News in brief - Jan. 30, 2012

Physician spending lags behind inflation

Overall medical care inflation grew more quickly than inflation for the cost of physician services and the economy as a whole, according to the monthly report on the consumer price index issued Jan. 19 by the Bureau of Labor Statistics bls.gov/news.release/cpi.nr0.htm.

There was no inflation in the wider economy for November and December 2011, although price growth for the year was 3%. Prices paid for medical care escalated by 0.4% in November and December 2011, with an annual inflation rate of 3.5%.

The cost of hospital services went up 0.7% in November 2011 and 0.5% in December 2011, with an annual growth rate of 5.3%. Prices paid for professional services, a category that includes physicians, went up 0.2% in November 2011 and 0.3% in December 2011, with an annual inflation rate of 2.2%.

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SEC targets WellCare executives

Three former top executives at Florida health plan WellCare are facing action from the Securities and Exchange Commission, in addition to lawsuits from the company's shareholders and the company itself.

Todd Farha, former chief executive officer; Paul Behrens, former chief financial officer; and Thaddeus Bereday, former general counsel, were named in a civil action filed by the SEC on Jan. 9. The action seeks compensatory damages, return of performance-based pay from their time as executives, and an order barring the men from acting as officers or directors for other companies.

The men are accused of conspiring to keep more than $40 million meant to pay for care for Medicaid enrollees, then using the money to boost earnings, and finally selling $91 million in stock at a price that was inflated by those earnings. They all resigned in 2007.

In March 2011, a federal grand jury in Tampa, Fla., indicted Farha, Behrens, Bereday and two other former WellCare executives on Medicaid fraud charges. The men have denied any wrongdoing.

Under its new management, WellCare reached a settlement with state and federal authorities under which it did not admit wrongdoing but paid back the $40 million to the state and a $137.5 million fine.

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Venture capital funding for health IT grew in 2011

The health information technology industry raised more than half a billion dollars in venture capital funding in 2011, according to a report by Mercom Capital Group, an Austin, Texas-based communications and consulting firm.

The report said venture capitalists in the health IT sector invested more than $500 million, up significantly from 2010, when $211 million was invested. The sector receiving the most money was health information management companies, with $336 million raised in 30 deals. Personal health record companies raised $83.3 million in 12 deals.

Merger and acquisition activity also was high, with 104 recorded transactions totaling $6 billion, compared with $4 billion in 85 transactions in 2010, according to the report.

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