Kusserow’s Corner: The WellCare Investigation Saga is Coming to a Close


One of the major enforcement sagas in Managed Care came to a head on May 19, 2014, when Todd S. Farha, former CEO for WellCare, was sentenced to serve 36 months in prison for defrauding the Florida Medicaid program. WellCare operates health maintenance organizations (HMOs) in several states providing services through government-sponsored health care benefit programs like Medicaid. It provides managed health care services for approximately 2.6 million Medicare and Medicaid beneficiaries nationwide; WellCare has been plagued with a series of investigations dating back to an FBI raid in 2007 that led to the indictment of five former executives. All five have been convicted.

Last June, Farha was convicted by a federal jury on two counts of health care fraud, along with Paul Behrens, the former CFO, who was convicted on two counts of making false statements. Both were originally charged in March 2011 with devising a scheme to defraud the Florida Medicaid program and making false, fraudulent statements on expenses for behavioral health-care services. William Kale, a former vice president of WellCare unit Harmony Behavioral Health, and Peter Clay, a former WellCare vice president of medical economics, were also convicted.

By way of background, companies in Florida are required to spend at least 80 percent of Medicaid money received for mental health care directly on patients. If they spend less, they are supposed to give the difference to the state. The WellCare executives avoided making the refunds to the state by setting up a unit to hide the money from regulators, according to prosecutors. They also falsified information on payments to doctors and mental health centers. As part of the scheme, Farha and others fraudulently submitted inflated expenditure information in the company’s annual reports to the Florida Agency for Health Care Administration (AHCA), the Florida agency that administers the Medicaid program; to reduce the WellCare HMOs’ contractual repayment obligations for behavioral health care services.

In a related case, WellCare has been the subject of four whistleblower suits filed under the False Claims Act; three suits in Florida, and the other Connecticut. Two WellCare HMOs operating in Florida, StayWell and Healthease, contracted with the AHCA to provide Florida Medicaid recipients with an array of services, including behavioral health services. The lawsuits alleged a number of schemes to submit false claims to Medicare and various Medicaid programs, including allegations that WellCare: (1) falsely inflated the amount it claimed to be spending on medical care in order to avoid returning money to Medicaid and other programs in various states, including Florida Medicaid and Florida Healthy Kids (Florida’s CHIP program); (2) knowingly retained overpayments it received from Florida Medicaid for infant care; (3) falsified data that misrepresented the medical conditions of patients and the treatments they received; (4) engaged in certain marketing abuses, including the “cherrypicking” of healthy patients in order to avoid future costs; (5) manipulated “grades of service” or other performance metrics regarding its call center; and (6) operated a sham Special Investigations Unit. WellCare agreed to pay $137.5 million in civil fines and penalties.

The Department of Justice (DOJ) also filed related charges in an information and a deferred prosecution agreement (DPA) against WellCare, whereby it is required to pay $40 million in restitution, forfeit another $40 million to the United States, and cooperate with the government’s criminal investigation. The company complied with all of the requirements of the DPA; following a government motion, the information was later dismissed by the court. The resolution of these civil suits brings total recoveries from WellCare to $217.5 million.

WellCare, under new leadership,has its own pending litigation against the former executives. With the latest actions of the court, WellCare may be finally able to put all this behind it.

Richard P. Kusserow served as DHHS Inspector General for 11 years. He currently is CEO of Strategic Management Services, LLC (SM), a firm that has assisted more than 3,000 organizations and entities with compliance related matters. The SM sister company, CRC, provides a wide range of compliance tools including sanction-screening.

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Copyright © 2014 Strategic Management Services, LLC. Published with permission.