A Healthy Boost

A Healthy Boost

WellCare Health Plans Inc. stock price surges after earnings restatement is small.

stock by Avram Goldstein / Bloomberg News

WellCare Health Plans Inc., the Tampa-based managed-care provider being investigated over possible fraud, gained the most ever in one day in New York trading last week after the company restated its earnings since 2004.

The revision, lowering net income by $28 million, was "small," analyst Matt Perry at Wachovia Securities says. WellCare jumped 24%, or $7.02, to $36.25 at 1:49 p.m. in New York Stock Exchange composite trading.

The provider of government-backed health plans says that previous executives overbilled government programs by $49 million. Those executives "set an inappropriate tone" and withheld information from regulators, the company says in a regulatory filing. The board and new management took measures to remedy "control deficiencies."

"This saga is likely far from over, but the shares should get a boost on Tuesday due to the small size of the restatement," Wachovia's Perry says in a note to investors. "We remain cautious" on WellCare stock, the New York-based analyst says.

The restatement covers the period from 2004 through June 30, 2007.

FBI and Florida state authorities raided the company's headquarters Oct. 24. Chief Executive Officer Todd Farha, Chief Financial Officer Paul Behrens and General Counsel Thaddeus Bereday quit on Jan. 25.

'Highest standards'

The company's board and current senior managers "are committed to the highest standards of business conduct, compliance and financial reporting and controls," says Charles Berg, WellCare's executive chairman since January.

"The decision to restate historical financial statements is an appropriate step in positioning the company for the future," Berg says.

The board and new management changed roles once held by individuals into duties performed by several people, the company says.

The insurer manages benefits for more than 200,000 elderly and disabled customers whose coverage is subsidized by the U.S. Medicare program. WellCare covers an additional 1.23 million members of state Medicaid programs for the poor, according to the company.

The company also covers about one million people enrolled in Medicare prescription drug plans, making it the fifth-largest provider of such policies, according to U.S. figures.

No quarterly reports

WellCare says it remains unable to file quarterly reports because of the investigation and there is no assurance civil judgments, criminal charges or other financial penalties won't occur.

The company says it faces multiple lawsuits by shareholders and former employees; an investigation by the U.S. Justice Department in cooperation with Florida state law enforcement agencies; an informal probe by the SEC; and a Connecticut investigation of WellCare's Medicaid contract there.

In May, the company attributed an expected first-quarter loss to growing costs in the Medicare drug plans, as well as $32 million in legal and consulting fees and employee retention costs related to the probe. In yesterday's filing, WellCare says it will revise calculations of premium revenue, net income, diluted earnings per share and amounts owed to governments.

The $49 million in refunds will go to health programs for low-income adults and children in Florida and Illinois, the company says. It also will increase amounts owed to other governmental entities through June of last year by $115 million.

WellCare says diluted earnings per share will be reduced by 22 cents to $1.34 for 2004; 12 cents to $1.20 in 2005; 30 cents to $3.13 for 2006; and 10 cents to $1.80 for the first half of 2007, the company says.

The gain in the share price was the biggest since WellCare's public offering on June 30, 2004.