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Don’t Mess with Texas Medicaid

Texas Reaches $15.2M Settlement with Fraudulent Medicaid Providers

Texas Attorney General Ken Paxton announced on May 30, 2018 that the state of Texas reached settlements totaling $15.2 million with a group of Dallas-Fort Worth area Medicaid rehabilitation therapy providers that were accused of making false statements and conspiring to avoid repaying unauthorized Medicaid benefits.

Background

Medicaid is a jointly funded state-federal health care program that provides health coverage to people who might otherwise go without medical care. The program serves primarily low-income families, children, related caretakers of dependent children, pregnant women, people age 65 and older, and adults and children with disabilities. Instead of making cash payments to clients, Medicaid makes payments directly to health care providers or managed care organizations. In at least some instances where audits determine that Texas Medicaid has overpaid the provider, Texas Medicaid will recoup the overpayment amounts by withholding a portion of the funds billed by that provider for ongoing/future services.

The Texas Medicaid Health Partnership Medicaid Audit group determined that Advanced Neurological Services LLC (ANS) had been overpaid in each year between 2000 and 2004, and that Advanced Neurological Services of Dallas LLC (ANS-Dallas) had been overpaid each year between 2003 and 2005. The outstanding balance due for these overpayments exceeded $2.7 million. Accordingly, Texas Medicaid began withholding funds from payments to the ANS entities for ongoing services in order to recoup the monies owed to Texas Medicaid for the overpayments. In response, ANS conspired with two front companies, DSM Healthcare Services LLC and Progressive Pediatric Therapy LLC, to avoid repaying Texas Medicaid the $2.7 million. While hiding their affiliation with ANS, these new providers billed Medicaid without recoupment for treatment still being provided by ANS. An anonymous tip made to the Medicaid Fraud Control Unit led to investigations, and in 2015, the state of Texas filed suit.

Settlements

In its lawsuit, the state of Texas named as defendants the four rehab therapy providers (ANS, ANS-Dallas, DSM, and Progressive Pediatric) as well as six individuals. Between March 2016 and May 2018, all the defendants agreed to settlements, which totaled a combined $15.2 million. Under this series of settlements, three of the individuals—David Scott Mitchell, Abraham Armani, and Shahriar Raoufpour—are permanently barred from participating as a Texas Medicaid provider, and two others—Cynthia L. Kidd and Joanie C. Powell—are barred from owning or managing any Texas Medicaid provider or vendor.

The first individual to settle was Greg Matusiak, who was accused of overbilling the Medicaid program and making false statements to the state of Texas between 2004 and 2006 about the ownership, chain affiliation, and identity of subcontractors in connection with the rehab facility he owned. In the March 2016 settlement, Matusiak agreed to pay $275,000 and to testify in the case. The next to settle was David Scott Mitchell, owner of DSM Healthcare Ventures. He settled in May 2017 for $1.1 million.

The majority of the state’s recovery, however, came in the March 2018 agreement involving individuals Cynthia L. Kidd and Joanie C. Powell and the four related therapy providers. The providers expressly denied wrongdoing, but they still agreed to pay $4.3 million for the alleged misstatements and overbilling and an extra penalty of $8.7 million for the alleged fraud.

The last settlement, on May 23, 2018, resulted in Dr. Abraham Armani and Shahriar Raoufpour agreeing to a judgment that they owe more than $1.6 million to Texas Medicaid and agreeing to a more than $20 million fine. However, according to their agreement with the state, Armani and Raoufpour owe Texas just $750,000, payable in installments over the next five years. The $21 million judgment balance will be abated and eventually dismissed if the full $750,000 settlement amount is paid.

Takeaway

This case sends a clear message to Medicaid providers that they will be held accountable for cheating the Medicaid system. In the state of Texas, particularly, this could mean both personal liability and exclusion from the Medicaid program.

If you are dealing with or suspect fraudulent activity, whether in the Medicaid realm or beyond, schedule a free consultation with the experienced attorneys of Parker, LLP today.

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