The Texas Supreme Court ruled Friday that Xerox is responsible for the $1 billion in fraudulent Medicaid payments the company made while overseeing pre-authorizations for Texas Medicaid patients’ dental work.

In a 25-page decision, the state’s high court upheld a Texas Court of Appeals ruling that Xerox — and not the dentists — was responsible for mismanaging and mis-authorizing payments for Medicaid dental services.

The decision comes years after the state found that Texas Medicaid and Healthcare Partnership, a subsidiary of Xerox, allowed workers with limited expertise to approve dental claims for the state's Medicaid program, the joint federal-state health insurance program for the poor and disabled. The state, dental providers and Xerox have been battling over who is responsible for paying back the funds.

State attorneys went after providers for allegedly submitting false pre-authorization, seeking payments for services they never performed and misrepresenting the qualifications of those who provided orthodontic services. Xerox argued dentists under the program knowingly bamboozled them into making payments even though the procedures were not medically necessary.

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Dentists have contended that it was Xerox’s and the state’s fault for automatically approving their requests and payments for orthodontic work for children and not making them aware something was wrong. They said they were not responsible and that both the company and state officials were looking to make them scapegoats.

But the state went after Xerox too, filing an initial lawsuit against the company in May 2014 over the mispayments and then suing them again three months later for allegedly withholding client health records. 

“We’re pleased with today’s Texas Supreme Court ruling on the state of Texas’ Medicaid fraud case against Xerox,” said Marc Rylander, director of communications for Texas Attorney General Ken Paxton. “It affirms the Legislature’s intent to protect taxpayer dollars, deter unlawful acts and punish those who steal from Medicaid.” 

Xerox officials could not be immediately reached for comment.

The Texas Health and Human Services Commission had a five-year, $759 million contract with the Texas Medicaid and Healthcare Partnership.

From 2011 to 2013, the state paid the contractor $527 million to process Medicaid claims, despite concerns as early as 2008 that it was not properly reviewing dental claims. A state audit that year found that the contractor had one dentist who reviewed roughly 10 percent of orthodontic claims. Employees without dental licenses reviewed the remaining claims, which the audit suggested was problematic. The contractor said in the 2008 audit that its contract did not require routine orthodontic claims to be reviewed by a licensed dental professional.

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A 2014 federal audit found that between 2003 and 2010, Texas Medicaid payments for orthodontic services grew by more than 3,000 percent — from $6.5 million to $220.5 million — while program enrollment only grew 33 percent. By 2012, federal and state auditors found that the contractor’s actions had opened the door to a “massive Medicaid fraud scheme” that cost taxpayers hundreds of millions of dollars.

Texas health officials reduced spending on Medicaid orthodontic services and pursued legal action against health care providers who billed for the services. But a Texas Tribune investigation found that while health officials repeatedly raised concerns with the Texas Medicaid and Healthcare Partnership, they had not severed its multi-year contract. The state eventually finalized a contract with Accenture, a different subcontractor under Xerox, to take over processing the Medicaid claims.

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