Judge Orders Dr. Richard Malouf to Pay Texas Back $12 Million for Medicaid Fraud

The Attorney General of Texas Ken Paxton sent out a press release Thursday that a Travis County judge had issued a summary judgment ordering Dr. Richard Malouf of Dallas to pay Texas back some $12 million for Medicaid fraud.  The court order is available below.


NOTE: THERE ARE MORE RECENT STORIES
May 19 – Incorrectly Billed $68 Fee Led to $12 Million Malouf Judgment, Not Medically Unnecessary Treatment
August 12 – Final Judgment in Malouf Case – $16.5 million

Allegations started back in 2011 about Medicaid orthodontia

If y’all remember back, Dr. Malouf was accused of millions of dollars of Medicaid orthodontic fraud back in 2011, along with lots of other dentists in the great Medicaid/Xerox orthodontia debacle about which TDMR has reported on extensively. Malouf received the most media attention as the allegations caught him building one of the largest, most expensive residences in Dallas after he had sold his practice to a private equity firm. He gained further notoriety for suing the media and his neighbor, the mom of actors Luke and Owen Wilson, after she allowed media on her property to film Malouf’s mansion in progress. You know, the one with the world-class waterpark which he sold last December for an undisclosed amount.

Back in the day, Malouf underwent criminal and civil investigations like other dentists who had practices with high Medicaid orthodontic billings.  No dentist we are aware of has ever been criminally charged over the orthodontic matter including Malouf.  But little was heard about these cases after 2015 until today.

Judgment not based on Medicaid orthodontic allegations

Now you might think that this judgment had to do with false HLD scoring and matters having to do with Medicaid orthodontia.

Well, that’s not the case. Malouf had “fraudulently billed Medicaid for services that were actually provided by a different doctor” some 1,842 times, even while he was on vacation, according to the press release sent out by AG Paxton.

The actual amount of the fraud was $538,228.45 per the judgment.  With TMFPA penalties, Texas winds up with a tidy sum of around $12 million that they will have to share with the whistleblowers Dr. Christine Ellis et al and her lawyers.  They get 14-25%.

$68 fee to blame

Here is the information TDMR obtained that came from court documents:

  • The OAG agreed that orthodontic services provided to Texas Medicaid patients by All Smiles were all done by properly licensed orthodontists.
  • The orthodontic services were pre-approved by the state’s agent, TMHP/Xerox/Conduent.
  • All Smiles billers sometimes incorrectly submitted requests for payment for procedures under Dr. Malouf’s provider number.
  • Apparently, these billings were for a $68 fee that All Smiles collected from TMHP/Xerox/Conduent when its dentists periodically adjusted braces per TMHP requirements.
  • It appears from the judge’s order that the fine levied against Dr. Malouf was $5000 per violation (1,842) plus three times the amount that was billed and collected—or a whopping 74 times the $68 adjustment fee
  • The OAG was seeking $20.1 million from Dr. Malouf for 3,711 acts. The judge ruled he was liable for 1,842.
  • Lawyers for Dr. Malouf had argued that the over $10 million civil penalties awarded against him personally violated the Constitution’s 8th Amendment prohibition against excessive fines.
  • The OAG has sought civil penalties from Dr. Malouf amounting to more than 34 times the total amount of payments the state made to All Smiles (not Dr. Malouf).

No need to prove treatment fraud

Ouch. This billing “gotcha” eliminates the need of the state to prove medically unnecessary fraudulent orthodontic services were delivered, which has been the chief accusation against Dr. Malouf for years and destroyed his reputation (the reason he attempted to sue media and others).

No issues of material fact, no need for a trial

This summary judgment means that the OAG convinced the judge that no genuine issues of material fact existed and that it was entitled to judgment as a matter of law. So there was no need for a trial. Only took nine years.

D-1-GV-12-000863 Order on State's Motion for Partial Summary Judgment

 

6 Responses

  • Of all the outlets to report the news and you guys try to slant the story. You make it sound as though Malouf
    allegedly billed under some random Dr. The allegations were that claims were submitted under the wrong Dr in a group all of which were fully medicaid credentialed. There were no double billing, upcharging or billing for something that wasnt done. All of the services were 100% preapproved by the state. The services were rendered by a credentialed dentist in our own group. So please dont make it sound as though Malouf was on vacation and billed for a bunch of services to some random dr. The fact is the state couldnt find or prove any real fraud. They utilized some technical issue to plead and the judge totally got it wrong. Furthermore, Malouf was not under “criminal investigation”. The claims were all civil. This site was supposed to be to protect dentists but it seems the dividend is better when sensationalizing a story even if it doesnt totally reflect the truth much like WFAA and the like. Perhaps you got a couple views. I say shame on you!

    • The Attorney General of Texas wrote in the press release referenced in our story: “Attorney General Ken Paxton today announced that the Hon. Catherine Mauzy of the 126th Judicial District Court of Travis County has ruled Dr. Richard Malouf of ASDC Holdings, LLC responsible for 1,842 unlawful acts under the Texas Medicaid Fraud Prevention Act. Dr. Malouf operated orthodontics clinics for many years in the Dallas area and billed tens of millions of dollars to Texas Medicaid. The Court found that Malouf fraudulently billed Medicaid for services that were actually provided by a different doctor, including over 100 billings he filed while vacationing out of the country.” The allegation of billing while on vacation comes from the AG not us and we have clarified this in the story. In relation to “being under criminal investigation,” the article does not say the judgment or case at hand was criminal in nature or came from a criminal investigation. The mention was past tense. All large billers of Medicaid orthodontia arising from the 2011 debacle were investigated by MFCU. TDMR has made it clear that the mere fact that no dentist has ever been criminally charged weighs heavily against the state’s allegations of massive, orchestrated Medicaid orthodontic fraud by dentists including Dr. Malouf. The article has been updated to make this crystal clear. Lastly, to further clarify, TDMR does not “protect” dentists. TDMR advocates for due process and that everyone, including dentists accused of Medicaid fraud, are innocent until proven guilty. Practices such as Antoine Dental Centers, Harlingen Family Dentistry and others have been vindicated on allegations of Medicaid fraud by SOAH court decisions on their Medicaid payment holds. TDMR did a further story to clarify the court judgment in question. Nothing would make us happier to see this judgment overturned and Dr. Malouf vindicated. Such would be great for the dental profession in Texas. Until then, we would look at publishing an article submitted to us by Dr. Malouf or his attorneys to clarify their position in this case.

  • Every dentist knows that the orthodontic “gold rush” occurred because savvy providers and their practice management advisors tested the system. Elimination of study models and other diagnostic tools for approving orthodontic cases, and the practice of rubber stamping orthodontic claims was like leaving the bank vault door open. More and more claims made it through the system and the word spread like wildfire.
    “Add ortho to your general practice and replace the SSC & Pulpotomy grind with easy stuff”.
    These guys who abused the system are as guilty as sin, and everyone with any sense knows it.

    • Sorry to see you write this. Five administrative court judges hearing the evidence in the only cases to make it to an administrative court did not find that scenario to be the case. Even this judgment has nothing to do with medical necessity which was TMHP’s job to assess and the state’s job to set. HHSC and OIG executives knew in 2008 about the TMHP/Xerox prior approval process and let it roll. State dental executives like Dr. Linda Altenhoff knew but withheld the information when they were directly asked by stakeholder dentists about the approval process. We’ve written about it. The truth is dentists did exactly what the state wanted them to do. It was a bait and switch. That tired analogy of leaving the vault open just isn’t accurate. You shouldn’t whitewash the state as blameless when they had full knowledge of the situation and control over it.

  • Yes, there’s plenty of blame to go around. Jerry Felkner and Linda Altenhoff could have been whistleblowers but instead chose to look the other way to hang onto their state jobs. Felkner’s boss also knew and got promoted instead of fired.
    But simply because the dentist entrepreneurs didn’t see a speed limit sign and decided to drive 120mph, doesn’t mean they were doing what the State wanted them to do. The State just didn’t have the right cop there to catch the speeding!
    “Pay and chase” is what all the agencies do to save money on the front end, and it’s a poor way to control spending.

  • Dr. Bolin, you dismiss too casually the role of those in charge — the company that APPROVED EVERYTHING, THAT HAD HIGH SCHOOL GRADUATES APPROVING THE ORTHODONTIC PRIOR AUTHORIZATION REQUESTS and THE HHSC STAFF WHO KNEW ALL ABOUT IT FOR YEARS AND SAID AND DID NOTHING. Who else could have been responsible?

    You suggest dental Medicaid providers knew more than state officials who ran the program. They didn’t.

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