Medicaid Providers Push Back on Fraud Inquiries

It has been nearly a year since Texas officials accused Dr. Glenn Wood of overbilling the state’s Medicaid system by $17.9 million through his business, Carousel Pediatrics. Wood denies the accusations, but as he waits for absolution, the state is holding 10 percent of Carousel’s Medicaid payments — hundreds of thousands of dollars.

“They’re painting with this very broad brush that basically says any big practice must be evil,” said Wood, a pediatrician. “That doesn’t make sense. A lot of big practices are big because they do a good job.”

The Texas Health and Human Services Commission’s Office of Inspector General is on a mission to reclaim hundreds of millions in misspent Medicaid money. But after months in the state’s crosshairs, more medical providers are saying publicly that they have been wrongly targeted. They say a controversial federal rule that allows the OIG to stanch the flow of Medicaid payments as it pursues fraud investigations is crippling businesses, denying providers due process and harming patients by jeopardizing the state’s limited network of Medicaid providers.  

Since Wood opened Carousel in 2002, the company has expanded to provide primary medical care, dental care and therapy treatments to 40,000 low-income children at six Austin-area medical facilities. He said Carousel’s services save the state money by preventing expensive emergency room visits.

Juan Villarreal, a dentist who owns Harlingen Family Dentistry and served on the Texas State Board of Dental Examiners for seven years, also said his practice was targeted by the OIG because of its success. With a staff of 150 employees and more than a dozen dental professionals, Harlingen Family Dentistry has an annual income of  $12 million, of which $5 million comes from Medicaid. The OIG said the clinic should repay the state millions for performing medically unnecessary orthodontic procedures.

Doug Wilson, the HHSC’s inspector general who is leading the investigations, cannot legally discuss specific cases, but he said that his staff is targeting prosperous providers. Most providers complain Medicaid payments are too low to sustain a business, he said, but “the people that we’re investigating have not only survived on Medicaid, but thrived on Medicaid.”

Since his appointment in 2011, Wilson has tripled the number of investigators focused on provider fraud, from 19 to 60. He said payment holds are only used when credible evidence, such as witness statements, medical experts’ reviews of patient files and data mining, suggest a provider intentionally overbilled the program. And cases undergo reviews by the agency’s highest officials before they institute a payment hold.

“Once the money has gone out the door it’s very difficult to get it back,” he said.

Under federal law, the state needs credible evidence — but less proof than what is necessary to prosecute the provider — to hold payments while the state investigates further. The law also compels the state to act because the federal government can seek restitution from the state for failing to hold payments when there is credible evidence.

After reviewing Carousel's patient files, the OIG informed Wood in February that Carousel had overbilled Medicaid $17.9 million from 2007 to 2011. The state wants that money back, plus a $4 million penalty. The OIG’s letter to Wood said that Carousel billed undocumented Medicaid services, duplicated billings for the same services and provided illegible documentation.

Tom Wise, the president and chief executive officer of Superior HealthPlan, one of the state’s contracted health maintenance organizations, came to Carousel’s defense.

“The apparent findings by OIG against Carousel are completely at odds with the high quality care that Carousel provides to Superior’s members,” Wise wrote in a letter to the OIG. The letter stated Carousel had lower hospitalization rates, fewer repeat patient visits and a quality score 17 percent higher than the average pediatric provider.

The Texas Medical Association is also supporting Carousel after three physicians independently reviewed patient files and determined the business had not committed intentional wrongdoing.

“Others that are vouching for people, in most cases, they’ve only heard one side of that story,” Wilson said. He said providers abusing the system are “going to paint themselves in a pretty positive light.”

He added that the OIG encourages providers on payment holds to request an informal hearing to “show us how we misunderstood what we think we know.” Few have taken the offer, and none have provided evidence “to make us think we’ve made a mistake,” he said.

At the time of the interview, Wilson was unaware Carousel had submitted 800 pages of documentation in May to validate the claims the OIG found erroneous. The HHSC later confirmed the OIG is waiting on the outcome of a medical consultant’s review of the documents.

“Because of all these problems with the OIG, we are basically running on fumes,” said Wood, adding Carousel was forced to lay off 20 percent of its staff and scratch plans to open three South Texas clinics as a result of the OIG’s payment hold.

Mark Chouteau, a lawyer for the Texas Medical Association helping represent Carousel, said the wait time for a response to the submitted documents is beyond reasonable due process. “We’re in complete limbo, I can’t do a thing, short of trying to go to a district court to order them to respond,” he said.

Wilson rebuffed allegations that the state agency process flouts due process laws, saying, “There are rules that govern what we can and cannot do.” Providers can expedite the process, he said, by requesting an official administrative hearing to have the payment hold withdrawn.

Only seven of 90 medical providers — including orthodontists, medical equipment retailers, and specialty physicians — that the OIG has put on payment holds since 2011 have asked for an administrative hearing.

Harlingen Family Dentistry is the only provider to have completed an administrative hearing. The OIG said the clinic should repay the state millions for performing medically unnecessary orthodontic procedures.

But the administrative judge sided with Harlingen Family Dentistry, which argued that determining the medical necessity of orthodontic care was subjective under the state’s Medicaid rules. The OIG was ordered to reduce the payment hold from 40 percent to 4 percent while it continued the investigation. The state has continued to hold 40 percent as it appeals.

“I don’t hold it as subjective,” said Wilson, adding that Medicaid is only intended to cover orthodontic care for dental deformities of severely handicapped patients.

A statewide crackdown on orthodontia fraud has left many patients with braces and no provider willing to treat them, said Villarreal. “From an ethical viewpoint, I can’t just go take the braces off of a kid because I didn’t get paid,” he said, explaining his practice is “eating the costs” of continuing to care for its patients.

Wilson refuted allegations that patients’ access to care has been impacted by the payment holds, saying his department coordinates with HHSC to ensure other providers are available to care for patients. “We’re not operating in a vacuum,” he said. “We try to make sure all bases are covered before we take action.”