Feds raid headquarters of Florida's largest Medicare provide

Federal authorities searched the headquarters of Florida's largest provider of managed health care for the poor Wednesday and trading of its stock was suspended, but nobody would say why the company is being targeted.

FBI agents along with various other federal law enforcement personnel - including from the attorney general's Medicaid Fraud Control Unit - raided the offices of WellCare Health Plans Inc. Authorities said the raid will not affect the 350,000 poor Floridians who receive Medicaid through the Tampa-based company.

"The ongoing investigation does not directly concern, nor should it have any impact upon, the delivery of any health care service to any person," the U.S. Attorney's Office said in a statement.

Trading in WellCare stock on the New York Stock Exchange was halted at 10:59 a.m., about 90 minutes after the market opened, after it had fallen $5.47 a share or 4.5 percent to $115.50.

The company acknowledged the search and said it is cooperating with authorities.

"Our No. 1 priority is making sure that our members have access to needed care and services," the company said in a statement. "Our essential services are operational and will remain uninterrupted."

A spokeswoman said WellCare would have no further comment.

Andrew Agwunobi, secretary of the Florida Agency for Health Care Administration, which administers the state's $16.6 billion Medicaid program, said he is "deeply concerned."

"Our highest priority is to ensure that there is no disruption of services to the citizens who are served by these companies," Agwunobi said. "We have been in communication with Wellcare officials (Wednesday) and they have indicated that there will be no effect on beneficiaries. We will continue to monitor this situation closely and respond appropriately if necessary."

WellCare's Web site describes it as a leading provider of managed care services dedicated to government-sponsored health care programs focusing on Medicaid and Medicare plans, including health plans for families, children, the blind and disabled, and prescription drug plans. It has 2.3 million members nationwide.

WellCare was among seven companies that in June agreed to suspend marketing until measures could be put into place to protect people from aggressive and misleading tactics reportedly used by some of their sales representatives.

The feds do it again
Maybe we can piggy back on their investigation

WellCare posts huge profit gain
Posted on Mon, Nov. 05, 2007Digg del.icio.us AIM reprint print email
BY AVRAM GOLDSTEIN
Bloomberg News
WellCare Health Plans, the largest HMO provider under Broward's Medicaid reform program, said profit rose 67 percent in the third quarter on gains in government revenue.

WellCare has 28,700 members in Broward County, 40,400 in Miami-Dade County and 12,900 in Palm Beach County.

Net income increased to $72.4 million, or $1.71 a share, from $43.3 million, or $1.06 a share, a year earlier, the Tampa-based company said Monday in a preliminary earnings statement. The profit beat the $1.53 average estimate of 14 analysts. Revenue rose 42 percent to $1.43 billion.

The biggest share of WellCare's revenue gain came from profitable drug and medical plans subsidized by the government Medicare program for the elderly and disabled, which account for about half the company's business. The rest of its revenue comes from U.S.-state Medicaid plans for the poor, with Florida's being its largest.

''For a small company with limited resources and nothing like a national footprint, they've picked very smart ways to expand their business,'' Matt Perry, an analyst with Wachovia Securities in New York, said in a Wednesday telephone interview. He has rated WellCare ''market perform'' since February and said he will wait for more information about the investigation before considering a revision.

WellCare surged $12.63, or 46 percent, to $40 in early trading Monday. If it stands at the end of regular trading, it will be the biggest gain ever for the company.

Analysts and investors view changes in the share of premium revenue spent on medical care as a possible indicator of future industry profits.

Across all WellCare health plans, the ratio was 81.5 percent in the third quarter, compared with 80.8 percent a year earlier and 82 percent in the second quarter of 2007, according to the preliminary earnings report.

Although FBI agents and investigators for the Florida attorney general's office didn't say what they were looking for in the Oct. 24 search, investors fled the stock. Within a week, the price fell more than 80 percent, eliminating almost $4.8 billion in value.

The company said it's conducting an internal probe and will delay filing its third-quarter financial report.

WellCare may have kept more than $35 million it should have given back to Medicaid by inflating how much it spent on mental health services over five years, according to an account in the Wall Street Journal that appeared over the weekend.

A former employee sued the company in U.S. District Court in Tampa on Friday, alleging the company engaged in potentially illegal activities in its Medicaid operations. Glenn Hutton, a former employee at WellCare's Harmony Behavioral Health unit, said WellCare insiders artificially inflated stock prices by withholding information from investors as they sold two million shares of stock for $108.5 million.

The stock doubled in a year to a high of $122.27 on Oct. 23 before plummeting 82 percent over the following seven days.

Hutton's lawsuit is under seal and WellCare cannot evaluate it now or state whether the former employee's his allegations are the focus of the government investigators, the company said Monday.

WellCare said last week that it's cooperating with the agencies and regulators and hasn't been informed of the subject of the probes. An independent company committee will nevertheless work with the audit committee to conduct an internal investigation of matters raised by federal and state regulators and other agencies, the company said.

The company provides health coverage solely through government-sponsored Medicare and Medicaid.

In addition to the FBI and Florida authorities, officials from the Connecticut attorney general's office and the Securities and Exchange Commission are reviewing the company.