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Medicaid Administrator Wreaks Havoc On Healthcare

Tuesday, April 2, 2019

Jerica Steward Junior Staff Reporter (2018 – 2019)

On June 22, 2018, the Texas Supreme Court determined that it would not allow Xerox, the State’s longtime administrator of its Medicaid program, to use a Texas specific law to escape liability for over $1 billion dollars in fraudulent Medicaid payments and place that liability on various orthodontic service providers. For nearly a decade, Xerox Corporation and Xerox State HealthCare, LLC administered the Texas Medicaid program, acting as a claims processor.¹ Xerox was responsible for making sure that all patients’ prior-authorization requests were approved or denied in accordance with the Medicaid policy. Instead, the State of Texas claimed that Xerox fraudulently conducted the review process and worked to conceal the fact that unqualified and inadequately supervised employees were approving the requests without careful consideration.²

The Texas Medicaid Fraud Prevention Act (“TMFPA”) is a Texas statute that makes it illegal to knowingly engage in any activity that causes a person to fraudulently receive a benefit or payment under the Medicaid program.³ Since the TMFPA action is a civil remedy to penalize Medicaid fraud, the Court would not allow Xerox to shift liability to the orthodontic providers. This law is typically reserved for shifting liability of damages in personal injury claims. While this case largely deals with the application of a specific Texas rule to Medicaid fraud actions, the important take-away for medical providers and billers is how a robust compliance system is necessary to avoid potential liability under the TMFPA. As a client, the important take-away is how important it is to make sure that your Medicaid benefits are correctly processed and handled.

The scope of the alleged fraud in this case was particularly widespread. For example, in 2015, an inspection of the Medicaid prior-authorization requests revealed that, out of a sampled 106 provider requests for payment, 89 were not properly approved in accordance with the Medicaid guidelines.⁴ Out of the 89 pre-authorizations, 78 did not meet the Medicaid guidelines for approval, and the other 11 did not have sufficient documentation to properly determine eligibility.⁵

While this decision clarifies an important question regarding the potential for shifting liability from one party to another in Texas Medicaid fraud actions, it also highlights that there is nothing stopping the State from bringing separate actions against every healthcare provider or client connected to the same controversy. The State has already filed TMPFA actions against various orthodontic providers involved in the alleged fraud, and, while some providers have succeeded in the actions brought against them, there are still several pending lawsuits that may not end favorably for others.⁶ If a court determines that the providers or clients are liable under the TMFPA, many of the suspects face hefty consequences.

So why does this matter? These TMFPA actions are an important reminder that medical providers should ensure they have compliance systems in place to comply with all laws. The TMFPA is broader than it was prior to these cases. Therefore, it is important to know which activities constitute “unlawful acts.”⁷Further, as a patient, these types of cases are a constant reminder that it is important to track your claims and avoid providers who are participating in these types of schemes. While the State has only held Xerox liable for these violations, it could easily pursue providers or clients who have engaged in this type of activity. If you notice suspicious activity with your claims, it is wise to consult an attorney who deals with white collar crime or governmental issues. Generally, these attorneys are able to offer further guidance with these types of issues.

Sources ¹ In re Xerox Corp., 555 S.W.3d 518, 521 (Tex. 2018). ² Id. ³ Tex. Hum. Res. Code § 36.002 (West). ⁴ Dep’t. of Health and Human Services, Office of Inspector Gen., Texas Paid Millions for Unallowable Medicaid Orthodontic Services 3 (Daniel R. Levinson 2015). Id. In re Xerox Corp., 555 S.W.3d at 521. ⁷ Tex. Hum. Res. Code § 36.002 (West).



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