Sunday, April 25, 2010

WellCare Health

The story about WellCare Health seems to have been rather buried in the weekend edition of The Wall Street Journal. But it's there if you look. Furthermore, if you do find it on page B6 you might skip right by it because the headline is misleadingly anodyne.

The headline is "Director Resigns at Wellcare Health," -- which sounds as if the story is a mere personnel matter, not a significant accusation. The subhead doesn't help much. It says "Head of Audit Committee Raises Questions About Company's Accounting." She did more than raise questions. She made statements. And they weren't about "accounting." This isn't an issue concerning, say, mark-to-market versus mark-to-model. This has to to with overcharges, and potentially it seems with fraud.

Here's a link to the resignation letter, dated April 21.

Regina Herzlinger, the head of the audit committee of the board of directors at WellCare, has resigned from the board and has made significant accusations on her way out the door. She says internal audits have found that WellCare overbilled Medicaid program of the state of Illinois by $1 million in 2009 and potentially overcharged states by almost half a million dollars more in connection with maternity care.

Nor does she regard this sort of thinbg as the result of honest mistakes. She also writes, after all, of "facially credible evidence of an unlawful agreement among at least Chairman Chuck Berg, Director Chris Michalik, and Lead Director Hickey to seize control of the Board regardless of the best interests of shareholders."

WellCare has a history. Back in the fall of 2007, 200 state and federal agents raided company headquarters in a dispute that led to the restatement of three years of earnings, and the firing of three of the entity's top executives. Last year, Georgia's Dept. of Community Health fined WellCare $610,000 in connection with the company's failure to account for each patient visit in which it paid providers.

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