Seeking to prove Medicaid fraud, state regulators lose again

State Medicaid regulators pursuing orthodontists who they claim bilked Texas out of tens of millions of dollars suffered another decisive setback Thursday, when an appeals court ruled investigators hadn’t proven any fraud had occurred in one of the state’s largest cases. Unless the state appeals the decision to the Texas Supreme Court, it means Texas must return millions of dollars in payments it has withheld from the Houston-based Antoine Dental Center.

The loss is the latest in a string of legal struggles in which judges at three different levels have determined the Health and Human Services Commission failed to prove practitioners intentionally billed for orthodontic services not covered by Medicaid. Despite claims five years ago that it had identified widespread fraud, the commission’s Office of Inspector General has yet to win a contested court case against an accused orthodontist.

Other cases have been settled for pennies on the dollar. In one instance, state regulators lost so decisively a judge ordered them to pay an accused dentist’s $400,000 in legal fees.

Fallout from the agency’s weak performance has spread beyond the courtroom. In late 2014, the Sunset Advisory Commission issued a scathing audit that concluded investigators’ failings in handling fraud cases had harmed providers and taxpayers. Inspector General Doug Wilson resigned two months later.

His boss, Commissioner Kyle Janek, also under fire for a contracting scandal, resigned last summer — the same day a federal Department of Health and Human Services audit concluded that Texas would have to reimburse the federal government for improper Medicaid orthodontic services, adding to the cost of the state’s struggles.

In Thursday’s decision, the 6th Court of Appeals affirmed a state court ruling last August that Texas prosecutors hadn’t made their case against Antoine. “I certainly hope this is the end of the road,” the practice’s Austin attorney, Jason Ray, said. “This has gone on way too long.”

Health and Human Services Commission spokesman Bryan Black said the agency was reviewing the latest decision and “will consult with the Office of Inspector General on next steps.” He added that the cases that have been litigated so far have been limited to whether the state can continue to withhold Medicaid payments from orthodontists suspected of fraud. It will ultimately be up to a Travis County jury to decide whether Antoine Dental Center broke the law, he said.

The case began in 2013, when the inspector general claimed it had credible evidence Antoine had defrauded the government, primarily by miscategorizing a particular tooth-repair procedure as medically essential. The agency initiated a so-called payment hold, eventually freezing about $3 million in payments. Antoine — run by Dr. Behzad Nazari — said that, at worst, it had made unintentional administrative errors.

In November 2013, two state administrative judges concluded regulators hadn’t made their case and ordered the inspector general to release Antoine’s money. That was reversed four months later by an in-house Health and Human Services Commission judge who erased many of the previous judges’ findings, ruling that witnesses the two earlier judges had dismissed as not credible were in fact believable. Janek approved the newer decision and ordered Antoine’s money held.

But state District Judge Amy Meachum concluded Janek couldn’t simply change the original judges’ findings. Thursday’s appeals court decision upheld her decision.

State regulators, meanwhile, have been fighting to prove they weren’t at least partially to blame for any of the alleged fraud.

Dentists and orthodontists accused by the state of fraudulent billings have argued the procedures they performed were preapproved by a company Texas hired to process Medicaid dental claims, ACS State Healthcare, owned by Xerox Corp. An American-Statesman investigation revealed state regulators shared blame because they knew as early as 2008 that ACS was rubber-stamping treatment requests without meaningful medical review, and yet did nothing.

The state is trying to recoup the money from Xerox, which it simultaneously fired and sued in state court in May 2014. Xerox has responded that state regulators were aware of and approved the work it was doing.

Editor’s note: This story has been updated to include more comments from the spokesman for the Texas Health and Human Services Commission.

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