WellCare reaches tentative $137.5 million settlement in health fraud case

The Medicare and Medicaid contractor's legal troubles began after an 18-month undercover investigation of its business practices.

By Pamela Lewis Dolan, amednews staff. Posted July 12, 2010.

WellCare Health Plans has reached a preliminary settlement of $137.5 million to end a whistle-blower case that has gone on for four years.

The announcement was made just days before a judge unsealed a 20-count False Claims Act complaint filed by a whistle-blower against the Medicare and Medicaid contractor.

Topic: Medicare
Region: States

For 18 months, former WellCare senior analyst Sean Hellein worked with the Justice Dept. and wore a hidden wire as part of an undercover investigation into possible criminal misconduct on WellCare's part. In 2006, a False Claims Act complaint was filed.

More than 1,000 hours of audio and video surveillance that Hellein conducted, and the subsequent complaint, detailed alleged crimes. Those allegations included schemes to avoid paying back overpayments WellCare received from Florida and New York's Medicaid programs, inflated reinsurance payments, and efforts to disenroll Medicaid beneficiaries whom the company considered unprofitable. The complaint claimed that the company stole $400 million to $600 million from Medicare and Medicaid programs in several states.

Hellein's complaint cites examples of what his attorney referred to as "fraudulent, insensitive and arrogant practices" that included a celebratory dinner held in honor of the team that successfully disenrolled 425 infants, saving the company $6.9 million.

With evidence from Hellein's undercover operation in hand, the FBI conducted a raid of the company's Tampa, Fla., headquarters in October 2007 and seized several computers and electronic files.

Facing a criminal indictment, WellCare in May 2009 agreed to pay $40 million in restitution and a $40 million forfeiture to the U.S. Attorney General's Office to avoid criminal prosecution on four charges that it inflated its billings to the Florida Medicaid program. The company accepted responsibility for its actions in that agreement.

In a separate agreement with the Securities and Exchange Commission, WellCare agreed to pay a $10 million fine.

Under the terms of a preliminary settlement of the False Claims Act complaint, WellCare would have 36 months to pay $137.5 million to the Civil Division of the Justice Dept., the Civil Division of the U.S. Attorney's Office for the Middle District of Florida and the Civil Division of the U.S. Attorney's Office for Connecticut. The terms were detailed in a June 24 filing with the SEC.

WellCare also would pay back $23 million to the Florida Agency for Healthcare Administration for overcharges from August to October 2005. The settlement includes a contingent payment of $35 million in the event the company is sold before the balance is paid. The agreement must be approved by a judge before it is finalized.

WellCare acknowledged that it was overpaid by the Florida Agency for Health Care Administration due to "a change implemented by AHCA in the payment methodology relating to medical benefits of newborns," according to its statement to the SEC. In the statement, WellCare does not admit or deny wrongdoing in the other counts against it.

"We are pleased to reach this preliminary settlement. This is an important step in addressing the government investigation that came to light in late 2007 and in continuing to improve our service to our members, providers and government clients," WellCare spokeswoman Amy Knapp said in a statement.

After the complaint against WellCare was made public, the Florida AHCA sent a letter to the state's attorney general, asking the office to continue investigating for other cases of fraud committed by WellCare and other Medicaid managed care organizations.

"The agency is still reviewing the whistle-blower complaint, and we continue to work to identify and recover all overpayments," said Tiffany Vause, press secretary for the AHCA.

Hellein's attorney, Barry Cohen, of Cohen, Foster and Romine in Tampa, said in a statement that the proposed settlement would permit 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 under the False Claims Act."

Whistle-blowers in a federal case can receive up to 25% of a settlement. At least two other whistle-blowers have claims against WellCare.

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