The news that Smile Magic Dental clinics recently settled with the Texas Health and Human Services Commission Office of Inspector General over allegations of Medicaid fraud confirms what TDMR has been saying for a long time – that the purpose of the large volume of orthodontic and dental fraud allegations against Medicaid dentists has been to either force them into bankruptcy or extort large settlements without having to prove a single allegation.
Settles for $4.5 million to avoid bankruptcy
Smile Magic, with four clinics in Texas, will shell out $4.5 million without admitting any wrongdoing because it no longer could afford the litigation that has been ongoing for over two years and hasn’t yet seen the inside of a court room. The settlement made financial sense to the clinics because it is a “cost of doing business” that will be amortized over a long period of time, more than a decade, whereas the alternative would be almost immediate bankruptcy. Any hearing was still months down the road.
Smile Magic’s Dr. Chad Evans provided TDMR the following statement:
“I think TDMR, Houston Chronicle, Austin American Statesman, Texas Tribune, and The Texas Sunset Commission Investigation and Report (Sunset Commission Report sections 10 and 11) have posted enough for anyone to see there are problems in the current due process for Medicaid providers and I am hopeful that Texas will follow through on their recent Sunset committee’s suggestions. I think seeing legislators letting go of most of the leadership [former Inspector General Doug Wilson and his deputy Jack Stick] involved in these cases says something about the process needing fixing.
“Ultimately, this case had to be settled to end an exhaustive financial and time consuming process that sadly eclipsed two years without our Texas small business’ day in court. Now we are excited to just get back to serving patients throughout Texas.
“Personally, I want and completely plan to continue delivering our amazing patient care experience and would encourage people to check out our fun experience for families and kids at mysmilemagic.com.”
Reasons why OIG doesn’t want to go to court
In TDMR’s opinion, this settlement and such settlements are a shame. They are unsatisfactory because although no wrong-doing is admitted to, the public perception is that there must have been something there. This affects not only the practice in question but also those under the hammer of similar allegations.
That is why due process needs to be provided so providers can get their day in court and get cleared of such allegations without going bankrupt.
Should the public doubt unsubstantiated allegations of wrongdoing? There is plenty of reason. Look at the following facts:
- There are no criminal cases against dentists for Medicaid fraud of which we are aware. None. So the evidence of any fraud must be pretty thin if not non-existent.
- When dentists have gone before the State Office of Administrative Hearings on such allegations, they have been exonerated.
- SOAH judges severely criticized the state and their cases against the dentists. State expert witnesses were deemed not credible (see above links).
- The blisteringly critical report of the Sunset Advisory Commission on the activities of OIG and the resignation of its Inspector General at the request of the Governor.
- A criminal investigation is ongoing into OIG and the apparent criminal conduct of OIG actuary Brad Nelson in “cooking the books” on extrapolation against a dental Medicaid provider. The revelation of this conduct caused a $16 million overpayment demand against a dentist to be settled for $39,000. OIG and the Office of Attorney General have been reluctant to make public the names of any other providers that Nelson worked on.
- OIG vowed never to return payment hold monies inappropriately taken from Medicaid providers. They lost that case before Travis County and on appeal.
That’s a 100% losing streak before the courts and evidence of internal malfeasance. In fact, it looks more like a shakedown than ferreting out waste, fraud and abuse.
Is it any wonder that only two dental practices have ever gotten before SOAH and only on payment holds since 2011? No one has ever made it to an overpayment hearing.
Will this change?
State needs to reduce amount owed to feds for orthodontic Medicaid program
So why the heavy hand?
The prosecution is mindful that Texas is liable to pay back to the federal government 60% of the monies it identifies as Medicaid fraud.
Looking at the almost $800 million spent on the Texas Medicaid orthodontic program from 2007 to 2011, the Department of Health and Human Services Office of Inspector General has already stated that Texas is responsible for any non-medically necessary Medicaid orthodontic treatment approved by its former claims administrator Xerox. HHSC and HHSC-OIG knew in 2008 that Xerox was not following state regulations regarding orthodontic prior authorizations but let that sham continue until the press, WFAA, found out about it in 2011.
Dentists in good faith submitted orthodontic prior authorizations. In fact even if they felt someone did not qualify, they had to submit the application to Xerox. Basically, almost all such applications were approved by the state’s then-Medicaid claim administrator.
Dentists are some of the most dedicated and highly educated health care professionals in the country. Xerox hired high school graduates working from home to review their orthodontic applications and HHSC knew about it. But when the jig was up, state bureaucrats needed to point the blame at someone, not themselves or their contractor.
HHS-OIG is supposed to come out with a second report on medical necessity of the orthodontic program this spring. Then the fur will really fly.
“Punitive prosecution” must drive providers to settle or go bankrupt
So the apparent truth of the matter is that OIG,and now the Office of Attorney General which is going before Travis County District Court on some cases and was in the Antoine Dental case, don’t have real cases.
Therefore, the prosecution strategy to reduce the amount Texas owes back to the feds is simple – if you don’t have a case you can win in court, drag it out and make it expensive to force either a settlement or bankruptcy – punitive prosecution.
Jack Stick told the legislature in 2013 (bottom of page 8 transcript) that bankrupting providers was a way for the state to avoid paying monies back to the federal government.
So even today, after the Sunset Commission hearings last December that exposed the horrendous incompetence of OIG, its legal team (now includes the OAG) has been demanding of dentists under investigation already now for several years, hundreds of new cases to review plus lots of extra depositions to make their legal cases financially punishing.
This is punitive prosecution at work.
Just look at the way SB 1803, a bill that was supposed to guarantee due process rights for Medicaid providers, was twisted into demanding providers advance large dollar amounts that they couldn’t afford for court fees to even schedule a hearing.
Due process still a sham, more of a protection racket
Thus, the Smile Magic settlement. It is unfortunate that Dr. Evans and his Smile Magic Dental are now casualties of this strategy of punitive prosecution.
Dr. Evans has been a very active and vocal advocate for due process for Medicaid providers. He has testified numerous times before legislative committees about the over-reaching nature of allegations made by OIG and was a primary force behind SB 1803 and its passing. He plans to continue this activity.
It is troubling that this Smile Magic settlement will be looked upon by some as a vindication of the tactics of OIG.
Actually it is a vitriolic condemnation of those tactics and has made the enforcement arm of Texas Medicaid look like a bunch of Al Capone-type hoods.
Let’s call it what it really is. Up to now, it has been nothing more than a protection racket, making providers “pay up” by making it impossible for them to do otherwise. It is an unfortunate “cost of doing business” with Texas Medicaid.
We sincerely hope this will change at the bureaucratic level, not just at the executive level. Due process currently is a sham and every Medicaid provider is at risk.