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WellCare CEO Alec Cunningham outlines once-troubled company's 'cultural transformation'

CEO Alec Cunningham has led the health care provider to stellar growth and performance.

CEO Alec Cunningham has led the health care provider to stellar growth and performance.

Flash back to a rainy October morning nearly six years ago.

FBI agents and regulators raid the Tampa headquarters of WellCare Health Plans, seizing computers of the Medicare/Medi­caid provider. Chief executive officer Todd Farha and two other top leaders are accused of orchestrating Medicaid fraud. The company's stock collapses.

Alec Cunningham had been working at WellCare for only a few years and wasn't one of the top executives. That soon changed. Picked by the board as CEO in 2009, he was charged with cleaning up the mess and rebuilding trust.

"I think my familiarity with the organization provided a good footing and good starting point in terms of affecting change," Cunningham said recently in a rare sit-down interview. "I had positive relationships with key regulators and customers. I clearly knew the organization."

WellCare, the second act, has since been on a roll.

Last year, its revenue jumped 21 percent to $7.4 billion. Its stock has surged 35 percent this year alone, surprising Wall Street analysts last month with better-than-expected results. With 3,000 employees in the Tampa Bay area, it has outgrown its headquarters, which takes up nearly all of north Tampa's Renaissance Center.

To handle a workforce that has swelled more than 12 percent so far this year, WellCare has sprinkled satellite offices nearby: its Florida division is based at Rocky Point; its pharmacy operations off of Independence Parkway; IT staffers are clustered in Carrollwood.

Currently, Tampa Bay's third-largest public company by revenue, WellCare has begun to close the gap with the longtime dominant duo: Tech Data and Jabil Circuit.

Cunningham credits the growth to ripe circumstances in all three of WellCare's core lines of business, all tied to government funding: contracts with states to handle their Medicaid coverage for low-income residents and their children; Medicare Advantage plans that supplement the base Medicare coverage for those 65 or older; and the Medicare Part D prescription drug benefit program that was added in 2006.

• Medicaid contracts are growing as states try to meet the financial needs of elderly, disabled and chronically ill residents hit hard by the recession. Check.

• Up to 10,000 baby boomers a day are aging into Medicare eligibility. As a result, the Congressional Budget Office estimates Medicare spending will double by 2022. Check.

• Part D prescription drug benefits for lower-income individuals, in which the federal government picks up all the premiums, are auto-assigned to private insurers. Through government contracts, WellCare has been auto-assigned to receive members in 30 national regions, up from 14 this year. Triple check.

"Demographics, economics and politics have lined up fairly perfectly for what we do for a living," Cunningham says.

Uncertainty over the rollout of Obamacare — particularly its impact on rising pharmaceutical costs — could threaten that alignment. Some states have already expanded their Medicaid programs as provided for under Obamacare. Others, including Florida, are resisting change and have held off on setting up health insurance exchanges where uninsured residents can find coverage from a selection of private insurers. WellCare has decided to sit out participating in the health care exchanges for 2014, waiting to see how Obamacare unfolds.

But when he thinks about the big picture, Cunningham doesn't appear overly concerned about the uncertainties.

"You've got the boomers driving growth in Medicare. You've got the continued budget pressures at the state level driving expansions in Medicaid. On top of that, you have the opportunity for expansion through the Affordable Care Act and then our successful bidding season (to win new government business) should drive growth in Part D," he said.

Born to lead

When he was named WellCare's CEO four years ago at the age of 42, Cunningham became one of the youngest leaders of a major health care organization in the country.

Yet it was a role he'd been practically bred for, having spent all his working life in the arena of publicly funded health care.

An Oklahoma State University graduate, Cunningham began working for Oklahoma Gov. David Walters in 1991 while the state was grappling with out-of-control expenditures for its Medicaid program and other health care programs. "I was frankly intrigued by something that consumed half the state budget but nobody was satisfied with," he said.

After helping Oklahoma establish its first managed-care health plan, the policy wonk shifted to the private sector in 1998, joining WellPoint Health Networks in California.

By 2004, recruiters from WellCare had caught his attention. Tampa cardiologist Kiran Patel had already developed the company into a powerful Medicare provider before he left in 2002, setting the stage for the company to go public two years later.

Cunningham's timing to join in 2005 couldn't have been better. Parlaying his experience in state government, he helped WellCare secure new Medicaid contracts in Georgia, Ohio and Hawaii.

In 2006, WellCare became the best-performing stock in Tampa Bay, feasting off record federal reimbursements for Medicare funding and the newly launched prescription drug benefit called Medicare Part D.

The fairy tale fizzled in 2007. After the FBI raid, regulators charged that WellCare executives had conspired to keep funds for the health care of poor Floridians that should have been refunded to the state.

By the time Cunningham was put in charge, he had been exposed to several sides of WellCare's operation, from creating new Medicaid programs in some states to running the Hawaii and Florida divisions.

"I was well-positioned to begin the transformation," he said.

Transformation seems an understatement.

New safeguards, regulatory oversight, training and whistle-blowing alerts were put in place by Cunningham and his short-term predecessor as CEO, Heath Schiesser. Today's leadership team includes a new chief financial officer, general counsel, chief compliance officer and dozens of other senior leaders, including a new board chairman. Duties of the general counsel and chief compliance officer have been separated, as have duties for the CFO and chief accounting officer. Sales incentives are now tied to quality and compliance instead of just how much money is generated.

In June 2010, WellCare agreed to pay $137.5 million to the U.S. Department of Justice and other federal agencies to settle civil lawsuits tied to the investigation.

Three months ago, former CEO Farha and two other former executives were found guilty of two counts of health care fraud for submitting false expenditure reports to the state.

WellCare still has pending civil suits against the former executives — actions that were stayed while the criminal case was unfolding.

Cunningham dismisses the remaining litigation as "personal matters for the individuals involved," with no bearing on WellCare's day-to-day operations. Likewise, he talks in vague terms about the company's troubled era as "historical matters."

Asked whether regulators and customers also consider the old WellCare a closed chapter, Cunningham points to the company's recent track record of growth. "I think the facts and realities speak for themselves," he says.

He's more loquacious in discussing the company's growth strategies, chief among them using an interplay among its three main units to create new business.

In Georgia, for instance, WellCare's entry point was offering a Medicare plan in 2004. That beachhead made it positioned to bid for — and win — a contract for a sizable chunk of the state's Medicaid business as well in 2005.

In Kentucky, one of its newest states, WellCare has about 220,000 Medicaid members. But of those 220,000, about 10 percent are dually eligible, meaning they could qualify for both Medicaid and Medicare benefits. So WellCare introduced Medicare products that it could cross-sell to its Medicaid population. "That supercharged growth," Cunningham said.

Acquisitions are also part of the growth equation. In the summer of 2012, WellCare bought Arcadian Health Plan's Medicare Advantage business in Arizona, where WellCare already had a prescription drug presence; later in 2012, it bought one of the fastest-growing Medicare Advantage plans in California.

No matter where WellCare expands, Tampa remains the hub for everything from claims payments to customer service phone calls to managing care.

"As we've grown anywhere, our employment base has grown in Tampa," Cunningham said. "And those are relatively higher-paying, durable jobs. … We're talking about adding IT, adding nurses, adding physicians, adding accountants."

The new jobs come with an average salary of $62,000, or roughly 50 percent higher than the median wage in Florida.

So far, WellCare hasn't had a problem finding health care and IT talent in Tampa Bay to meet its staffing needs, Cunningham said

Personally, he and his wife, Johnna, have become acclimated to the local lifestyle as well: boating; spending time outdoors; relishing moments outside the office with his 6-year-old twin daughters, who love the beach.

He acknowledges the company is running out of space on its campus. But if WellCare has to expand or move at some point, don't look for it to move far.

"Tampa is a great place," he said. "It's home. It's where we were founded many years ago. We have a great workforce. … I (like) what the governor and the Legislature have done in developing an appealing, attractive, favorable work climate."

As evidence, he points to a number of companies not based in Tampa Bay that have created substantial health care operations here for pharmacy, call center needs, nursing and specialty care.

"I would say all the reasons that are likely to drive a large national company to put a meaningful operations center here are probably the same reasons we've been able to thrive."

Times researcher Natalie Watson contributed to this report. Jeff Harrington can be reached at jharrington@tampabay.com.

.biography

Alexander R. "Alec" Cunningham

Title: CEO of WellCare Health Plans

Age: 46

Education: Bachelor's degree in economics from Oklahoma State University; master of business administration from the University of Southern California.

Career path: Worked for the governor of Oklahoma and Oklahoma Health Care Authority; vice president of WellPoint Health Networks; joined WellCare in 2005.

Family: Wife, Johnna, and 6-year-old twin daughters, Kate and Rachel.

2012 compensation: $5.5 million, up 23 percent from prior year.

On WellCare's growth: "We're very well-positioned. … Demographics, economics and politics have lined up fairly perfectly for what we do for a living."

On rebounding from a Medicare fraud scandal that forced the company to clean house: "I don't think we would have enjoyed the business success that we have if we hadn't been successful with a complete cultural transformation."

.

.by the numbers

$7.4 billion in annual revenues

1.8 million Medicaid

members

272,000

Medicare Advantage

members

772,000 Medicare Part D Prescription Drug Plan members

15 states with on-the-ground operations

5,100 employees (including nearly 3,000 in Tampa)

$62,000

average wage of

new employees

WellCare CEO Alec Cunningham outlines once-troubled company's 'cultural transformation' 08/30/13 [Last modified: Friday, August 30, 2013 6:38pm]

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