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Insiders: After millions in fraud penalites, WellCare may be big winner in Kentucky Medicaid bonanza

by Terry Boyd

When Kentucky officials announce the state’s long-awaited Medicaid managed care contracts tomorrow, insiders say a big winner could be a Tampa-based firm hit with hundreds of millions in fraud and securities violation fines during the past five years.

Cabinet of Health and Family Services officials are scheduled to announce at 11 a.m. Thursday which companies are getting pieces of managed-care contracts for the $4 billion in Medicaid funds – 80-percent federal, 20-percent state – that flow through Kentucky annually.

That announcement will include WellCare Health Plan getting a substantial contract in at least one Medicaid region, according to insiders with direct knowledge of the process.

That WellCare has faced multiple fraud charges and securities violations can’t come as a surprise to state officials. A Google search returned more than 200 listings including media reports related to WellCare fraud investigations and securities violations dating back to 2007.

WellCare settled with state and federal regulators on Medicaid fraud charges and making inflated earnings statements, then cleared house, firing executives connected to the charges, according to multiple media reports.

Wellcare spokeswoman Amy Knapp initially requested an off-the-record conversation with Insider Louisville. After the request was declined, Knapp said the company would issue a statement. Insider Louisville received no statement as of late Wednesday afternoon.

Kentucky Finance Cabinet spokeswoman Cindy Lanham declined to comment on WellCare’s past infractions and whether state contract regulations address bids from companies that have been sanctioned for Medicaid fraud.

Jill Midkiff, Cabinet of Health and Family Services communications director, declined to comment.

WellCare is one of five companies that bid on a request for proposals for the managed care contracts issued in April by the Cabinet for Health & Family Services. (See the list below)

State officials are seeking to shift from fee-for-services Medicaid reimbursements across most of Kentucky now to a managed-care system in an attempt to balance Kentucky’s Medicaid budget.

At the time of this post, Insider Louisville was not able to double-verify all the companies getting contracts, which were awarded last Friday.

But Insider Louisville was able to double-verify through multiple sources that WellCare has been awarded at least one, and perhaps several, contracts, and real estate sources confirmed WellCare is searching for office space in Louisville.

Moreover, WellCare posted on-line seven new top executive positions in Louisville related to the managed-care contract including managers of regulatory affairs, provider relations, network development and regional operations.

WellCare would bring serious baggage to Kentucky’s Medicaid program.

Federal authorities have been investigating WellCare for Medicaid fraud and securities violations since at least 2007.

The company paid $80 million in penalties in 2009 under an agreement allowing WellCare to avoid criminal prosecution for conspiracy to commit health care fraud.

In June 2010, WellCare execuitives agreed to a $137.5 million civil settlement with the Justice Department. The company also agreed to appointment of a third party to oversee WellCare’s compliance with state and federal regulations.

Allegations include WellCare executives building market share by encouraging doctors and hospitals to over bill, with the increased costs passed on to Medicaid.

WellCare executives also agreed to Securities and Exchange Commissions fines including a $10 million civil penalty related to more than $40 million in profits that WellCare didn’t pass on to Florida agencies from 2003 to 2007.

Shortly after the firm’s civil settlement last year, a series of whistleblowers stepped forward after courts unsealed investigations of WellCare, according to news reports.

A senior WellCare financial analyst charges senior executives developed shemes to defraud Florida and six other states where the company provided Medicaid coverage, with WellCare netting $400 million to $600 million from the states’ low-income health insurance programs.

Then three months ago, five former WellCare executives including the company’s ex-CEO were charged in an elaborate scheme to divert millions of dollars designated for Medicaid patients to company profits, according to media reports.

More as we know more.

Bidders responding to the state’s Medicaid managed-care RFP include:

• WellCare, based in Tampa. WellCare is a for-profit, publicly traded company that trades on the New York Stock Exchange under the symbol “WCG.” The company has about 2.2 million members, according to its financial statements. It reported about $1.6 billion in revenue for 2010.

• UnitedHealth Group, based in Minneapolis. UnitedHealth is the largest health insurer in the United States, ranked by revenue. United Health is a major Humana Inc. competitor, but is substantially larger than the Louisville-based health insurer/health care provider. UnitedHealth reported $94.2 billion in 2010 revenue compared to about $34 billion for Humana. UnitedHealth trades on the New York Stock Exchange under the symbol, “UNH.”

• AmeriGroup, based in Nashville. AmeriGroup is a for-profit managed-health care company and the eighth-largest publicly traded health care company ranked by revenue, according to its website. It has about two million members, with operations in Florida, Georgia. Maryland, Nevada, New Jersey, New Mexico, New York, Ohio, Tennessee, Texas and Virginia. The company reported $5.8 billion in revenue for fiscal year 2010. AmeriGroup trades on the New York Stock Exchange under the symbol “AGP.”

• Coventry Health Care, based in Bethesda, Md., is a for-profit that trades on the New York Stock Exchange under the symbol “CVH.” The company has about 1.6 million members, according to its website. Total 2010 revenue was $11.6 billion.

* Passport Health Plan. Passport is a non-profit entity created by local hospital groups including the University of Louisville and Norton Healthcare, and indirectly controlled by them. Passport currently has a $740 million contract to manage Medicaid in one of Kentucky’s eight regions. The region includes Jefferson County and 15 surrounding counties, covering about 165,000 people. That contract ends at the end of the month. AmeriHealth, based in Iselin, NJ, is the third-party contractor that supplies Passport’s staff other than top executives. AmeriHealth has about 265,000 members New Jersey, Delaware, and Pennsylvania, according to the company’s website.

The RFP stated that a master agreement covering at least 800,000 Kentuckians – one out of every three residents – would provide and manage health care services for members enrolled in Medicaid. Services would include physical health, mental health and dental.

The RFP also makes clear the state hypothetically could award more than one company part of the business in each of the eight regions, or one company the entire piece of business. Or variations in between.

The transition must be complete no later than early 2012, according to the RFP, including creation of a provider network along with all the management structures and systems needed to manage federal Medicaid funds as they flow into the state.

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