CorpWatch : US: WellCare to Restate Years of Results

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 million.

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 have.

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 positions.

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