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WellCare admits shortchanging Medicaid patients, will pay $80 million

TAMPA — WellCare Health Plans became an extraordinarily profitable managed care company, in part — it now admits — by shortchanging children on Medicaid out of critical mental health services.

Rather than spend most of the money it got from the state to provide such services, WellCare officials skimped on care, inflated expenses and kept the difference.

Now the company must pay.

Nearly 18 months after state and federal agents raided its Tampa headquarters, WellCare has agreed to pay $80 million to avoid conviction on a charge of conspiracy to defraud the Florida Medicaid program and the Florida Healthy Kids Corp., the U.S. Attorney's Office said Tuesday.

An agreement calls for the company to pay $40 million in restitution to the Florida health care programs and another $40 million in civil penalties.

Prosecutors wanted to avoid "crushing" the company, electing instead to offer a deferred prosecution agreement to spare employees and shareholders who weren't involved in the conspiracy, U.S. Attorney A. Brian Albritton said.

"We don't want to put the company out of business but want to punish it," said Albritton, who was joined by investigators from the FBI, the U.S. Department of Health and Human Services and the state's Medicaid Fraud Control Unit.

Albritton described the investigation as "one of the largest health care fraud cases in the United States."

WellCare, one of the largest Tampa Bay area companies in terms of revenues, administers medical benefits for about 2.5 million people in government-sponsored plans such as Medicare and Medicaid. As of last year, it employed some 4,100 people, including 2,200 at its Tampa headquarters.

If WellCare complies with the conditions of the agreement, the prosecutors will dismiss the criminal charge filed Tuesday.

By law, WellCare was supposed to spend 80 to 85 percent of the money it got from the state on medical services for Medicaid recipients. If less was spent, any leftover money was supposed to be returned to the state.

Authorities accused WellCare of funneling millions of dollars to a subsidiary, Harmony Behavioral Health, to disguise expenditures to avoid returning unused money to the state.

From mid-2002 through 2006, the company falsely and fraudulently inflated expenditure information that it submitted to the Florida Medicaid and Healthy Kids programs, prosecutors said.

In addition to the $80 million payment, WellCare will:

• Accept and acknowledge full responsibility for the conduct that led to the government's investigation.

• Retain and pay an independent monitor to review and monitor its business operations and regularly report on WellCare's compliance with federal and state regulations.

• Continue cooperating with the government's ongoing federal and state investigation of former WellCare executives and employees.

WellCare has already paid much of the $80 million, prosecutors said.

The company paid $35.2 million in August, anticipating the total amount of restitution. It will pay an additional $25 million within five business days of the agreement. The remaining $19.8 million is due by Dec. 31.

"Compliance with all of the laws and regulations governing WellCare's business is a top priority, not only for our senior leadership team, but for all our associates," WellCare chairman Charles G. Berg said in a statement. He joined WellCare after the company ousted its top three executives last year.

While the criminal case against the company appears to be resolved, former executives and employees could still face charges. Albritton declined to discuss the possibility of individual prosecutions, saying that the investigation is ongoing.

Former WellCare employee Gregory West pleaded guilty in December 2007 to conspiracy to defraud the Florida Medicaid program of more than $20 million by inflating bills. He faces up to 10 years in prison.

The ongoing investigation into WellCare doesn't directly affect the company's delivery of health care services, prosecutors said.

Kevin Graham can be reached at kgraham@sptimes.com or (813) 226-3433.

WellCare through the years

1985: WellCare is founded by a group of Tampa doctors.

1992: Dr. Kiran Patel buys WellCare.

May 2002: Patel sells WellCare to a New York investment fund.

July 2004: WellCare goes public at $17 a share.

October 2007: FBI agents raid WellCare's offices on Henderson Road in Tampa.

Tuesday: The U.S. Attorney's Office agrees to defer prosecution if WellCare pays $80 million and accepts responsibility. WellCare shares rose $2.85, or 18 percent, to $18.47 on Tuesday. That's down from a high of more than $110 in 2007.

WellCare admits shortchanging Medicaid patients, will pay $80 million 05/05/09 [Last modified: Wednesday, May 6, 2009 10:07am]
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