Company That Approved Unnecessary Orthodontia Kept Its State Contract

Part one of two.

_{*Correction appended.} 

In 2010 and 2011, Antoine Dental was among Texas’ top-billing Medicaid providers for orthodontic services, collecting more than $1 million annually for putting braces on poor children. Its three Houston-area clinics employed 15 dentists and orthodontists and treated more than 2,500 young patients annually through the joint state-federal health program, owner Behzad Nazari said.

But in 2012, the Medicaid money that kept Nazari’s dental clinics and dozens of others in Texas in the black came to a dramatic halt. An investigation by WFAA-TV in Dallas had revealed that Texas was spending more on Medicaid orthodontic services than the nation’s nine other most populous states combined. The Texas Medicaid and Healthcare Partnership (TMHP), the contractor the state hired to assess the medical necessity of the services, had employed only one dentist to review thousands of monthly claims, according to a federal audit of the Texas program in 2012, and the company was “essentially rubber-stamping” dental claims.

The Health and Human Services Commission’s Office of Inspector General (OIG) opened fraud investigations into the state’s highest-billing Medicaid dental providers, alleging Antoine Dental and more than four dozen others had committed fraud by performing medically unnecessary services.

Nearly three years later, the state’s aggressive campaign has yet to prove any dental providers intentionally committed fraud. The state alleged hundreds of millions of dollars in fraudulent billing, but it has so far recovered $10.4 million in settlements under legal terms that cleared the providers of any criminal wrongdoing.

The state has not yet taken action against TMHP, the company that approved all those claims. And TMHP, which is owned by Xerox, is still being paid between $168 million and $185 million annually to process certain Texas Medicaid claims.

Stephanie Goodman, a spokeswoman for the state health agency, said TMHP will be held accountable “for its role in approving services that weren’t medically necessary” — but not until the state knows “exactly how much those actions cost.” A spokesman for Xerox said the company has “collaborated closely” with the health agency to “ensure the integrity of the state’s Medicaid system.” He declined to comment on any specific investigation into TMHP.

The extent of overbilling and fraudulent activity that occurred in the Medicaid dental program between 2007 and 2011 is still unclear. State investigators have alleged that providers were paid more than $550 million for medically unnecessary orthodontic and dental services, and the state’s health agency has withheld more than $10 million in payments to upwards of 40 orthodontic and dental providers while it conducts fraud investigations.

“There’s nothing wrong with treating lots of Medicaid patients,” Goodman said. “But if you routinely bill the state for services those patients didn’t need, that’s fraud.”

Providers like Nazari argue they’ve been tangled in a legal tug-of-war for years without evidence they’ve done anything more than use the state’s own system. 

“If it was fraud, then we should have been handcuffed and gone to jail,” said Nazari, who has been wrangling with state investigators for more than two years.

For Nazari, the state's investigation and allegations of wrongdoing have been financially crippling. Texas officials initially demanded that Antoine Dental repay the state $20 million, he said, but later reduced that figure to $7 million. Because the state froze his Medicaid payments, he has had to sell two of the three Antoine Dental clinics.

Now, he employs only two part-time dentists instead of 15 full-time dentists and orthodontists. Most of his current patients must carry private insurance. And the clinic is down from 2,500 Medicaid patients to fewer than 500 — all of whom began their orthodontic treatments before the payment freeze. They're treated for free. 

Two state administrative courts have found that the state OIG does not have enough evidence that Antoine Dental clinics committed fraud to justify continuing to withhold Medicaid payments. An appeals judge reversed that decision, keeping the payment freeze in place. Nazari plans to take his case to a federal district court. 

Nazari argues that if orthodontic services weren’t medically necessary, the burden for repaying the state should fall to TMHP — not to the providers. Antoine Dental submitted X-rays, dental molds and score sheets to TMHP to prove the medical necessity of its orthodontic services, he said, and the contractor authorized the clinic to perform all of the services the state is challenging.

“Every single case, they had all the necessary information,” Nazari said. 

Nazari is among seven dental providers accused of fraud who are suing TMHP. Kevin Lightfoot, a spokesman for Xerox, TMHP’s parent company, said in an email that the Medicaid providers’ lawsuit is “baseless and without merit.”

“All dentists participating in the Medicaid orthodontic program are aware of the processes for submitting claims and are themselves responsible for submitting authorization and requests that were medically necessary,” he said.

Doug Wilson, the state health agency’s inspector general, said Medicaid providers shouldn’t try to shift the blame. “They had an agreement to provide necessary services to Medicaid patients for dentistry, period,” he said. “That had nothing to do with TMHP.”

Goodman, the health agency spokeswoman, added that the OIG is working with the Texas attorney general’s office to evaluate its legal options regarding TMHP. “It would have been easy to file a lawsuit earlier,” she said, “but we want to make sure we win and that we get everything the state is due back.”

The state has also been helping the federal government with an ongoing audit of TMHP, which is likely to include firmer numbers on how much the state overpaid for orthodontic and dental services, Goodman said. The federal government covers about 60 percent of Medicaid costs. Because Texas is required to repay the federal government for misspent money, she said, that audit could also determine what the state owes.

So far, the OIG has recovered $10.4 million in settlements with 10 dental and orthodontic providers — though those providers admitted to no criminal wrongdoing under the terms of the settlement.

In a February 2013 legislative report, the state health agency said spending on Medicaid orthodontia services had dropped to $25 million in fiscal year 2012 from $130 million in fiscal year 2011, and that the number of orthodontia services had fallen to 401,000 from 1.4 million. For a variety of reasons, the report said, spending on diagnostic and preventive dental care and access to dental providers also declined.

The health agency has tightened its oversight of TMHP, and the number of dental claims authorized by the company has declined since 2012, Goodman said, largely because administrative changes have reduced TMHP’s role. Still, the health agency paid TMHP $168 million in 2013 to process Medicaid claims for all kinds of medical services.

Questions remain as to why Texas officials would keep a major contract with a company whose actions they believe cost the state hundreds of millions of dollars in unnecessary spending. Linda Edwards Gockel, another health agency spokeswoman, said in an email that any changes to such a huge contract “would require a transition period.” 

“We are taking a look at this contract,” she added, “and our options going forward.”

Coming Friday: When is a state contract too big to fail?

This story was produced in partnership with Kaiser Health News, an editorially independent program of the Henry J. Kaiser Family Foundation, a nonprofit, nonpartisan health policy research and communication organization not affiliated with Kaiser Permanente.

_{Correction: This story initially stated that the state’s legal settlements with dental and orthodontic providers cleared those providers of criminal wrongdoing. Under the terms of those settlements, the state could still prosecute the providers for criminal wrongdoing if it finds additional evidence that fraud occurred.}