Wellcare Settles Again, but Wait, There is More...

We posted several times, most recently in 2009 (<a href="http://hcrenewal.blogspot.com/2009/05/wellcare-settles-accepts-deferred.html">here</a> and <a href="http://hcrenewal.blogspot.com/2009/08/wellcare-did-not-contest-that-its.html">here</a>), about misbehavior by the health insurance company/ managed care organization Wellcare.  That year, the company settled criminal charges that it defrauded the Florida state Medicaid program by paying a fine and accepting a deferred prosecution agreement.  Previously, the state of Connecticut had canceled its arrangement with Wellcare to run a Medicaid program in that state after the company refused to provide the state with requested data.  Then the company signed a consent order with the Florida Elections Commission in which it admitted making "questionable" political contributions.<br /><br />Then this year, it was announced that the company would settle additional civil charges, as <a href="http://www.tampabay.com/news/health/wellcare-health-plans-strikes-1375-million-settlement-challenged-by-new/1104947">per the St. Petersburg (FL) Times</a>, <br /><blockquote>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.</blockquote><br />Also,<br /><blockquote>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.<br /><br />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.<br /><br />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.<br /><br />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.<br /><br />WellCare, which is Florida's largest Medicaid plan operator, has acknowledged that it overcharged Florida and Illinois health programs by about $46.5 million.</blockquote><br />But wait, there is more. No sooner than this settlement been announced than it was challenged. While considering the settlement, the judge involved unsealed a set of complaints by whistle-blowers about Wellcare. First, <a href="http://www.miamiherald.com/2010/06/28/1704842/wellcare-whistleblower-complaint.html">as reported by the Miami Herald</a>,<br /><blockquote>The complaint, filed by former WellCare financial analyst Sean J. Hellein, portrays a company so ethically challenged that it rewarded employees who dumped hundreds of sick newborns and terminally ill patients from the membership rolls, thereby pumping up profits by millions of dollars.<br /><br />It describes a company that embraced fraudulent accounting as a business model, eventually stealing between $400 million and $600 million from Medicare and Medicaid programs in several states, perhaps most of it from Florida.</blockquote><br />See these specifics:<br /><blockquote>Hellein, who wore a wire for more than a year to gather evidence for federal agents, says in the complaint that:<br /><br />- WellCare moved money between accounts to make it appear that patients' treatment cost much more than it actually did. In some cases, the company made payments years in advance to jack up the apparent cost of care to fool states into increasing Medicaid premiums. It worked, he said.<br /><br />- When states made overpayment errors, WellCare didn't pay the money back, as its contract requires. Florida Medicaid made a series of overpayment blunders that fattened WellCare's bottom line by many millions; those who made the errors included both state officials and contractors.<br /><br />- Sometimes hospitals and physician groups helped WellCare hide its true spending from Medicaid programs by accepting payments through one account for expenses incurred by another. Sometimes they allowed WellCare to pay for future years' expenses to make it appear spending for the current year was higher than it actually was.<br /><br />Hellein named two hospital systems - one in Illinois and one in Florida - that he said participated in the sham arrangement, but he said it was common.<br /><br />WellCare pushed expenses into certain programs - behavioral health programs in Florida and Illinois and the Healthy Kids program in Florida, a program for uninsured children of families with modest incomes - because they required repayment if the cost of treatment fell below a certain threshold.<br /><br />Florida public officials were repeatedly duped by WellCare. The director of the Florida Medicaid program from 2004 to 2007, while much of the alleged fraud was going on, was Tom Arnold. He currently is Secretary of the Agency for Health Care Administration.<br /><br />Another agency that fell for WellCare's line was the Office of Insurance Regulation, where an actuary found nothing wrong with a WellCare subsidiary in the Cayman Islands acting as the company's reinsurer.<br /><br />The reinsurance arrangement enabled WellCare to bank $5 for each insured while making it appear that the cost was just 11 cents, the complaint says.<br /><br />After Wall Street analysts raised questions about the legality of the reinsurance arrangement in 2007, some thought it might be reviewed by Chief Financial Officer Alex Sink. But nothing ever came of it.<br /><br />WellCare conducted a study to figure out which Medicaid recipients were profitable and which were not so that it could engage in "cherry-picking," a term for enrolling only the profitable members. The study found that disenrolling a baby born with health problems saved the company an average of $20,000; each terminally ill patient saved $11,500.<br /><br />Those who were persuaded to resign from WellCare went into the general Medicaid or Medicare fee-for-service programs.<br /><br />WellCare also restructured its benefit package to discourage the least-profitable Medicaid recipients from enrolling and encouraging those who were more profitable to sign up.<br /><br />Low-income mothers and children yielded a net of only about 10 percent, while the physically and mentally disabled paid for by Medicare yielded a net of 30 percent, the complaint says.<br /><br />The complaint names about 20 employees of WellCare who knew about the fraudulent activities. Only one, Gregory West, has been charged. He pleaded guilty in December 2007 but sentencing has been postponed several times.<br /><br />No charges have been brought against three former executives of the company named in the complaint as orchestrating the fraud: President, CEO and Chairman Todd Farha, CFO Paul Behrens and General Counsel Thaddeus Bereday.<br /><br />They all resigned in January of 2008, three months after the FBI and other law-enforcement agents raided the Tampa campus of WellCare and carted off computers and files.</blockquote><br />The the St. Petersburg Times <a href="http://www.tampabay.com/news/business/more-lawsuits-against-tampa-company-wellcare-made-public/1105716">reported</a> about two more complaints that were unsealed:<br /><blockquote>Clark J. Bolton, a former supervisor of special investigations at WellCare, said the insurer encouraged overbilling and refused to audit claims for fraud in order to curry favor with doctors and hospitals and build market share. The result was millions in excessive and illegal expenses passed through to federal Medicare and state Medicaid programs, Bolton said.<br /><br />Eugene Gonzalez, a referral coordinator for seven years, claimed WellCare met government customer service standards only because it had employees create backdated documents and make bogus calls to the company's phone lines. Failure to meet these standards would have resulted in the loss of billions of dollars worth of Medicare and Medicaid contracts.</blockquote><br />As we have before, we see a striking contrast between the scope of the allegations and the response by the government agencies that are supposed to regulate insurers, insure that public money is spent wisely, and investigate and seek punishment for illegal activities. As the latter St. Petersburg Times article noted,<br /><blockquote>U.S. Rep. Kathy Castor criticized the proposed settlement as wholly inadequate in a letter this week to Attorney General Eric Holder. 'Where is the penalty and punishment for such egregious actions?' she wrote. 'It appears that companies such as these simply build such payments into the 'cost of doing business.' We cannot allow this to continue.'</blockquote><br />This notion should be familiar to readers of Health Care Renewal. The Wellcare case fits right into the parade of<a href="http://hcrenewal.blogspot.com/search/label/legal%20settlements"> legal settlements</a> we have discussed. As we have said again and again, the usual sorts of legal settlements we have described do not seem to be an effective way to deter future unethical behavior by health care organizations. Even large fines can be regarded just as a cost of doing business. Furthermore, the fine's impact may be diffused over the whole company, and ultimately comes out of the pockets of stockholders, employees, and customers alike. It provides no negative incentives for those who authorized, directed, or implemented the behavior in question. My refrain has been: we will not deter unethical behavior by health care organizations until the people who authorize, direct or implement bad behavior fear some meaningfully negative consequences. Real health care reform needs to make health care leaders accountable, and especially accountable for the bad behavior that helped make them rich. <br /><br />Also note that the case of Wellcare remains relatively <a href="http://hcrenewal.blogspot.com/search/label/anechoic%20effect">anechoic</a>. Despite the severity of allegations, and the national scope of the company, the case has only been mentioned in news stories, mainly in Florida where the company has its headquarters, and in a few health care trade publications. It, like many of the cases we discuss on Health Care Renewal, has not been mentioned in the medical/ health care research/ health care policy literature. <br /><br />If we cannot even speak about the sort of very bad management that afflicted Wellcare as a cause of many of the ills of our health care system, how do we really expect to constructively reform that system?

Wellcare Settles Again, but Wait, There is More...

We posted several times, most recently in 2009 (here and here), about misbehavior by the health insurance company/ managed care organization Wellcare.  That year, the company settled criminal charges …

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Board Member Blows Whistle on Health Insurance Company's Accounting

We previously posted about some of the travails of for-profit health insurance company/ managed care organization Wellcare.  In August, 2009, we <a href="http://hcrenewal.blogspot.com/2009/08/wellcare-did-not-contest-that-its.html">posted</a> about Wellcare's "admission" that it had made numerous questionable campaign contributions.  In May, 2009 we <a href="http://hcrenewal.blogspot.com/2009/05/wellcare-settles-accepts-deferred.html">posted</a> about WellCare's submission to a deferred prosecution agreemeent based on charges that it defrauded state programs by inflating its expenses. In 2007, we <a href="http://hcrenewal.blogspot.com/2007/11/health-plans-programs-cancelled-for.html">posted</a> about how the state of Connecticut stopped WellCare from running a plan for poor children after the company refused to reveal what it was paying physicians, and why it was failing to pay for particular services. So WellCare has been cited for three different kinds of unethical behavior in 2007-09. <br /><br />Here's a <a href="http://online.wsj.com/article/SB10001424052748704388304575202260647832760.html">story</a> about Wellcare with a new twist in the Wall Street Journal:<br /><blockquote><em>A prominent director at WellCare Health Plans Inc. resigned Wednesday and raised questions about accounting practices</em> at the Medicare and Medicaid company.<br /><br />Regina Herzlinger, the <em>head of the board's audit committee</em> and a professor of business administration at Harvard Business School, said <em>internal audits found WellCare overbilled the Illinois Medicaid program</em> by $1 million in 2009 and <em>potentially overcharged states for almost $500,000 worth of maternity care</em>. Additionally, the Tampa, Fla., company<em> ran afoul of Georgia's requirements that it account for each patient visit for which it paid providers</em>, resulting in a $610,000 fine, she said.<br /><br />Ms. Herzlinger said those problems, which the company corrected last year and this year after an internal auditor discovered them, are <em>evidence of weak accounting practices</em>. Ms. Herzlinger said she had hoped to provide oversight, as chairwoman of the audit committee, but that the board didn't renominate her for re-election at this year's annual meeting of shareholders. Ms. Herzlinger alleges that the board <em>forced her out for asking questions about accounting problems and corporate-governance practices</em>.</blockquote><br />Wellcare offered the response one might expect:<br /><blockquote>WellCare said good corporate-governance practices require it to bring in new board members periodically to provide a fresh perspective. The company said the accounting errors Ms. Herzlinger identified were relatively small and the company's own internal controls identified them, indicating that its processes are working well. The company said the board chose not to renominate Ms. Herzlinger.<br /><br />'At any company, you are always going to have these kinds of immaterial amounts pop up,' said Thomas Tran, WellCare's chief financial officer, who added that it is important to 'address them and document them and learn from them to change your processes.'</blockquote><br />That might have been more convincing were Wellcare not to have the track-record discussed above. <br /><br />Every now and then we have discussed cases of whistle-blowers from within health care organizations, but I cannot remember another instance in which the whistle-blower was on the board of directors.  In our post of August, 2009, we noted Prof Herzlinger's position on the Wellcare board, and urged her, as a main stream health policy expert, "to acknowledge that health care leadership may be unaccountable, opaque, dishonest, and sometimes flagrantly corrupt."  We also urged her to "pay a bit more attention to the mischief being committed by those who answer to her."  From this new story, it looked like she did just that, and hopefully made a contribution to more transparent and honest governance of health care organizations.  Good for her!<br /><br />It is time for the often well-paid and not over-worked members of the board of directors of health care corporations to take some responsibility for the actions of the corporations over which they are supposed to exercise stewardship.

Board Member Blows Whistle on Health Insurance Company's Accounting

We previously posted about some of the travails of for-profit health insurance company/ managed care organization Wellcare.  In August, 2009, we posted about Wellcare's "admission" that it had made nu…

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WellCare "Did Not Contest" that its Political Contributions Violated State Law

From a <a href="http://blogs.tampabay.com/buzz/2009/08/huge-fine-levied-over-dubious-campaign-donations.html">report</a> in the St Petersburg (Florida) Times:<br /><blockquote><br />WellCare Health Plans on Wednesday <em>admitted to making 129 'questionable' contributions to Florida politicians over four years ending in 2007.</em> In a consent order with the Florida Elections Commission, the Tampa-based managed-care company agreed to pay a $120,000 fine and <em>did not contest the commission's finding of probable cause that the contributions violated state law.</em><br /><br />The Associated Press reported in February that WellCare, its subsidiaries and executives spent $2.4 million in political contributions in the 2004 and 2006 elections. More than 95 percent went to Republicans, who pushed a plan to send more state and federal Medicaid spending through private companies like WellCare.<br /></blockquote><br /><br />In May, 2009 we <a href="http://hcrenewal.blogspot.com/2009/05/wellcare-settles-accepts-deferred.html">posted</a> about WellCare's submission to a deferred prosecution agreemeent based on charges that it defrauded state programs by inflating its expenses. In 2007, we <a href="http://hcrenewal.blogspot.com/2007/11/health-plans-programs-cancelled-for.html">posted</a> about how the state of Connecticut stopped WellCare from running a plan for poor children after the company refused to reveal what it was paying physicians, and why it was failing to pay for particular services. So WellCare has paid three penalties for three different kinds of unethical behavior in the last two years. <br /><br />WellCare is one of numerous health care organizations which seem to be serial violators of reasonable ethical norms. Usually, however, the penalties paid for these behaviors are trivial, given the financial capacities of the offending organizations. Furthermore, rarely are the individuals who made the decisions that caused the behaviors identified, much less subjected to negative consequences. <br /><br />Given our continued permissiveness towards all sorts of deception, dishonesty, cheating, and even outright fraud, bribery, and corruption, is it any wonder that the unethical behavior continues? Such behavior doubtless directly drives up costs. Furthermore, leaders focused on their personal power and enrichment may not lead well, and demoralize employees and professionals who want to do the right thing, leading to further cost increases, access decrements, and threats to health care quality. I submit that to truly reform health care, and have a chance at improving cost, quality, and access, we cannot continue to shrug off these sorts of ethical violations.<br /><br />A postscript - as we have noted before, one member of the <a href="http://ir.wellcare.com/phoenix.zhtml?c=176521&p=irol-govboard">WellCare board of directors </a>is Regina Herzlinger, a well known and prolific health policy expert, and holds the <a href="http://drfd.hbs.edu/fit/public/facultyInfo.do?facInfo=bio&facEmId=rherzlinger">Nancy R. McPherson Professor of Business Administration Chair of the Harvard Business School</a>. As far as I know, Prof Herzlinger is one of the many health policy experts who avoids discussing the sorts of problems with the accountability, integrity, and transparency of health care leadership which is grist for the mill here at Health Care Renewal. Perhaps, Prof Herzlinger, like many other main stream health policy experts, should learn to acknowledge that health care leadership may be unaccountable, opaque, dishonest, and sometimes flagrantly corrupt. Furthermore, Prof Herzlinger, like many other well-paid board members of health care organization, should pay a bit more attention to the mischief being committed by those who answer to her.

WellCare "Did Not Contest" that its Political Contributions Violated State Law

From a report in the St Petersburg (Florida) Times:WellCare Health Plans on Wednesday admitted to making 129 'questionable' contributions to Florida politicians over four years ending in 2007. In a co…

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WellCare Settles, Accepts Deferred Prosecution Agreement

'Tis the season for deferred prosecution agreements for health care organizations. As <a href="http://online.wsj.com/article/SB124153953103687873.html">reported by the Wall Street Journal</a>:<br /><br /><blockquote><br /><em>WellCare Health Plans Inc. agreed to pay $80 million to settle a Florida Medicaid fraud investigation</em> that has embroiled the company since the fall of 2007, previously prompting a management shake-up and restatement of more than three years of the company's earnings.<br /><br />The settlement resolves federal and state criminal probes into allegations that <em>WellCare defrauded Florida benefits programs for low-income adults and children of about $40 million by improperly inflating what it spent on care</em>.<br /><br />WellCare, based in Tampa, Fla., administers medical benefits for about 2.5 million enrollees in government-sponsored plans in several states.<br /><br />Under a deferred prosecution agreement, the U.S. Attorney's Office for the Middle District of Florida in Tampa filed <em>a fraud conspiracy charge</em> against the company but said it wouldn't prosecute the case if WellCare meets all of the deal's terms.<br /><br />U.S. Attorney A. Brian Albritton said in a news conference Tuesday that his office <em>could have pursued a conviction but that it likely would have put the insurer out of business, hurting customers, innocent employees and shareholders. In penalizing the company, 'we have, at the same time, tried to avoid crushing it,' he said</em>.<br /><br />Under the terms, WellCare must forfeit $40 million and pay another $40 million in restitution to Florida's Medicaid and 'Healthy Kids' plans. WellCare also has agreed <em>'to accept and acknowledge full responsibility for the conduct that led to the government's investigations</em>,' according to the deferred prosecution agreement. The company declined to elaborate.<br /><br />In addition, the company also must retain an independent monitor to review its business operations, cooperate with the government's ongoing investigations and implement new procedures within 60 days to prevent future abuse or faulty reports to state health care programs.<br /></blockquote><br /><br />This was not the first bit of trouble WellCare got itself into. We posted <a href="http://hcrenewal.blogspot.com/2007/11/health-plans-programs-cancelled-for.html">here</a> about how the state of Connecticut stopped WellCare from running a plan for poor children after the company refused to reveal what it was paying physicians, and why it was failing to pay for particular services. <br /><br />So, as we have found from blogging on Health Care Renewal for a while, organizations that are found to be committing one sort of mischief often are also found to be committing another sort. <br /><br />We also see some other familiar patterns. While human beings authorized or committed the acts that got the organization in trouble, rarely do these people seem to suffer any negative consequences. At most, the organization may pay a seemingly large fine. This, however, may come out of dividends or the stock price, dispersing the cost to stock-holders, or out of salaries across the board. Thus, those who got the organization into trouble are unlikely to feel pain from it. Perhaps because of reverence for all organizations related to health care, and fear that the bankruptcy of any health care organization, even a health care insurance company, will leave patients in the lurch, prosecutors do not seem inclined to actually prosecute such organizations. The net effect, though, seems to be that dishonest executives of health care organizations can continue to act with impunity.<br /><br />Until bad leadership of health care organizations leads to negative consequences for those practicing it, health care leadership can be expected to continuously degrade. <br /><br />By the way, one member of the <a href="http://ir.wellcare.com/phoenix.zhtml?c=176521&p=irol-govboard">WellCare board of directors </a>is Regina Herzlinger, a well known and prolific health policy expert, and holds the <a href="http://drfd.hbs.edu/fit/public/facultyInfo.do?facInfo=bio&facEmId=rherzlinger">Nancy R. McPherson Professor of Business Administration Chair of the Harvard Business School</a>. As far as I know, Prof Herzlinger is one of the many health policy experts who avoids discussing the sorts of problems with the accountability, integrity, and transparency of health care leadership which is grist for the mill here at Health Care Renewal. Yet under the stewardship of such an august expert, WellCare had to "accept and acknowledge full responsibility for ... conduct" that included fraud. Perhaps, Prof Herzlinger, like many other main stream health policy experts, should learn to acknowledge that health care leadership may be unaccountable, opaque, dishonest, and sometimes flagrantly corrupt. Furthermore, Prof Herzlinger, like many other well-paid board members of health care organization, should pay a bit more attention to the mischief being committed by those who answer to her.

WellCare Settles, Accepts Deferred Prosecution Agreement

'Tis the season for deferred prosecution agreements for health care organizations. As reported by the Wall Street Journal:WellCare Health Plans Inc. agreed to pay $80 million to settle a Florida Medic…

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