Wellcare taken to the woodshed for actions of prior management team

There has been a lot of interest lately regarding Wellcare in the state of Florida, where their subsidiaries cover over 400000 Medicaid beneficiaries (about 40% of the Medicaid HMO market - data available at the following link).

As reported by Florida Health News and the Wall Street Journal yesterday, Wellcare was charged with felony fraud and has agreed to pay $80M in order to defer prosecution. The crux of the fraud was that the organization was required to spend 80 percent of their mental health and substance abuse dollars on the provision of services (aka the 80-20 rule) and instead they paid 80 percent to a subsidiary that took another 20 percent off the top and so forth and so on such that only around 50 to 60 percent of the premium dollar actually went to care.

On Monday, Wellcare also announced that it was dropping its profitable Medicare PFFS plans a year early and speculation was that they wanted to free up capital to settle the fraud claims and also drop a line of business that was the primary cause of their February suspension from enrolling Medicare beneficiaries (see FHN reports on the speculation and the suspension).

Personally , I remember reading a Medicaid managed care market segment report a few years ago where an analyst was sincerely puzzled as to why Wellcare had twice the margin of any of their competitors and I think we now have at least a partial explanation.

In the announcement, U.S. Attorney A. Brian Albritton stated that the fraud was committed by persons no longer with the company and he attributed their motive to pure greed. Additionally, the Tampa Tribune reports that prosecutors expect to file criminal fraud and conspiracy charges the former executives responsible for the fraud.

That said, I am quite hopeful that Wellcare has turned a corner. Their new management team has stopped their overly aggressive lobbying efforts and retooled and reinvigorated their compliance programs and as reported by FHN,

In the wake of the raid, WellCare's board of directors -- which includes former Florida Gov. Bob Graham -- formed its own investigative committee and hired separate counsel. Within weeks, Farha, Behrens and Bereday were out, and a former WellCare executive, Heath Schiesser, was installed as president. The board also appointed an executive chairman, Charles G. Berg.

Last summer, WellCare executives filed statements admitting the company overbilled the state and paid about $35 million in restitution.

WellCare has cooperated fully with the investigation, Albritton said, and if it abides by the requirements in the deferred prosecution agreement, it will not be prosecuted in court and will not have a criminal conviction on its record. He said prosecutors gave a lot of thought to the matter before offering the deal, but decided it was fair for several reasons: Those responsible were no longer employed there, and prosecution would force WellCare out of business, which would hurt people who weren’t responsible, including shareholders, employees and patients.

This episode is just another example of how the Wall Street culture of greed took our society down the wrong path. It is a shame that innocent Medicaid beneficiaries and Wellcare shareholders and employees paid the price for the actions of some terrible people and let us hope that anyone found responsible faces serious consequences.

That said, we all should have known better. It is one thing for an organization to be rewarded for increasing efficiency but another for them to do it in an opulent and arrogant way that defied explanation. Also, we have got to expect a different type of leadership from the organizations that care for our most vulnerable citizens.

To answer the question from the graphic above, unadulterated greed is not good (as the current recession proves) but significant incentives that align payment with patient outcomes are an imperative if we want to improve the performance of our health systems. That way, the Wellcares of the world could put their creative geniuses to work improving care and being rewarded as opposed to finding ways to cut corners. Of course, this is a radical change for most Medicaid programs but it is one that is necessary. ~BAA

[Just as an aside and to stir up a bit of controversy, it would be interesting to track the ratio of MBAs to clinicians in major health care organizations. Not to say MBAs are always bad and clinicians are always good, I have seen it cut both ways, but in the aggregate, it would give one a relative feel about the values of an organization.]