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WellCare Health Plans strikes $137.5 million settlement, challenged by new whistle-blower disclosures

Tampa-based WellCare Health Plans Inc. has agreed to pay $137.5 million to the U.S. Department of Justice and other federal agencies to settle civil lawsuits accusing the company of overcharging for its Medicaid and Medicare programs.

But the deal, intended to resolve a nearly three-year federal investigation, faces a big hurdle out of the gate. Tampa attorney Barry Cohen late Friday said he will challenge the settlement for vastly understating the size of WellCare's fraud, which he estimated was between $400 million and $600 million. The government is allowed to seek triple the actual damages in fraud cases, so WellCare's total penalties could surpass $1 billion.

Cohen disclosed that he represents a whistle-blower who filed a case against WellCare under seal in June 2006, well before FBI agents raided WellCare's Tampa headquarters in October 2007.

Though U.S. District Judge James S. Moody Jr. ordered the whistle-blower case unsealed on Friday, the file is not yet publicly available.

Cohen said his client, who has not been named, worked with the Justice Department as part of an undercover operation at WellCare for 18 months.

Cohen said there are more than 1,000 hours of audio and video surveillance during which his client was "surreptitiously capturing hundreds of incriminating admissions of the company's fraudulent, insensitive and arrogant practices at the expense of the economically weak by an economically strong corporation."

Cohen accused WellCare of trying to mitigate the effect of an expected unsealing of the court file by announcing a "preliminary settlement" of his client's claims.

"In all likelihood once the attorney general becomes conversant with all the salient facts, it is our belief that he will not permit the taxpayers to be unfairly disadvantaged by a settlement that pays less than half of what our pleadings suggest was stolen to say nothing of the requirement of triple damages."

WellCare has said in public filings that it is aware of several whistle-blower complaints that have been filed under seal against the company. A company spokeswoman said late Friday that she had not seen Cohen's allegations and declined to comment.

Cohen's client as well as any other whistle-blowers are entitled to receive 15 to 25 percent of any settlement, so Cohen and his client have a strong interest in seeing the penalties against WellCare increased.

But Cohen, who called the proposed settlement "grossly inadequate," said, "Of course there are financial benefits, but more important is to deter any effort by companies such as WellCare to take advantage of the health care system or the people who should be served by this system."

Under the tentative deal, which must be approved in court, WellCare would have three years to make payments to the Justice Department's civil division, the U.S. Attorney's Office for the Middle District of Florida and the U.S. Attorney's Office for Connecticut.

WellCare said the payments will include the approximately $23 million owed to the Florida Agency for Health Care Administration for overpayments received by the company in 2005.

The civil settlement is separate from a deal struck last year on the criminal front. In that case, WellCare agreed to pay $80 million to settle a charge of conspiracy to defraud the Florida Medicaid program and the Florida Healthy Kids Corp.

It also previously agreed to a $10 million civil penalty settling an informal inquiry by the Securities and Exchange Commission that regulatory filings reflected more than $40 million in profits that WellCare failed to return to the Florida agencies from 2003 to 2007.

WellCare, which is Florida's largest Medicaid plan operator, has acknowledged that it overcharged Florida and Illinois health programs by about $46.5 million.

In the aftermath of the federal raid, WellCare has taken several steps to clean house and put the scandal behind it. Alec Cunningham, a WellCare manager, took over as chief executive in December.

The company returned to profitability last year, rebounding from a $37 million loss the year before. It boosted revenue 5 percent to $6.9 billion. Part of the increase was tied to the recession, which sparked higher enrollment in many of the company's Medicaid plans.

In a note to clients, Collins Stewart analyst Brian Wright said WellCare has enough cash to cover the settlement. The stock was worth as much as $128.42 in the days before the October 2007 raid of WellCare's Tampa headquarters. WellCare shares rose on the report, closing Friday at $27.05, up almost 2 percent.

Times wires contributed to this report.

WellCare Health Plans strikes $137.5 million settlement, challenged by new whistle-blower disclosures 06/25/10 [Last modified: Friday, June 25, 2010 11:15pm]
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