WellCare shares rise on hopes for limited probe
NEW YORK, Jan 3 (Reuters) - Shares of beleaguered WellCare Health Plans Inc (WCG.N) rose more than 10 percent on Thursday after an analyst projected that a government probe of the insurer would have limited ramifications.
Shares were up $4.70, or 11.2 percent, at $46.69 in mid-day trade on the New York Stock Exchange.
WellCare, which provides Medicare and Medicaid plans to about 2.3 million members, has seen its shares plunge some 60 percent from about $115 a share since a raid on its Tampa, Florida headquarters by federal and state agents in October.
The stock has been volatile in the past few months as investors have tried to gauge the potential fallout from the ensuing government probe. Some information about the investigation has emerged through search warrants that were made public and news reports, but the subject of the probe remains uncertain.
On Thursday, CIBC analyst Carl McDonald said information from subpoenas to the company and from a letter from WellCare to Connecticut state officials underscores his belief that "the investigation is targeted, and not indicative of widespread fraud."
McDonald said in a research note that it seems clear the investigation is focused on WellCare's Medicaid business in Florida, a behavioral health services arrangement in Florida, and a reinsurance subsidiary. Medicaid is the U.S. government health-insurance program for low-income Americans.
"Although the investigation will be drawn out, we think a settlement and fine is the most likely outcome," McDonald said. "If this is the case, WellCare's stock is worth far more than $42 per share," about where it closed on Wednesday.
(Reporting by Lewis Krauskopf)
((lewis.krauskopf@reuters.com; 646-223-6082;Reuters Messaging: Lewis.Krauskopf.reuters.com@reuters.net; editing by Gunna Dickson)) Keywords: WELLCARE SHARES/
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