Malouf Appeal Deadends But AG Attorney Fees Award Considered Excessive By Appeals Court

This case has finally come to an end. The Court of Appeals, Eighty District in El Paso, on October 14 confirmed the May 2020 lower court summary judgment award obtained by the state against Dr. Richard Malouf for violations of the Texas Medicaid Fraud Prevention Act.

Misused TPI

The summary judgment was based solely on Dr. Malouf's TPI (Texas Provider Identifier) being used to bill Medicaid for services performed by other dentists in his All Smiles chain some 1,842 times. The actual billed amount to Medicaid for these services amounted to $538,228.45.

The Appeals Court did not buy Dr. Malouf's appeal argument that he did not know his TPI was being used in such a manner because he had admitted he knew his TPI was used by his billing department sometimes as a "workaround" for billing purposes and he should have known if he didn't because part of his agreement to participate in Medicaid was to ensure he followed the rules.

TMPFA penalty award 30x treatment cost

The onerous penalty provisions of the Texas Medicaid Prevention Act jacked this relatively meager amount to an astronomical $16.5 million.

This consisted of an award to the state of:

$538,227.45 for Medicaid payments resulting from unlawful acts, plus 5% per annum interest accruing from January 31, 2010, through the date of the State’s recovery;

$9,210,000.00 for “per violation” statutory minimum civil penalties;

$1,076,456.90 for two times the award of Medicaid payments resulting from unlawful acts;

$4,345,647.00 for state attorney’s fees

$265,200.32 for costs and expenses.

Plus an award of $1,115,794.00 for relator attorney fees and expenses.

Appeal on constitutionally excessive penalty not considered

Dr. Malouf appealed that the amount of the penalties awarded under the TMFPA was unconstitutionally excessive, an incredibly important legal argument for all Texas Medicaid providers.

Sadly, the Court would not entertain this argument because it had been brought too late into the proceedings at the trial level and was seen to unfairly prejudice the nature of the case.

The Appeal Court ruled, "Here, the constitutionality of civil penalties under the TMFPA would have injected a new substantive matter into the case. The State objected to the amendment. Because Appellant [Malouf] proposed amendment after the pleading deadlines expired, after discovery deadlines expired, after his current lawyers had not sought to raise it when they moved to amend the agreed scheduling order’s expert-witness deadlines, after the State filed its motion for partial summary judgment, and after nearly eight years of litigation, the trial court could have found Appellant’s proposed late amendment was calculated to surprise or reshape the cause of action, prejudicing the State and
unnecessarily delaying trial. As such, the State’s objection alone was enough to show prejudice or surprise and provide grounds for denying the proposed amendment. Accordingly, we hold the trial court acted within its discretion in denying Appellant leave to amend his pleadings."

Ouch. Sayonara.

It is very much too bad this argument didn't see the light of day for all Medicaid providers as these excessive TMFPA penalties need judicial review and oversight.

OAG attorney fees excessive

The only appeal argument entertained by the Court was that the OAG's calculation of attorney fees for themselves was excessive. The OAG calculated the $4,345,647.00 in owed state attorney fees based on private sector rates. Needless to say, this does not represent the actual cost of the time for an attorney in the Office of the Attorney General which is what this award should reflect, according to the court. The Appeals Court sent this back to the trial court for review and determination.

AG Paxton lauds decision

Attorney General Ken Paxton failed to mention this in his press release yesterday about the Appeal Court's decision to uphold the majority of the award against Dr. Malouf.

"Attorney General Ken Paxton has announced that the El Paso-based Texas Eighth Court of Appeals affirmed a lower court's judgment against Dr. Richard Malouf, former owner of All Smiles Dental Center, for violations of the Texas Medicaid Fraud Prevention Act (TMFPA). The trial court held Dr. Malouf responsible for committing 1,842 unlawful acts under the TMFPA, resulting in more than $11 million in civil remedies. The opinion makes clear that Medicaid providers who falsely represent that they treated Medicaid patients, and who ask Medicaid to pay for those un-performed services, will face stiff monetary penalties.

"The integrity of the Medicaid program must be protected, and I applaud my litigation and appellate teams for defending their hard-earned judgment to recover taxpayer money," said Attorney General Paxton. "Identifying and preventing Medicaid fraud continues to be a top priority for my office. I remain committed to ensuring that taxpayer dollars are preserved for those who most need them."

Credentialing might have played a part

This release deceptively claims that the services were "un-performed." Maybe they were not performed by Malouf but were definitely done by another doctor but billed to Malouf's TPI.  It is possible to surmise this was done as a "workaround" which Malouf admitted to for some of these billings for the incredible red tape in credentialing staff dentists for various dental offices in his chain so service could be supplied to Medicaid clients and payment received for those services.

Incredibly byzantine credentialling issues still exist today which are harming patient care and Medicaid dental practices today.  The inability to get replacement or temporary dentists quickly credentialed because of emergencies or staff shortages for multiple practice offices is hurting patients and practices.

It's over - one case after a decade

So a decade of trial and tribulation from the Great Texas Medicaid Orthodontic Debacle closes with a whimper, not a bang.

Dr. Richard Malouf turns out to be the only dentist in the state to our knowledge that has been found culpable by a court for civil Medicaid fraud despite the claims of various state actors back in the day that such and even criminal fraud was rampant across the state.

It needs to be stated clearly that no evidence has ever been presented to our knowledge that Dr. Malouf or All Smiles billed for services not provided or provided substandard or unnecessary orthodontic treatment.

It was paper fraud. The wrong piece of paper was submitted.

It needs to be also stated clearly that not a single dentist to our knowledge has ever even been charged much less tried for criminal fraud arising from the Great Texas Medicaid Orthodontic Debacle.

Legacy unstained

Medicaid dentists should be proud of their contribution to the health of Medicaid children across this state. That legacy should not be stained by one case or unfounded allegations made a decade ago.

appeals court decision Malouf

One Response

  • Utilization of uncredentialed dentist providers not only violates Texas Medicaid rules, but federal rules. Medicaid, as we all know, is a matching state & federal program. If the State of Texas declined to take action against Dr Malouf, the US government had every right to claw-back moneys from the State of Texas. This is all not-with-standing the challenges associated w/ getting providers credentialed.

    Michael W Davis, DDS
    Santa Fe, NM

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