Venture

Robert Trigaux

AP: WellCare skirted law with campaign funds

16

February

Wellcarefbiraid Wake up and good morning. One of the great Tampa Bay business mysteries left unresolved is how the October 2007 FBI raid on Tampa's WellCare Health Plans will finally be played out. The company has been under that investigatory cloud for so long that it's surprising, frankly, that the business has been able to hold up and continue operating as well as it does. WellCare shares dropped to nearly $6 in November last year but now trade over $15. (FBI raid photo by Chris Zuppa of the St. Petersburg Times.)

Now comes an AP story in the past few days that says while Florida politicians were considering a vast overhaul of the state's troubled Medicaid system, a Tampa company that administered care for half a million poor and needy residents was busy lining their pockets with campaign donations. That company is WellCare. According to an AP analysis of campaign records, WellCare, its subsidiaries and executives spent $2.4 million on political contributions in the 2004 and 2006 elections. More than 95 percent of it went to Republicans, who pushed forward a nationally watched plan that funnels more state and federal Medicaid spending than ever through private companies like WellCare, which profit most by providing the least care.

At the same time, WellCare acknowledges it was cheating Florida out of tens of millions in overpayments and is under investigation for suspected fraud and unfair business practices by a cadre of state and federal agencies. Here's the complete AP story. Here's what caught my eye -- I've added the emphasis in bold:

"The company spent seven times more on lobbying than its top two competitors combined, skirting state laws meant to cap candidate donations at $500 per person or company by writing checks under nearly 30 different business names... Half of WellCare's contributions -- $1.2 million -- went to the Republican Party of Florida. State law provides no limit on party donations, and there is virtually no way to tell where the funds go after that."

WellCare manages care for nearly 2.4 million people on government-sponsored health plans in Florida, Connecticut, Georgia, Hawaii, Illinois, Missouri, New York and Ohio. Florida's Medicaid reforms are being closely monitored by other states seeking to alleviate their own health care costs. WellCare has approximately 330,000 Florida enrollees in traditional Medicaid programs, more than twice as many as top competitor Amerigroup Corp.'s 165,000.

Toddfarhawellcareceoformer WellCare's offices were raided by the FBI, Florida regulators and numerous other agencies in October 2007. In a now-unsealed plea agreement, prosecutors and a former employee said the company inflated expenditures by submitting fake documents to the state. Under some mental health care contracts, WellCare was paid a flat per-patient fee and required to spend at least 80 percent of it on care. Any leftover amount beyond 20 percent was to be repaid to the state, but the bogus expenditures allowed WellCare to keep that surplus. Todd Farha (show in photo by Ken Helle of the St. Petersburg Times), WellCare CEO at the time, resigned a year ago and was replaced by Heath Schiesser.

The AP story says WellCare agreed in August to repay $35 million, its best estimate of the total wrongly kept from 2002-2006. After the raid, the company restated its quarterly and annual profits -- driving down net income by $32 million -- and saw its top three executives resign.

No criminal charges have been announced against WellCare or its officials but investigations by Florida, Connecticut and federal prosecutors are ongoing. The Securities and Exchange Commission is leading an informal investigation, and WellCare faces numerous shareholder lawsuits and sealed whistleblower complaints, the company's SEC filings say.

WellCare has since halted all Florida campaign contributions. And WellCare responded to the AP story with this written statement:

"... As part of a broader enterprise-wide compliance initiative detailed in our public filings, we are developing new policies and procedures regarding, among other things, political activities and contributions. WellCare takes very seriously its responsibility as a government-sponsored managed care health plan, and appreciates that health care is top of mind to many political leaders. Our top priority is to provide our members timely access to quality health care."

Read the entire AP story. It's revealing.

-- Robert Trigaux, Times Business Columnist

[Last modified: Tuesday, June 1, 2010 12:24pm]

    

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