• Settlement Agreement Between WellCare Health Plans, Inc. et al. and State of Connecticut and others Relating to Medicaid False Claims Allegations
  • July 18, 2012 | Authors: Justin Gundlach; Arthur N. Lerner
  • Law Firm: Crowell & Moring LLP - Washington Office
  • In a series of qui tam actions filed between 2006 and 2009, the States of Connecticut, Florida, Illinois, and New York, and the U.S. Attorney for Florida's Middle District, alleged that between January 2002 and June 24, 2010, WellCare submitted false claims to Medicaid programs in those states and failed to repay the monies it received thereby. The conduct alleged in those law suits led to several agreements between WellCare and some or all of the parties, including a Deferred Prosecution Agreement and a Corporate Integrity Agreement with the HHS OIG.

    The allegations against WellCare include the fraudulent inflation of expenses charged to Florida's Agency for Health Care Administration; manipulation of the MLR reported to various states; falsifying the encounter data submitted with Medicaid claims; rewarding physicians for upcoding and permitting contracted independent physician associations to collect premium payments for deceased former beneficiaries; manipulating CMS's Risk Adjusted Payment System in order to upcode claims; and operating a sham Special Investigations Unit that failed to provide adequate oversight and that filed false and misleading fraud prevention plans with CMS.

    The Settlement Agreement specifies an amount that is comprised of a "fixed" component and a "contingent" component. The fixed component requires WellCare to pay $137.5 million to the United States and the states that execute separate settlements with WellCare. Of that, $53.5 million shall be allocated to the several states; Connecticut will receive $3.2 million. Interest on these amounts shall accrue at an annual rate of 3.125 percent. The contingent component anticipates a possible change in control of WellCare through transfer of a majority of its shares of stock and makes such a change in control the trigger for payment of an additional $35 million to the states settling with WellCare.

    Under the terms of the Settlement Agreement, WellCare expressly warrants that it is solvent, and stipulates that several aspects of a normal bankruptcy proceeding would not apply should WellCare seek judicial relief for bankruptcy, insolvency, or attempt any sort of reorganization.