I was checking in on WellCare Health Plans'
It turns out that the New York Stock Exchange had halted trading of the security on Wednesday. On Thursday, when trading resumed, the stock closed down 65% from Tuesday's close.
This all stemmed from a rude awakening the company got on Wednesday, when about 200 agents from the FBI, the Department of Health and Human Services, and the Florida Attorney General's Medicare fraud division stormed the company's Tampa, Fla., headquarters.
Details on why the company was targeted by the raid have been sparse. But the company has said it will cooperate with the investigation -- as if it has any choice -- and has also stated that its services to its members will not be interrupted, nor will its schedule to release its third-quarter earnings report.
This hasn't been the only recent drama in the managed-care industry. About a year ago, shares of Amerigroup
It's still too early to tell what the ultimate fallout will be at WellCare, but I would think there will be a negative effect on future business, even if the company is found to have engaged in no foul play. Since Wednesday's raid, Connecticut state Rep. Christopher Donovan has already asked a social services agency to review the state's contract with WellCare.
Although its Q3 earnings could impress, I would view the purchase of shares as a gamble until more information is available. There are safer plays in this industry, such as Molina Health Care