State Settles $16 Million Medicaid Fraud Case for Less Than $40,0000

In a stunning reversal of their previous hard-line stance, State regulators have settled a high profile “fraud” case for less than a penny on the dollar.

Trueblood Dental Associates, an Austin dental practice with four locations and a high percentage of Medicaid patients, was originally charged with over $16 million dollars (Letter from OIG re Final Notice of Overpayment 7-31-2013) in Medicaid overpayments over a five-year period, from September 2007 to June 2012. In January 2013, Trueblood was placed on a 100% payment hold and, as a result, the practice was forced to quickly shut all its doors and fire all of its dentists and staff.

But in an agreement finalized last Thursday by Doug Wilson, Inspector General of HHSC-OIG, the State agreed to accept $39,211 out of the initial reimbursement claim of $16,209,289 (Settlement Agreement). The settlement expressly states that Trueblood admits no liability for fraud or overpayment.  Trueblood in turn releases the State from any liability for the State’s investigation and improper payment hold. Given that the State has withheld over $100,000 of Trueblood’s Medicaid monies, the settlement should result in an immediate return payment to the practice.

Trueblood was formerly the dental affiliate of Carousel Pediatrics, one of Austin’s few Medicaid providers; Carousel settled with the OIG earlier this year. Carousel’s case — and by extension, Trueblood’s — gained media attention in late 2012 as the practice gained the support of TMA and HMO allies in its fight against the agency’s recoupment effort. OIG insisted that its case was sound and its methods appropriate, but allies decried the State’s draconian actions. According to TMA’s general counsel, the case was “nuts, this is not fraud, this is a dispute over coding errors.”

Fraud, or Paperwork Issues?

A core point of contention, and confusion, has been the precise extent of OIG’s power to enforce payment holds base on “credible allegations of fraud” (“CAF”).

OIG claims their application of the regulatory tool is authorized by the Affordable Care Act, as well as State Law, but detractors counter that the State’s implementation goes far beyond the mandate of either the Federal Government or the State of Texas. Controversial new administrative rules from 2012 enabled OIG’s current practice of implementing CAF holds based, not on actual fraud (that is, criminal misrepresentation meant to deceive) but rather upon simple errors, or “program violations”. According to the TMA, the rules “cast every Medicaid billing error as a possible target for fraud-and-abuse prosecution.”

The rules themselves are unambiguous, stating “OIG may impose a payment hold against any person (who) commits a program violation” (any transgression of Medicaid rules, such as failing to sign a form, is a program violation). This is a drastic overreach by HHSC when compared to federal and state law, which only authorize payment holds based upon actual fraud. Perhaps for this reason, the agency has continued to hint that its enforcement actions are somehow justified by criminal acts on the part of providers.

When Trueblood was shutdown as a result of OIG’s stringent payment hold — based on allegations of “99% fraud” — HHSC spokesperson Stephanie Goodman implied the providers were criminals: “Continuing Medicaid payments to offices with highly suspect billing practices doesn’t help children” she said to the Austin-American Statesman.

No Meat on that Dog Bone

The OIG’s message of rampant “fraud” in dental Medicaid upset the State’s politicians in the 2013 session.

In an early 2013 hearing because of OIG’s allegations, Sen. Jane Nelson (R – Flower Mound) singled out Carousel, and in particular their dental practice (Trueblood). “The Office of Inspector General shared with us some really harmful things that he told us are happening to children in some of our dental clinics,” said Nelson. “I am going to be like a dog on a bone to make sure we don’t have any fraudulent activity on our whole dental and medical spectrum.”  Based on the allegations, Nelson had good justification for the remarks.  But now it appears there was no fraud on that dog bone and never was.  That will be upsetting too.

Unfortunately, the exchange set the tone for the entire session. Inspector General Wilson had already tripled the number of Medicaid investigators in 2011.  He obtained more funding in the 2013 legislative session towards further expansion of OIG’s war on “fraud”.

There is nothing wrong with having a strong agency to fight Medicaid fraud.  Texas must have this.  But the fruits of this expenditure should surely lead to finding some actual Medicaid fraud and, while doing so, not trample Medicaid providers’ due process rights in its processes, destroying practices and careers.

It’s still innocent until proven guilty even for Medicaid dentists and providers.

Patience Wearing Thin

More recent hearings before State Senators indicates that the Legislature’s patience may be wearing thin for the OIG’s practice of alleging fraud and closing businesses, but ultimately admitting that the provider did not commit fraud.

In an August 14, 2014, hearing before the Legislature, attorney Jason Ray stated, “The fact is, when a law enforcement agency like the OIG alleges that a Medicaid provider is a ‘fraudster’, then uses a payment hold as leverage to extract money and allows the alleged “fraudsters” to stay in the Medicaid system, the OIG’s actions begin to look less like law enforcement, and more like a shakedown.”

Mr. Ray represented Trueblood in the case and negotiated Trueblood’s settlement with the State.

No more Medicaid Doctors

It’s unclear what changed between the OIG’s revelations of “really harmful things” — so harmful that they merited a $16.2 million reimbursement claim — and their settlement for a mere $40,000.

It’s also unclear who’s benefited from the State’s action. Given that the case proceeded for over 18 months before a State administrative judge, the State certainly did not recover the costs of its investigation. Meanwhile, the disruption to Trueblood’s business was immediate and catastrophic — its owner shut the doors immediately.

And then there are the patients

The previously cited TMA piece stated that “(a)ccording to TMA’s 2012 survey, Texas physicians available to treat all new Medicaid patients plummeted from 42 percent in 2010 to 31 percent — an all-time low.” The State can now add another Medicaid provider to that pile — Trueblood Associates is out of Medicaid for good.

As part of the settlement, Trueblood withdrew from Medicaid as a provider.

Who can blame them but it is young Medicaid patients in need of care that lose out the most.

2 Responses

  • Trueblood was the dental wing of Carousel. They were nailed with a 3 million plus penalty last year for the fraud they committed Trueblood is bankrupt. That’s why they only got 40k, thats all that was left to get. I am curious why Rachel was banned from the medicaid program? I noticed you skipped over that part.

    • Thanks for the comment, Jim. The dental and medical sections of Carousel were separate and the settlement earlier did not relate to dental. That settlement was also not for “fraud” but for billing errors with a repayment period of 15 years. The original $16 million demand letter to Trueblood is one of the links in the article – it wasn’t to Carousel. The state was attempting to collect that amount up until a few weeks ago. You are correct that Trueblood withdrew from Medicaid and that is in the settlement agreement and the story will be updated to reflect that fact.

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