Texans discovered nearly two years ago that the state was spending more on orthodontic claims in its Medicaid program than the other 49 states combined, but recovery of millions in purportedly misspent Medicaid money has moved slowly.
After a couple judicial setbacks, the Health and Human Services Commission’s Office of Inspector General has stepped up its game by bringing in the big guns at the attorney general's office and private counsel. The OIG also hired a chief dental director, Dr. Linda Altenhoff, and is making sure that multiple dental experts review cases before they’re brought to a judge. The outcome of those efforts will be apparent when an administrative judge rules on a case testing the state's evidence for withholding payments to Antoine Dental Center in Houston, which was argued in May.
Meanwhile, the accused Medicaid providers have made it clear they aren’t returning any money — or allowing the state to sully their reputations — without a fight. They’ve formed a coalition, Texas Dentists for Medicaid Reform, and filed a lawsuit against the state challenging the OIG’s hardball tactics of withholding Medicaid payments for months on end during fraud investigations with limited evidence that fraud occurred.
After WFAA-TV in Dallas reported in December 2011 that Texas spent more on braces and Medicaid orthodontic claims between 2008 and 2010 than the other 49 states combined, the U.S. House Committee on Oversight and Government Reform released a report that found the Texas Medicaid and Healthcare Partnership, the company contracted by the state to process Medicaid claims, had only one dentist on staff and essentially rubber-stamped dental and orthodontia claims without reviewing whether those services were medically necessary.
Although the state OIG has ramped up Medicaid fraud investigations, identified more than $550 million in potential overpayments to orthodontic and dental providers, and withheld $10 million in payments while the state conducts fraud investigations, it has yet to hold either TMHP or the Medicaid providers that filed allegedly unnecessary claims legally accountable.
“The state has actions against both, and both [are] based on contract breach,” said Doug Wilson, the HHSC’s inspector general. The state argues that TMHP violated its contract by pre-authorizing medically unnecessary claims, and Medicaid providers violated their contracts by submitted inaccurate patient information for medically unnecessary claims. The OIG is assisting in an ongoing federal audit of TMHP, and continuing to withhold Medicaid payments to accused providers in order to coerce them into settling their alleged debt to the state.
So far, the only provider that has tested the state’s justification for withholding its payments — Harlingen Family Dentistry, a member of the coalition — has won two court battles.
While the state alleges the provider owes $7.8 million in overpayments for medically unnecessary procedures, an administrative judge ruled in August 2012 that the state did not have enough evidence of fraud to continue withholding 40 percent of HFD’s payments and instead should reduce the payment hold to 9 percent. When the state refused to reduce the payment hold, the provider took the case to Travis County district court. Last month, that court ordered the state to pay HFD $1.25 million. The state plans to appeal. HFD has requested a final hearing in administrative court to address the allegations against it, but no date has been set for that hearing.
Jim Moriarty, a private practice attorney representing the state in at least four Medicaid fraud cases, said the state did not rise to the level of professionalism necessary for the HFD hearing but since then has significantly changed course. “The bad guys have won the last of these cases they’re going to win,” he said.
Jason Ray, an attorney representing Harlingen Family Dentistry in the district court case, said the idea that a state agency “would haphazardly take a million dollar case to hearing is ridiculous.” He added that the state has "always treated this stuff seriously. The problem that they have is they just don’t have the evidence to prove their case.”
The dentists will go head to head with the OIG in court again in January to try to strike an agency rule that allows the state to withhold Medicaid payments if a provider violates Medicaid program rules, such as failing to retain certain documents or using the wrong codes for services in patient files, even if the state does not have evidence that intentional wrongdoing or fraud occurred.
The state is both authorized — and obligated — under federal law to withhold payments to Medicaid providers if there is a credible allegation of fraud, said Wilson, and often that is evidenced by consistent violations of program rules. If the state has a credible allegation of fraud and does not withhold payments, the federal government could seek restitution from the state.
“Across the nation, holding payments is one of the only tools a state has even to compel compliance,” said Wilson. “Short of that, there is nothing a state agency has that makes payments to providers to make them cooperate.”
Ultimately, both parties say the legal battles between the state and accused Medicaid providers could drag on for years. By that time, it’s likely the state could only recover a fraction of the identified overpayments, said Wilson, because many providers will be out of money or out of business.