UPDATE 1-Healthways to settle lawsuit with former employee

* Agrees to settle 15-year old lawsuit

* Sees charge of $0.73/shr for Q1, 2009

* Says settlement not an admission of wrongdoing

March 13 (Reuters) - Healthcare management provider Healthways Inc (HWAY.O) agreed to a $28 million settlement of a lawsuit related to its former Diabetes Treatment Center of America business and said it would take a related charge in the first quarter.

The settlement, which Healthways said was not an admission of wrongdoing, is yet to be approved by the Department of Justice.

As part the proposed settlement, Healthways has incurred a first-quarter charge of about $40 million, which is expected to hurt quarterly earnings by 73 cents a share.

The charge includes a $28 million payment to the U.S. government and an estimated $12 million for other costs related to the settlement.

Healthways, which had warned of higher legal expenses for the year, said its forecast on Feb. 5 did not include charges related to either the lawsuit going to trial or any potential settlement. [ID:nBNG405827]

The qui tam lawsuit against Healthways was filed in 1994 by a former employee on behalf of the U.S. government.

Shares of the Franklin, Tennessee-based company closed at $7.43 Thursday on Nasdaq. (Reporting by Vidya L Nathan in Bangalore; Editing by Himani Sarkar)