WellCare Health Plans
Inc. said it will restate more than three years of financial results in
response to a Medicaid fraud investigation it has been embroiled in
since last fall, and linked the bad accounting to an "inappropriate
tone" set by former executives.
The restatement will reduce net income from 2004
through mid-2007 by about 9%, or $28 million, said WellCare, which
provides medical benefits for more than 2.4 million people in
government health-care programs nationwide.
More than 200 federal and state investigators raided
the company's Tampa, Fla., headquarters last fall. The company also
faces inquiries from several states and the Securities and Exchange
Commission, and lawsuits by shareholders. The company says it is
cooperating with the investigations. The decision to restate results
stems from an internal inquiry initiated after the government's
criminal investigation began.
WellCare hasn't yet filed its 2007 audited financial
statements and said it doesn't know when it will release the restated
results. It said its restatement estimates don't include the cost of
any settlement with regulators and prosecutors and that its internal
inquiry continues, though it doesn't expect further restatements.
By accounting for medical expenses improperly, the
company said it failed to return about $46.5 million in premiums to
state programs providing health care to low-income adults and children
in Florida and Illinois, and understated liabilities by about $46
Under some of WellCare's contracts with Medicaid and
other health-care programs, its mental-health spending must reach
certain thresholds or it has to return money to the state. The company
said it improperly counted ineligible expenses when tallying what it
spent on mental-health care, and therefore kept more than it should
While conducting its internal inquiry, company
officials determined that "former senior management set an
inappropriate tone in connection with the company's efforts to comply
with the regulatory requirements" under Florida's health-care programs,
WellCare said in a statement.
The company's top three executives resigned in late
January. Since then, WellCare has appointed a new executive chairman,
chief executive officer, general counsel and chief financial officer,
and established a regulatory-compliance committee made up of board
members. It also has separated several regulatory and financial
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