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Whistle-blower case details allegations of massive fraud at WellCare

For years, WellCare Health Plans Inc. of Tampa seemed to defy gravity as it squeezed ever-growing profits from the business of providing health insurance to the elderly and poor. The company, which saw its earnings triple between 2004 and 2006, credited its success to hard work, customer service and a keen eye on costs.

But Sean J. Hellein, a senior financial analyst at WellCare from 2002 to 2007, said the secret behind the company's stellar performance was simpler: It cheated.

In a whistle-blower complaint that became public Monday, Hellein, 37, alleges that more than a dozen WellCare managers and executives participated in wide-ranging schemes to defraud Florida and six other states where the company provided coverage for Medicaid members. His lawsuit estimates that WellCare's misdeeds illegally siphoned $400 million to $600 million from state health insurance programs for the poor.

A company spokeswoman declined to comment on Hellein's allegations, but said, "WellCare believes it has fully cooperated with the (Justice Department) Civil Division," since being told of pending whistle-blower complaints.

At the time Hellein filed the complaint, in 2006, the company was reporting nearly $4 billion in revenue and $140 million in profit from government-funded programs.

Working undercover for federal investigators for 18 months, Hellein wore hidden microphones and miniature cameras disguised as buttons to capture more than 1,000 hours of audio and video during meetings with co-workers at WellCare. His assistance helped the government prepare for a surprise raid by 200 agents on the company's headquarters in October 2007 during which thousands of documents were seized.

That action triggered a 66 percent drop in WellCare's stock price, several shareholder lawsuits and the abrupt departure of WellCare's top three executives: president and chief executive Todd Farha, chief financial officer Paul Behrens and general counsel Thaddeus Bereday.

One of Hellein's co-workers, Gregory N. West, pleaded guilty even before the investigation was made public. Approached by federal agents the night before the raid, West, also a senior financial analyst, conceded his involvement in the fraud and has been cooperating with the government. He is the only individual criminally charged to date.

In an effort to resolve the complaints, last year WellCare admitted it inflated its billing and kept about $40 million that should have been returned to Florida Medicaid. That led to an $80 million settlement and a criminal deferred prosecution agreement with federal officials in May 2009. It is also the basis for the $137.5 million preliminary civil settlement with the Justice Department announced last week.

But Hellein and his attorney, Barry Cohen, said WellCare's wrongdoing goes far beyond what has been disclosed so far. They intend to fight the proposed settlement, saying it's a pittance compared to actual damages and will do nothing to discourage health care fraud in the future.

"WellCare's criminality permeated from the top of the corporation throughout much of its ranks," Cohen said. "They've got to be held accountable."

Federal law allows triple damages in such cases, so Cohen estimated that WellCare's penalties could exceed $1 billion. Whistle-blowers can receive 15 to 25 percent of any settlement, and there are reportedly several whistle-blowers in this case, though only Hellein has been identified. But Cohen said everyone benefits when citizens help expose fraud.

"If you only have to pay back half of what you steal, it's not a deterrent to health care fraud," he said. "Otherwise the economically weak will continue to be bullied by the economically strong."

In his 20-count lawsuit, Hellein alleges that WellCare did things like divert money through an offshore subsidiary and drop high-cost patients to maximize profits.

When 425 premature infants were pushed from WellCare back on to Florida's Medicaid rolls in 2004, Hellein said the team responsible was treated to a celebratory dinner and its leader promoted.

Similar efforts went toward dropping terminally ill patients. Lists of WellCare's hospice patients attached to Hellein's complaint show that most were switched to Medicaid, except for a handful who refused or died before the change could be made. A 2003 company study found that WellCare could save $11,000 for each hospice patient it dropped and $20,000 for each preemie.

WellCare's cost-cutting efforts were enhanced, Hellein claims, by the incompetence of state officials who were supposed to be regulating the company. On five occasions, Hellein said, Florida's Medicaid officials either accidentally overpaid the company or made serious errors that resulted in higher reimbursement rates. Though Hellein's complaint said the state's mistakes were recognized by WellCare officials, they were never reported.

WellCare also had close relationships with regulators. Andrew Agwunobi, head of Florida's Medicaid agency at the time of the raid, briefly served on the company's board and left with $1 million in stock. Another former Medicaid and Medicare official, Ruben King-Shaw, was a director for six years, leaving at the end of last year. And in 2006 the company hired Robert C. Butler, who had been in charge of setting Florida's Medicaid reimbursement rates, and put him in charge of WellCare's Medicaid policy and analytics. There he dealt with state employees he had supervised.

Hellein's complaint says the actuarial consultants hired by the state to set rates also made serious errors when dealing with WellCare's data. One year experts miscalculated WellCare's mental health expenses, mistakenly doubling them, he said. That led to an undeserved multimillion-dollar increase in reimbursements from the state.

The windfall had a downside: The following year the company had to perpetuate the fiction so reimbursements would not be cut. Hellein said WellCare doubled its reported costs. Discussing the move at a meeting in early 2007, Peter Clay, the company's vice president of medical economics, is quoted in the lawsuit saying, "It's highly illegal, but I haven't heard any of you come up with an idea that's better than mine."

Clay then went on to admonish Hellein for getting so many people involved in the decision. "Why did you invite so many people to that meeting? You have to be careful. This is fraud."

Clay, who no longer works for WellCare, declined to comment.

During the 2007 legislative session, WellCare successfully lobbied for a law that eliminated a restriction on the amount of profit insurers could make on Medicaid mental health services. Hellein said WellCare officials thought if the restriction was lifted, Florida officials would no longer demand the cost reports that had been causing so much trouble.

WellCare's hopes were dashed when Gov. Charlie Crist vetoed the bill in May.

Just five months later, federal agents were at WellCare's door.

Times researcher Carolyn Edds and staff writers Jeff Harrington and Jessica Vander Velde contributed to this report. Kris Hundley can be reached at khundley@sptimes.com or (727) 892-2996.

Whistle-blower case details allegations of massive fraud at WellCare 06/28/10 [Last modified: Monday, June 28, 2010 9:53pm]

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