complaint)

After the filing of the whistleblower case and armed with the undercover evidence gathered with the help of the whistleblower, the FBI raided WellCare’s offices in Tampa, Florda, on October 24, 2007. According to an article in the AMA’s American Medical News, to avoid criminal charges over inflated billings to the Florida Medicaid program, WellCare accepted responsibility for its actions and agreed to pay $40 million in restitution and a $40 million forfeiture to the U.S. Attorney General’s Office. WellCare also agreed to several other payments for their improper billings.

Before the October, 2007 FBI raid of the Tampa offices, WellCare’s common stock (WCG) price had just achieved a 52-week record high of over $122 per share on the New Your Stock Exchange. By 11:00 a.m. the morning after the raid, the value of the stock had fallen 50%. The current value of the stock is $23.73 (as of July 20, 2010, 1:20pm ET), with a 52-week high of $39.12.

Find documents, press releases and other articles about this case here: WellCare Health Plan Whistleblower FCA Case – Resources