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OIG Loses Another Medicaid Fraud Court Battle

The health commission’s Office of Inspector General, which says Texas has misspent hundreds of millions of dollars on Medicaid orthodontic and dental fraud, has now lost its first three court battles against accused providers.


The Texas Health and Human Services Commission’s Office of Inspector General, which says that hundreds of millions of dollars have been misspent on fraudulent Medicaid orthodontic and dental claims, has lost its first three court battles against allegedly fraudulent providers. And the accused Medicaid providers argue that the court losses show that the office’s claims are unjustified.

The latest judicial setback for the inspector general’s office occurred Monday, when an administrative court found that the state did not show reliable evidence of fraud to withhold payments in its case against Antoine Dental Center. ADC, which was among the top 10 providers billing the state for orthodontic services, was paid more than $8 million in Medicaid money for orthodontic services between November 2008 and August 2011.

Since April, the state has withheld more than $1 million in Medicaid payments to ADC while it conducted an investigation.

“The state hasn’t shown any sign of changing its position or recognizing what the judges have found in earlier cases. Frankly, they appear incorrigible,” said Jason Ray, one of ADC's attorneys. “Judges have told them what the truth is, and the state continues to propound a fiction that these dentists have done something wrong.”

Doug Wilson, the HHSC’s inspector general, did not return a request for comment.

After WFAA-TV in Dallas broke the news in December 2011 that Texas was spending tens of millions of dollars on Medicaid orthodontics without proper oversight, the U.S. House Committee on Oversight and Government Reform released a report that found Texas spent more on braces and Medicaid orthodontic claims between 2008 and 2010 than the other 49 states combined. The Texas Medicaid and Healthcare Partnership, the company contracted by the state to administer Medicaid claims, had only one dentist on staff and essentially rubber-stamped dental and orthodontia claims without reviewing whether those services were medically necessary, according to the report.

The state ramped up fraud investigations following the release of the report, but neither the TMHP nor the Medicaid providers accused of filing unnecessary claims have been found guilty of wrongdoing. The state lost its first two court battles against Harlingen Family Dentistry, another accused Medicaid provider. 

The OIG alleges that more than $550 million has been overpaid to Medicaid providers for medically unnecessary orthodontic and dental services, and it has withheld millions in payments to more than 40 orthodontic and dentistry providers while it conducts fraud investigations. The OIG is also assisting in a federal audit of TMHP.

The state is authorized and obligated under federal law to withhold payments to Medicaid providers if there is a credible allegation of fraud, Wilson said in a previous interview with the Tribune, and often that is supported 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,” Wilson said in October. “Short of that, there is nothing a state agency has that makes payments to providers to make them cooperate.”

Meanwhile, managed care organizations that began administering Medicaid dental plans in March 2012 have placed stricter requirements on dental providers to prevent fraud. Some Medicaid patients lost access to dental care as a result of the state’s policy changes, but many providers, including Antoine Dental Center, have continued treating patients without being paid by the state.

“The state’s war on dentists is driving them out of serving Medicaid patients,” Ray said. As a result of the state’s payment hold, Antoine Dental Center has closed two of three locations. “If you want to believe that this is about reducing Medicaid spending by pushing the biggest providers out, then it makes perfect sense.”

The accused Medicaid providers have formed a coalition, Texas Dentists for Medicaid Reform, and say they aren’t returning any money — or allowing the state to sully their reputations — without a fight.

“The wrongdoing is there, the corruption is there, and the question is just how you go about proving it,” said Jim Moriarty, an attorney hired by the state for orthodontic fraud cases, including the case against Antoine Dental Center. He said the state’s loss in the ADC case would strengthen its resolve to win future cases. “It just means that the state is going to have to regroup and focus more on … tracking down former employers, getting former employees to disclose what they know,” he said.

ADC, which has denied the allegations, requested an administrative court hearing to have the state’s evidence against it reviewed. To keep withholding payments to the provider, the state had to show the court reliable evidence that fraud may have occurred, justifying the withholding of payments while pursuing its investigation.

The state’s orthodontic expert, Dr. Charles Evans, reviewed 63 of the Antoine Dental Center’s patient files and determined that none of those patients met the state’s standards for receiving orthodontic services. The state also showed the court that many of ADC’s patient files were missing documentation to prove the patient needed braces.

Dr. Behzad Nazari, the owner of ADC, told the administrative court that the scoring he used to determine which patients needed braces is subjective. He did not believe he committed any wrongdoing, because he had submitted the necessary documentation to the state and received prior approval from TMHP to provide orthodontic services to those patients.

“A payment hold should be reasonably related to the magnitude of the violation,” wrote Administrative Law Judge Catherine Egan, explaining the court’s ruling that the state should discontinue its payment hold against ADC. “These technical violations are very limited in number and are innocuous; therefore, they do not warrant a payment hold in this case.”

The first provider to have the state’s case against it tested in court, Harlingen Family Dentistry, has won two court battles against the state. While the state alleges that HFD 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.

After losing the court battle with HFD, the OIG stepped up its game by bringing in the attorney general's office and private counsel. The OIG also hired a chief dental director, Dr. Linda Altenhoff, and is ensuring that multiple dental experts review cases before they’re brought to a judge. Despite those efforts, they still failed to convince an administrative judge that they have enough evidence of fraud to continue withholding payments to Antoine Dental Center, the second accused provider to have its case tested in court.

“Just because the state disagrees with someone’s medical opinion doesn’t mean that it’s wrong and it certainly doesn’t mean that it’s fraud,” said Ray, who has also represented HFD.

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This article originally appeared in The Texas Tribune at http://www.texastribune.org/2013/11/05/oig-loses-another-court-battle-medicaid-fraud/.

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