In 2011, state regulators announced that they were taking a giant stride toward fighting blatant insurance fraud. They said they had identified nearly four dozen dentists and orthodontists who had ripped off taxpayers by billing Medicaid tens of millions of dollars for children’s braces that they knew weren’t covered by the public insurance program.
More than two years and hundreds of thousands of dollars in legal costs later, however, the investigation has few, if any outright victories to show for its efforts. A few dentists have settled without admitting criminal guilt, and, in cases that have gone to a judge, the government’s lawyers have been soundly defeated.
Now, the state’s original narrative — that several dozen unscrupulous dentists bilked taxpayers for unnecessary tooth repair — is being turned upside down. State documents and a series of new court filings suggest another party bears at least partial responsibility for any financial losses: government regulators themselves.
In a flurry of lawsuits filed in Travis County this month, more than a half-dozen dentists have asserted that every Medicaid orthodontic procedure they performed first had to be evaluated and approved by a company hired and overseen by the Texas Health and Human Services Commission. Between 2008 and 2011, the agency paid a politically active company called Affiliated Computer Services, or ACS, $69 million to administer the state’s Medicaid dental plan, including orthodontic preauthorization.
“Every dollar that the state spent on each child was reviewed and approved by ACS well before those dentists put the first bracket on those kids,” said Jason Ray, an Austin attorney representing several of the accused dentists. “No one has ever questioned the accuracy of the X-rays, picture or molds. ACS, not the dentists, made the decision about whether braces were appropriate.”
With that official permission in hand, the dentists installed the approved braces and billed the government.
Yet almost from the very start of the program, the Health and Human Services Commission’s own investigators knew that ACS wasn’t properly vetting the prior authorization forms as required. A 2008 audit of the program concluded that more than 90 percent of the requests were being rubber-stamped by low-level administrative workers, not by medical professionals as contractually required.
The state agency responsible for the program didn’t ensure it was corrected, however, according to court testimony. As a result, over the course of the intervening years, the state human services commission directed tens of millions of dollars to dentists and orthodontists that the agency is now scrambling to recover.
Texas ordered to spend more
Now owned by Xerox Corp., ACS is one of the state’s largest contractors. It contributed $150,000 to Gov. Rick Perry between 2001 and 2011, according to an analysis by the nonprofit Texans for Public Justice. Its lobbyist over the past decade has been Mike Toomey, Perry’s influential former chief of staff, whom ACS has paid as much as $450,000 to advocate on its behalf, the nonprofit calculated.
According to court documents, the state’s Health and Human Services Commission tapped ACS to manage its Medicaid claims in 2004. The company hired several subcontractors to help; together, they are called the Texas Medicaid and Healthcare Partnership, or TMHP.
The state’s Medicaid dental business soon surged thanks to a class action ruling that in 2007 required Texas to spend dramatically more money on poor children’s teeth. Spending on dentistry rose quickly. Orthodontic Medicaid bills soared even faster, more than doubling between 2008 and 2011, according to WFAA, a Dallas television station that has reported extensively on the program.
The commission’s Office of Inspector General appeared to identify one reason early on. When it conducted an early audit of ACS/TMHP in August 2008, it claimed the company was violating crucial provisions of its contract.
Despite the fact that the contract called for ACS to provide “medically knowledgeable” analysts, for example, the audit discovered that the staff weren’t reviewing the technical medical information submitted by the dentists seeking the state’s approval to treat; and, even if they were, they “do not have the dental licenses necessary” to properly analyze the technical medical information. Only 10 percent of the requests were reviewed by a dentist.
Careful reviews by qualified medical staff were important because in many cases permission to approve braces involved a medical judgment. Yet the company also was being paid, in part, based on the number of applications it processed.
What happened next is in dispute. The Health and Human Services Commission said it instructed ACS to improve its preauthorization process. “HHSC began meeting with TMHP in April 2009 to address the audit and issues related to noncompliance with the contract,” a follow-up audit said.
The company responded that it never received any such feedback. “TMHP did not receive any direction from HHSC as a result of the audit or the findings to change this process,” the company wrote in response to the follow-up.
Three months ago, Jerry Felkner, the dentist who oversaw ACS’s preauthorization program during the time the dentists were alleged to have cheated, was grilled in a court deposition. “Do you know of any changes that were made in the operation of TMHP as a result of the (2008) audit?” he was asked.
“No, sir,” he replied.
“It wasn’t a process at all”
A spokesman for Xerox, which bought ACS in 2009, said the company fulfilled its contract with Texas. “Texas Medicaid and Healthcare Partnership performed its work in good faith and with transparency from the time the contract was awarded by HHSC until the present,” Kevin Lightfoot wrote in an email. “Xerox bears no responsibility for the fact that the state has called into question the validity of these dentists’ submissions.”
What is clear is that ACS didn’t change its prior authorization process — it continued to employ only a single dentist, even as requests soared between 2007 and 2011. And, despite the critical findings in 2008, state auditors appear not to have performed another meaningful evaluation for another four years.
When they did, they found identical conditions. “TMHP is not hiring medically knowledgeable personnel to process dental (prior authorization) requests as required by the contract,” the 2012 audit found. “As a result, more orthodontic (prior authorizations) were approved, which has resulted in the State of Texas spending excessive dollars for orthodontic procedures.”
“What the contract contemplated in terms of prior authorization approvals, ACS does not appear to have been doing at any time,” Jack Stick, deputy inspector general of the Health and Human Services Commission, testified in a recent court deposition. “It wasn’t a process at all. It was simply a, move the paper from the left side of the desk to the right side of the desk.”
Stephanie Goodman, spokeswoman for the health commission, acknowledged the agency’s lack of oversight. “Ultimately, we’re responsible for the work our contractors do,” she said. “We set high performance standards in our contracts, but we failed to recognize that the contractor wasn’t meeting those standards.”
Still, she added, that doesn’t absolve any dentists who cheated. “That’s like saying it was OK to rob that house because it didn’t have a good lock on the door,” she said. “There was clear wrongdoing on the part of some unscrupulous providers and an approval process that wasn’t stringent enough to catch that.”
Goodman said the agency nevertheless would hold ACS accountable for any money lost due to the company’s negligence. According to the company’s contract with the state, it can be fined up to $2,500 for each individual violation. A spokesman for the U.S. Department of Health and Human Services investigative arm said a federal audit of Texas’s Medicaid orthodontic preauthorization process is nearing completion, which Goodman said could inform Texas’s next steps.
Legal cottage industry
The government’s own role in the high orthodontic expenses has raised questions about the state’s efforts to pursue many of the dentists and orthodontists for repayment.
In late 2011, the agency opened investigations into the top individual billers. Since then, it has blocked 44 dentists and orthodontists from collecting millions of dollars in federal payments.
The actions have created a sprawling, and growing, legal cottage industry.
There are more than a dozen pending cases. The government is appealing one of the cases it already lost. A related civil case remains under seal in Travis County. In addition to the four cases filed recently by dentists against ACS, three more are on the way, Ray said.
The dentists and orthodontists who have built their practices around Medicaid clients say they are fighting for their professional lives. For those suspected of fraud, the blocked reimbursements can mean hundreds of thousands, even millions of dollars in anticipated income frozen in limbo.
“It makes it very difficult for doctors to continue to practice,” said Robert Anderton, a dentist and attorney who is representing several of the accused practitioners. One of the dentists that was hit with fraud allegations, All Smiles Dental, in Dallas, filed for bankruptcy protection. Other providers have stopped their Medicaid practices, Ray and Anderton said.
Prosecutors have spared no expense pursuing the providers. During a hearing against Antoine Dental Center last May, “the state must have had 15 or 20 lawyers,” said Tony Canales, who represented the dental practice.
The government’s team included attorneys from the state attorney general’s office and the Health and Human Services Commission’s Office of Inspector General. It also included private attorneys the state had hired — for as much as $500 per hour, $250,000 in all — specifically for the case.
But the state has had little success so far in proving in court that it was justified in freezing the Medicaid payments. Ten dentists have quietly settled, paying a total of $9.7 million without admitting any criminal guilt — the price of ending what promised to be a protracted legal battle, their attorneys say.
And in the two cases that have been heard, judges have ruled decisively against the government.
In each case, the Office of Inspector General had charged that the dentists aroused suspicion because of their high billings.
The cases against Harlingen Family Dentistry, at the time a sprawling 26,000-square-foot practice with $5 million in Medicaid dental and orthodontia billings, and Antoine Dental Center revolved around the same premise: Although Medicaid was to pay for children’s braces only in those instances of medical “dysfunction,” the practitioners had intentionally exaggerated their diagnoses to meet that definition. As a result, they collected millions of dollars for procedures the government never intended to pay for.
To prove its case, the state hired an expert who said that in virtually every case he reviewed, the dentists under investigation had inflated their evaluations to meet Texas’ Medicaid definition. Yet as both cases progressed, his claims fell apart.
That’s because the state’s own medical definition of an especially disputed procedure — an ectopic eruption, or improperly placed tooth — was so vague that it was wide open for interpretation. During the hearings, when several dentists were asked to evaluate the same patient’s chart, they reached different conclusions for whether the patients’ teeth were eligible for government-covered braces.
The broad definition “leaves interpretation of those words to professional judgment,” Catherine Egan, the judge in the Antoine case determined. “These differences in professional judgment do not prove fraud or intentional inflated scoring.” As a result, in both cases the judges dismissed the opinion of the state’s expert.
On Jan. 1, 2012, the state changed its definition of ectopic eruption and adopted a managed care system for dental procedures. (TMHP is no longer handling preauthorizations.) Since then, orthodontic billings have dropped.
The accused dentists in both instances also noted that each of their requests had been approved by ACS. Prosecutors claimed the dentists knew ACS’s preauthorizations were cursory and used that to game Medicaid.
Judges in both cases sided with the dentists. “There is no evidence that is credible, reliable, or verifying, or that has indicia of reliability, that ADC committed fraud or misrepresentation,” Egan wrote in her Antoine Dental Center opinion last November.
To crack down on fraud, state officials filed suit against dentists who billed Medicaid for children’s braces. But evidence suggests the state, through a politically connected contractor, authorized the treatment plans.