WellCare spat simmers on …

May 12, 2010

We’ve been following the dramatic resignation of Regina Herzlinger, the Harvard health-care accounting and management guru, from the board of WellCare Health Plans (WCG), the Medicaid and Medicare managed-care company that has struggled with a variety of regulatory issues. Herzlinger headed the board’s audit committee, and in departing on April 23, fired off a stinging letter accusing fellow board members of conspiring against her and laying out concerns about Wellcare’s accounting and operational problems. (More here, and for Footnoted Pro subscribers, here.)

Herzlinger wasn’t happy with WellCare’s public response to her letter, and now she’s filed her formal response. It’s as sharply worded as the original, if not more so: By “operating under the cloud of a Monitorship as part of a continuing Deferred Prosecution Agreement while accounting and quality lapses continue to arise,” she argues, WellCare

“requires a heightened level of expertise and continuity. To remove the Chair of the Audit Committee who has not only accounting experience, but also extensive experience with health care generally and this firm specifically, was not in the best interests of shareholders.”

Perhaps more seriously, Herzlinger adds some detail to her complaint that other board members had earlier conspired to oust her (an allegation the company disputes). In her letter, she says the company doesn’t appear to have investigated the question at all. “[I]f it did, what were the answers?” she writes. As for the call in which the conspiracy was allegedly discussed, Herzlinger explains that she “could not provide the transcript because it was not mine to legally give”; however, she added, her “counsel informed the Company of where it could obtain the transcript and it appears that the Company never followed up.”

WellCare kept its own riposte to Herzlinger’s response pretty short and sweet:

“The Company believes that the information and description of the circumstances regarding Dr. Herzlinger’s resignation as set forth in the Initial Form 8-K is fully responsive to the Response Letter. The Board believes that the recruitment of new, independent, qualified directors is consistent with good corporate governance and that, from time to time, boards of directors should change their composition, particularly in the wake of challenges such as those that the Company has addressed in recent years.”

The back-and-forth seems to be leveling off, at least publicly. The question for WellCare shareholders is whether this is the end of the concerns Herzlinger raised, and whether the government — WellCare’s biggest customer — takes an interest as well.

Image source: eschipul via Flickr

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