WellCare Health Plans has agreed to pay about $334 million to settle legal actions from federal prosecutors, securities investigators and class-action litigants related to a $40 million, five-year pattern of fraud in its managed-care contracts for federally funded behavioral healthcare.
WellCare announces $334 million settlements, layoff plans
WellCare, Tampa, Fla., will pay about $134 million to settle civil litigation from the U.S. attorney's office in Tampa, and another $200 million in class-action litigation from shareholders. The company also agreed to pay to settle a related investigation by the U.S. Securities and Exchange Commission. The announcement came with a quarterly earnings statement that announced layoffs and restructuring actions.
WellCare, which was one of the largest managed-care providers in Florida, was required to spend at least 80% of its reimbursements for behavioral healthcare on actual care, with any remainder going back to the CMS. Instead, investigators say the company manipulated its financial records to make it appear that it was meeting the mandated threshold in order to keep $40 million in reimbursements that it should have remitted back to the state and federal payers between 2002 and 2007, according to the U.S. attorney's office's deferred prosecution agreement.
Principally that was done by altering paperwork and submitting incorrect bills based on work for a separate government-funded managed-care program to provide insurance coverage for children from low-income families. By claiming on paper that work for the kids' program was in fact performed for the behavioral health program, WellCare was able to inflate its apparent expenses to meet the 80% threshold and avoid remitting payments to CMS, prosecutors say.
The deferred prosecution agreement, posted on WellCare's website, says company officials engaged “in a concerted and organized effort to conceal and cover up the fraudulent nature” of company expenses.
In the separate action from the SEC, the company agreed to pay a settlement while not admitting or denying any wrongdoing. The decree noted that WellCare officials have agreed to comply with SEC policies that they not say anything publicly to give the impression that the government complaint against the company is without a factual basis.
Federal filings say the company plans to lay off fewer than 100 people through a restructuring. The settlements brought the firm deep into the red, with a net loss of $129 million for the second quarter of 2010, compared with net income of $37 million for the year-ago period. Adjusted net income for the 2010 second quarter, which excludes the settlements, was $39 million.
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