WellCare Health Plans hired Kirk Cianciolo, DO in 2010 to be the insurer’s vice president of care management. His main job was to be the person who made final claims decisions. On December 3, 2012, the Tampa-based company fired him along with five of his subordinates.
The fired employees sued the insurer, claiming they were fired because they wouldn’t participate in a scheme to deny medically necessary inpatient hospital stays paid for by Medicare and various state Medicaid programs.
In addition to Dr. Cianciolo, the other fired employees were Karen Ross, the vice president of clinical management, and subordinates Circe Lopez, Sandra Brower, Kristi King and Alyson Scott,
The group (Relators) hired Kevin Darken, a former federal prosecutor, to file a sealed qui tam (whistleblower) action in 2013. Darken’s partner, Barry Cohen, won a previous whistleblower suit against the company.
False Claims Alleged
At the end of November 2014, the government decided not to join in their False Claims suit and the Relators’ complaint was unsealed.
The fired employees claim that taking money from public payers to provide services to beneficiaries and then deny legitimate services to make more money is a violation of the False Claims Act. They claim WellCare continued to charge the federal and state governments for the same hospital visits for which it refused to pay.
The allegations bring home something that every provider who has ever had a claim denied by an insurer has thought—the insurer is just trying to make more money.
WellCare’s Continued Woes
As noted above, if found guilty, it won’t be the first time WellCare or their senior managers have found themselves on the wrong side of the law.
The company, Florida’s largest Medicaid HMO contractor, with more than 622, 000 state-sponsored members, paid more than $400 million in 2009 to settle past accusations of health-care fraud.
In October 2007 the FBI and other agencies raided the company’s Tampa headquarters to gather up records. A different whistleblower, Sean Hellein, had worn a wire for months to get evidence that top executives were using a subsidiary to hide money they owed Florida and U.S. taxpayers, and were falsifying records.
Hellein claimed the company had moved money between accounts to make it appear patient treatments cost more than they actually did, in order to justify higher Medicaid payments from the state. He said the company even gave bonuses to staff members who found ways to get patients with expensive illnesses to dis-enroll from the plan.
Criminal Charges and Prison
The company settled criminal charges in 2009 by agreeing to pay $80 million, split between the state and federal government. It later settled a class-action suit by shareholders for $200 million and Hellein’s whistleblower suit for $137.5 million.
The accused executives were tried 2013 and were found guilty of some counts, acquitted on others.
In May 2014, Todd Farha, former CEO and president, drew a three-year prison sentence; former CFO Paul Behrens, two years; William Kale, vice president of the subsidiary where the money was hidden, one year and one day; and Peter Clay, vice president of medical operations, received probation.
Plummeting Denial Rates Cause “Bleeding”
Dr. Cianciolo and the other Relators claim their troubles started in 2012 when Tom Tran, the company’s then-CFO began to worry about the company “bleeding” money. The company had been reducing its denial rate over the course of the year for inpatient hospital stays from 14% to 2%, the industry average.
At a 2012 meeting, Tran allegedly said, “We are losing too much money and must increase our denial rates.”
The reduction of denial rates was attributed by the Relators to a 2010 decision by the company to change its accreditation from URAC (Utilization Review Accreditation Commission) to NCQA (National Committee on Quality Assurance).
Under NCQA, the company was required to make hospital admission decisions on medical necessity within 24 hours of getting clinical information. Under the prior system, the company didn’t have to make those decisions for up to 72 hours and didn’t have to consider diagnosis code sufficient clinical information.
In 2011, according to the suit, WellCare’s inpatient hospital denial rate was 11-14%. As the Relators began implementing the new NCQA in 2011-12, the denial rate began decreasing to around 2%. “This was because admissions that historically had been denied because the provider had supplied only the diagnosis code were now no longer being denied.”
Medical Necessity or Financial Goals
Implementing the new system caused “friction” within WellCare, claim the Relators.
In January 2012, Dr. Amy Tunidias, one of four medical directors under Dr. Cianciolo, allegedly told Lopez, one of the fired employees, that the changes were going to “ruin WellCare financially.” Tunidias added that the medical directors, “are in charge of financial goals related to utilization management and the changes will impact bonuses.”
Lopez said she replied that “UM (utilization management) decisions are based on medical appropriateness, not driven by financial goals.”
In September 2012, CFO Tom Tran, and VP Finance Don Zang, instructed VP Finance Larry Smart to begin generating a daily denial rate report.
CFO: “I don’t give a damn about national statistics”
In a meeting a couple of months later, Dr. Cianciolo claims he presented the results of a literature search that supported an expected inpatient denial rate of 2% to Tran and Zang. Tran allegedly replied “I don’t give a damn about national statistics; we are losing too much money and must increase our denial rates to rates seen in 2011.”
On October 1, 2012, Medical Director Dr. Milo Jaminez allegedly confronted Non-Clinical Supervisor Amie Conception to ask “how can we get those three amigos?” referring to Relators Cianciolo, Lopez and Ross. Dr. Jaminez wanted to know if there were any memos or emails that would implicate “them, ” says the suit.
On November 5, 2012, Dr. Cianciolo, Lopez, Brower and Kristi King say they met with Larry Smart, Diane Norcross (senior manager of compliance), Dr. Tracy Ferguson (medical director), Michelle Mock (VP non-clinical health services), and Faustino Mayo (senior director of appeals and grievances.) Smart allegedly said “We have to do something, we are bleeding everywhere.”
“Dr. No”
By mid-November, Dr. Cianciolo said Tran told him directly that he, Cianciolo, needed to be “Dr. No” and increase inpatient denial rates in the second half of the month. Dr. Cianciolo claims he replied that “Tran had the wrong guy if that was what he expected.” Cianciolo explained that he would do what was medically and clinically appropriate. Walt Cooper, the company’s chief administrative officer and Dan Paquin, the president of national sales were also allegedly at the meeting.
After the meeting, Tran, Cooper and CEO Alec Cunningham allegedly assigned Al Smith, medical director for pharmacy, to review the inpatient authorization process. On November 27, 2012, Ross says Smith asked her “how the denial rate got so low.” Ross said she told Smith that the utilization management team does not “manage by denial rate.”
A couple of weeks earlier, November 12, 2012, Dr. Cianciolo said he met with Cooper to review the inpatient authorization process and discuss how denial rates could be increased. Cooper requested daily denial rate reports. Dr. Cianciolo did this for both Cooper and Paquin. They both allegedly asked him how denial rates can be increased faster. They also said Cunningham, the company’s CEO, had asked how to deal with the denial rate problem.
Denial Rates Increase
Then just before Thanksgiving, the Relators say Larry Smart stated that the good news with increasing the inpatient denial rate was that although a percentages of these denials would be overturned on appeal, a percentage of them also would not because providers would determine that it was not worth appealing the denial of care.
He allegedly said at a Florida and Georgia cost of care meeting on November 30, 2012, that denial rates are increasing “and this is what we want.” Smart noted that some hospitals would not appeal such denials.
The Accusations
The whistleblowers accuse the company of presenting false and fraudulent claims to the feds as well as in Florida, Georgia, Illinois, Ohio, Kentucky, Missouri and New York.
First, they claim the company said it was “in compliance with a ‘material condition of payment’, i.e. providing services based on the contractually required and statutorily required medical necessity standard, when in fact the company knew that was not the case.”
Second, they accuse the company of concealing and avoiding obligations in violation of the law. The company allegedly improperly avoided obligations to pay overpayments back to the Medicare program and various state Medicaid programs.
Third, they accuse the company of “Retaliatory Discharge” in violation of federal law. They say their allegations are sufficient to support a “reasonable” conclusion that the company could have feared being reported to the government for fraud or sued in a False Claims Act quit am action by the whistleblowers.
They seek triple the damages sustained by the government.
WellCare Statement
A WellCare spokeswoman told a local newspaper that the company is reviewing the case. “WellCare takes all allegations of misconduct very seriously and investigates every allegation. WellCare is deeply committed to regulatory compliance and ethical behavior. We have strong systems and processes in place to support a culture of integrity, personal accountability and transparency.”
Where’s the Beef?
Our observation of this lawsuit is that while the whistleblowers allege a systematic denial of legitimate claims, they do not allege any specific denial of a service to a particular provider for a particular beneficiary. Our experience is that judges like to see specific instances of false claims.
We reached out to the Mr. Darken for an answer to that observation, but he did not reply to our email request.
One final note. This is not the first time Dr. Cianciolo has sued a former employer. He sued his previous employer, AvMed Health Plans in 2011 under the Employee Retirement Income Security Act. That case was dismissed in May 2012 after a settlement was reached.
Will WellCare Settle Again?
Given WellCare’s tainted past, it would not seem out of the question that another settlement will be reached. The company has new senior executives after former CEO Cunningham was abruptly fired in November 2013. Former CFO Tran announced his resignation shortly after Cunningham was booted.
The reported reason cited for Cunningham’s ouster by Dave Gallitano, who had been chairman of the board, was that the board felt WellCare needed a CEO “with a demonstrated track record of leading an organization of this size” and who is “more strategic.”
