WellCare Health Plans Inc. (WCG), a day after announcing the planned exit from a key business, agreed to pay $80 million to settle Medicaid-fraud probes, partly resolving a significant issue that had been weighing over the managed-care company.

The settlement and WellCare's decision to drop its Medicare Advantage private-fee-for-service contracts in 2010 are not related but signal that the Tampa, Fla., health insurer, burdened by the fraud allegations and Medicare sanctions, is moving to clear its slate and refocus.

WellCare shares closed up 18.25% to $18.47, although they remain far below the high of $128.42 reached the day before the government officials raided company headquarters in October 2007.

Under a three-year deferred prosecution agreement in the Medicaid fraud case, WellCare will pay $80 million, nearly half of which it paid last year, and retain an independent monitor selected by the U.S. attorney's office.

The U.S. attorney's office filed a one-count criminal information charging the company with conspiracy to commit health-care fraud against the Florida Medicaid and Health Kids programs under certain contracts, and agreed to recommend to the court that prosecution be deferred, with charges dismissed if WellCare complies with the agreement.

The settlement doesn't completely put the matter behind WellCare, which said it is engaged in resolution discussions with the civil division of the U.S. Justice Department, the Securities and Exchange Commission and the Department of Health and Human Services' inspector general's office.

"The resolution of this investigation removes a significant overhang for the company and could allow the company to reduce its ongoing legal expenses. ... However, other issues remain in additional investigations," Wachovia Capital Markets analyst Matt Perry said in a note.

WellCare's separate plan to drop its Medicare Advantage private fee-for-service contracts in 2010 will affect some 110,000 individuals, or more than 40% of members of the company's Medicare Advantage health plans, slice revenue and likely pressure earnings next year.

In doing so it will exit a business that generates some $1 billion of the company's $6.5 billion in revenue.

WellCare's Medicare Advantage PFFS program operates at a thin profit margin, analysts said, cropping their per-share earnings estimates for 2010. At least one firm boosted its 2011 view, however.

While the company called the move unrelated to previously disclosed probes, WellCare said through a spokeswoman that focusing on its other Medicare products, including its Medicare Advantage HMO plans, will help the company address issues raised earlier this year in a government sanction over Medicare marketing activities.

Medicare, the government health program for senior citizens, had ordered WellCare to suspend new enrollment in its private Medicare health plans, citing noncompliance and deficiencies in prescription-drug contracts and the alleged misleading of Medicare Advantage health plan beneficiaries.

Credit Suisse analyst Gregory Nersessian called the PFFS exit a negative surprise. "It appears that (WellCare) is in retrenchment mode with regard to its Medicare business" and the decision could be an early indication the company will bid very conservatively for other Medicare business next year, he said in a note.

Medicare Advantage PFFS plans, which often have few frills and allow beneficiaries to use most any doctor or hospital participating in the traditional Medicare program, are largely going by the wayside in 2011 anyway under a Medicare law passed last year. The law requires companies to form provider networks for the plans in most areas.

"Investing to build the provider networks which will be required for 2011 would be unwise given the geographic dispersion of our membership and the uncertainty of Medicare rates in rural markets," said WellCare spokeswoman Amy Knapp on Tuesday.

Another managed-care company, Coventry Health Care Inc. (CVH), indicated last week it likely will make a similar move next year regarding its Medicare Advantage PFFS plans, citing Medicare plans to cut reimbursement rates in 2010 and rising medical costs. Health Net Inc. (HNT) said Tuesday it plans to do the same.

Several hundred thousand beneficiaries in the PFFS plans being dropped next year can use other types of Medicare Advantage plans with their insurers or competitors, or can use the government's traditional Medicare program. Companies like Humana Inc. (HUM), Universal American Corp. (UAM) and UnitedHealth Group Inc. (UNH) may pick up new business.

Those moves may presage what Stifel Nicolaus analyst Thomas Carroll predicted may be "another land grab coming in Medicare Advantage" as most of the PFFS plans disappear in 2011 and beneficiaries switch to traditional Medicare or other types of private plans.

-By Dinah Wisenberg Brin, Dow Jones Newswires; 215-656-8285; dinah.brin@dowjones.com