Dentists Suing Conduent for Orthodontic Prior Authorization Debacle Hits Third Court of Appeals

For the last decade flying under the radar, a couple of dentists and their attorneys have quietly and doggedly pursued the private contractor that approved their Medicaid orthodontic prior authorizations from 2004 to 2012.  These dentists are seeking damages for the contractor’s flawed prior authorization process — high school grads, former janitors, etc. adding up HLD scores and approving millions of dollars of services for the State that the State then alleged were not medically necessary — that caused irreparable financial and reputational harm to their practice.

Suing Conduent for orthodontic prior authorizations

Yes, we’re talking about ACS Healthcare, then Xerox and now Conduent, the company with which the state settled claims of Medicaid fraud in 2019 for $235.9 million and which the state again hired last year to oversee Medicaid.

For simplification, we’ll just say Conduent for the balance of this article.

One of those cases was originally filed in the 126th Judicial District Court of Travis County in 2014.  The plaintiffs are M&M Orthodontics PA, Dr. Scott Malone DDS, and Dr. Diana Malone DDS.

The Malones contend that they relied on Conduent’s prior authorizations in good faith, providing services and submitting claims for reimbursement under Medicaid and that Conduent failed to review the prior authorization requests properly. This failure, they argue, led the State to believe that the approval of orthodontic services may not have met the stringent criteria for medical necessity as defined by Medicaid. This led to actions by the State of Texas, including payment holds and allegations of fraud against providers, in which providers like the Malones were required to go back and explain their diagnoses and submissions to Conduent.  The need to prove that the dentists had acted properly inflicted significant financial and reputational damage to them.

Key issues

Their original petition (copy below) raised the following key issues:

Prior Authorization Process: Obtaining prior authorization from Conduent for orthodontic services under the Medicaid program was necessary. This process was meant to ensure that the services provided were medically necessary.

Allegations Against Conduent: The Malones allege that Conduent, contracted by the State of Texas, failed to adequately review prior authorization requests, leading to approvals without proper vetting for medical necessity. This failure is claimed to have resulted in the approval of orthodontic services that may not have met Medicaid’s standards for medical necessity, although the State could not be sure either way.

Impact on Plaintiffs: The Malones contend they relied on the prior authorization approvals provided by Conduent in providing orthodontic services and submitting for Medicaid reimbursement. Subsequent actions by the State of Texas, including significant time and effort gathering, reviewing, and justifying their submissions, as well as a payment hold and allegations of fraud against providers like them, are said to have caused them significant financial and reputational harm.

Claims Against Conduent: The lawsuit includes several legal claims against Conduent, including common law fraud (fraudulent misrepresentation and fraudulent inducement), breach of contract, promissory estoppel, negligent hiring/supervision, negligence, negligent misrepresentation, gross negligence/misapplication of fiduciary property, and conversion. The Malones asserted that the State of Texas had waived sovereign immunity for their claims due to its actions.

Damages and Relief Sought: The Malones seek damages, including but not limited to, actual damages for loss of funds, reputation, business, earnings, inconvenience, and loss of enjoyment of life, as well as exemplary damages, interest, court costs, and attorney fees.

Initially, the lawsuit included the State of Texas, but those claims were dismissed as the courts agreed with State arguments that the State has sovereign immunity and can’t be sued.

Third Court of Appeals

However, the case against Conduent has continued and last month went before the Third Court of Appeals for oral arguments.

Conduent is seeking to dismiss the case because the company contends that, as contractors acting on behalf of the State, they indeed fall under the umbrella of sovereign immunity offered to the State. This stance posits that their actions, executed in fulfillment of the Medicaid policy as directed by the State, should render them immune from lawsuits under the principles of sovereign immunity, especially considering their role was essentially as an arm of the State itself. Their argument hinges on the premise that their activities, allegedly leading to the legal dispute, were undertaken as part of their contractual obligations to the State, thereby entitling them to the same protections as the State against civil suits.

The Malones argue that Conduent, as an independent contractor, was responsible for its actions and decisions that led to the legal dispute. They emphasize that Conduent’s process for Medicaid prior authorization, which is central to the case, was not only independent of the State’s control but also flawed and unlawful, resulting in harm to them.

Decision down the road

The court’s decision is not expected for some weeks. Wouldn’t it be nice if the Malones came out on top after all these years?



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