The complaint that launched a federal investigation of WellCare Health Plans four years ago by a whistleblower within the company has now been unsealed, and the picture it paints of the state's largest Medicaid HMO contractor is grim.
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.
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.
These "ill-gotten gains were taken by deceiving, outsmarting and concealing the truth from government regulators,'' said Hellein's attorney Barry Cohen in a press release Friday.
WellCare has not yet issued a response, but has in the past has termed what occurred "accounting errors.''
Cohen persuaded U.S. District Court Judge James S. Moody to unseal the records on Thursday after learning that the U.S. Attorney's Office was discussing settling the case with WellCare for $137.5 million.
In telephone interviews, Cohen said he hoped that the U.S. Attorney General and Florida Attorney General Bill McCollum will read the complaint and "raise hell'' with the U.S. Attorney's Office in Tampa for not insisting on full repayment plus damages.
"The state of Florida got screwed out of $300 million, probably more than that, to say nothing of triple damages'' that can be awarded in such cases under the law, Cohen said.
"If [McCollum] is politically smart, he's going to try to back away'' from the agreement, Cohen said. McCollum is running for the Republican nomination for governor.
Hellein, who wore a wire for more than a year to gather evidence for federal agents, says in the complaint that:
• 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.
• 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.
• 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.
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.
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.
• 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.
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.
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.
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.
• 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.
Those who were persuaded to resign from WellCare went into the general Medicaid or Medicare fee-for-service programs.
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.
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.
• 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.
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.
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.
It's not clear what effect, if any, the unsealing of the complaint will have on the possible settlement with the federal government that WellCare announced late Thursday in an SEC document.
The company said it expected to settle the civil damages case for $137.5 million. That is in addition to $80 million WellCare agreed to pay in May 2009 to defer criminal prosecution on a felony charge of fraud. About half of that money went back to Florida health programs.
Hellein's complaint names other states besides Florida as victims of WellCare's fraudulent accounting -- Illinois, Indiana, Louisiana, New York, Georgia and Hawaii.
And it names other Medicaid HMO companies as participating in some of the same inappropriate accounting practices, particularly failing to give back overpayments made in error.
Hellein's complaint, which was filed June 7, 2006, has been kept under seal ever since then at the request of the Justice Department. Between his complaint and the FBI raid in October 2007, Hellein worked undercover, providing more than 1,000 hours of surveillance audio and video, Cohen said.
The whistleblower now lives in Atlanta, where he still works in the health-care industry, Cohen said. Hellein will probably return to Tampa to assist in the lawsuit, Cohen said.
WellCare is a major player in Florida's Medicaid system. The company's 2009 annual report said that almost one-fourth of its members were from Florida: 425,000 on Medicaid and 114,000 on Medicare.
However, WellCare's Medicaid enrollment in Florida dropped when it moved out of Duval and Broward counties last year, saying the reform pilot programs there weren't profitable. As of April, WellCare's Healthease and Staywell HMOs combined to enroll nearly 355,000 Medicaid recipients, about one-third of all enrolled in such plans, according to a state report. AHCA said WellCare received $914.5 million from Florida Medicaid last year.