Lessons from WellCare's Medicaid fraud

A Florida federal judge last week sentenced three former WellCare executives to prison for their involvement in a Medicaid fraud scheme, The Tampa Tribune reported. Wellcare Health Plans, Inc. had been investigated since a 2007 FBI raid of the company's headquarters led to the indictment of five former executives. Four were convicted on healthcare fraud-related charges last June.

At issue was this: Florida's managed care plans must spend at least 80 percent of Medicaid premiums paid for behavioral healthcare on beneficiary services. Spending less than 80 percent obligates plans to refund the difference to the state's Medicaid administrator.

WellCare dodged this obligation by creating a unit to hide money from regulators and falsifying information about provider payments, as FierceHealthPayer reported. WellCare inflated cost data in reports to the Florida Agency for Healthcare Administration to lower the company's repayment obligations.

"The implications of these decisions seemed very small at the time," former WellCare CEO Todd Farha told Judge James S. Moody, Jr.

Prosecutors disagreed. WellCare's fraud was "a plan concocted and executed over years," according to Assistant U.S. Attorney Jay Trezevant. "There were multiple opportunities for each defendant to bring this to a halt, and each and every time, they rejected that in favor of continuing the scheme."  

WellCare was required to pay $40 million in restitution, forfeit another $40 million and cooperate with the government's investigation as part of a deferred prosecution agreement, the U.S. Department of Justice announced.

Defrauded Medicaid money in WellCare's case was a small part of the company's overall revenue at the time, and defendants didn't pocket the money, Moody noted.

Still, this was a huge case. When a team of executives participates in fraud, they can leave a trail of broken bones.

  • Think of the losses Florida's Medicaid program and its beneficiaries bore.
  • Think how much it cost the government to investigate and prosecute this case.
  • Think of the investigation-related resource drains on WellCare.    
  • Think how long it will take WellCare to rebuild brand equity. The negative publicity must have been awful for honest, hard-working employees. It's tough having to look at your shoes when people ask where you work.
  • Think of the wasted potential of five executives whose decisions led to criminal conviction and ruined careers.     

Farha's lawyers said he did nothing illegal, that consultants approved WellCare's business practices. But consultants sometimes report what executives want to hear, like a rouge scientist who says acid rain is good for the trees.

The WellCare case shows ethical decision-making is a core leadership competency. Executives should weigh not only the financial and market effects of their decisions but the compliance and ethics effects as well. Just because something isn't illegal doesn't mean you should do it.

Warren Buffett advised companies to hire job applicants with integrity, intelligence and energy. But integrity matters most, he said, since people with intelligence and energy who lack integrity will bury you.

"Many insurers think a fraud investigation won't happen to them, but that's not a very good bet," attorney Kirk Nahra told FierceHealthPayer: Anti-Fraud in an exclusive interview. As the WellCare case shows, the federal government is aggressively pursuing these cases.

"I never imagined that this is how my career would end," William Kale, a former WellCare subsidiary vice president, told the court.

WellCare's Medicaid fraud case should be required reading for all payer executives. - Jane (@HealthPayer)

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