United States: Texas: A Cautionary Tale For Medicaid Management And Managed Care Companies

State Medicaid Agencies have historically engaged in an epic balancing act.  Federal law requires State Medicaid Agencies to ensure beneficiaries have access to medically necessary services.  Federal law also requires State Medicaid Agencies to safeguard their Medicaid Programs against fraud, waste or abuse in billing for Medicaid services.  Balancing those competing requirements has long proven challenging.

Indeed, that very challenge is why federal law also requires State Medicaid Fraud Control Units (MFCUs) be housed outside of the State Medicaid Agencies, and that the State Medicaid Agencies have no authority over which cases the individual MFCUs investigate or prosecute under applicable civil or criminal statutes.  Concerns over access to care should not factor into prosecution judgments in the face of allegations of Medicaid fraud.

No state is more emblematic of the challenges presented by that balancing act than Texas.  But Texas may also be a case study in why use of private Medicaid Management and Medicaid Managed Care companies is no panacea for those challenges.  Moreover, Texas may be a case study in the importance of private Medicaid Management and Medicaid Managed Care companies understanding the depth of those challenges and the need to fully assess what the company may be taking on, before contracting to provide Medicaid services in a particular state.

Access to Care and the Legacy of Frew v. Hawkins

In 2010, Texas entered into a landmark settlement of a 14-year old lawsuit, Frew v. Hawkins.    The Frew litigation, originally filed as a class action in 1993, alleged that Texas had failed to ensure that children enrolled in Medicaid were receiving necessary preventative and specialty health care services.  The essence of the plaintiff's case was that inadequate Medicaid reimbursement had led to a drastic shortage of providers willing to provide children with essential health services, including dental services.

Texas first tried to settle the case through a 1995 consent decree, but were hauled back into court on allegations the state was refusing to implement and pay for Medicaid services called for by the consent decree.  Texas' attempts to fend off the plaintiff's enforcement efforts, including 11th Amendment arguments before the Supreme Court, were all thwarted.  Facing a trial deadline, the state essentially caved.

The 2010 settlement required Texas to substantially increase Medicaid spending by hundreds of millions of dollars to incentivize health care providers to enroll in Medicaid.  A specific provision of the settlement required the state to allocate $258.7 million to fund a 50% increase in Medicaid dental reimbursement rates.

One of the ways Texas chose to implement the Frew settlement was by substantially increasing its use of private companies; contracting out Medicaid provider enrollment, screening, and claims processing to private entities instead of state employees.  Through those contracts, the state delegated many of its responsibilities to the contracting private companies, including the responsibility for oversight and prevention of fraud waste and abuse; the state also insisted on contract provisions requiring the private companies to swiftly process and pay Medicaid claims to ensure an unimpeded flow of services.

One of the private companies chosen by Texas in 2004 to administer Texas State Medicaid was known as the Texas Medicaid and Health Care Partnership, a subsidiary of Affiliated Computer Services, Inc.  The company was later acquired by Xerox.

Fall Out from WFAA Investigation

In 2011, TV station WFAA-TV in Dallas reported on its investigation of Texas Medicaid spending on pediatric orthodontic services.  Dubbing its investigation "Crooked Teeth," the reports alleged that Texas spending on pediatric orthodontic services in 2009 was more than almost all the other 49 states combined.

Ensuing federal and state audits found that Texas dental providers were being paid for pediatric orthodontic services that were beyond what was medically required or justified.  A 2015 HHS-OIG Report found that the Texas Medicaid and Health Care Partnership paid out at least $191.4 million for what OIG determined was unallowable Medicaid pediatric orthodontic services.

The state attempted to institute administrative overpayment cases against individual dentists, but in the first three cases hearing officers found the state failed to establish that there was reliable evidence of fraud to even support suspending the individual dentists from Medicaid.  While the state continued separate attempts to pursue individual dental providers, it added a new tactic.

In 2014, Texas cancelled its contract with the Xerox and sued Xerox.  Using the civil false claims remedies under the Texas Medicaid Fraud Prevention Act as the basis for its lawsuit, the state alleged that Xerox misrepresented, concealed or failed to disclose that it was not substantively reviewing documentation before approving prior authorizations for pediatric orthodontic services, as required by contract terms.  Thus, the state alleged, Xerox indirectly caused the state to pay millions of dollars in unnecessary or what should have been unauthorized Medicaid claims for dental services.   Under the Texas statute, which largely mirrors the Federal False Claims Act, the state sought treble actual damages, civil penalties of not less than $5,500 per individual claim, and costs of pursuing the lawsuit.  The state alleged its potential recovery against Xerox under the lawsuit exceeded $1 billion.

Texas Supreme Court Decision

After the civil lawsuit was filed, Xerox sought to join the separate proceedings against individual dentists to the lawsuit; Xerox also asserted counterclaims and third party claims alleging that individual dentists bore at least some responsibility for the state's losses.  Despite the fact that the state itself was still actively pursuing claims against the individual dentists, Texas went all out to oppose Xerox's attempts to add individual dentists as parties to its case against Xerox. The pretrial dispute between the state and Xerox eventually landed in the lap of the Texas Supreme Court.

The Texas Supreme Court decision issued on June 22, 2018 relied heavily on language of the state false claims act, the Texas Medicaid Fraud Prevention Act.  The Court held that statute was not akin to a tort claim and did not allow for apportionment of responsibility: Xerox could not attempt to pass or share blame with the individual dentists.    The ruling left Xerox as the sole defendant, and deepest pocket, facing the state's billion-dollar false claims case.

Meanwhile, Access Concerns Return to Center Stage

  At the same time the Texas Supreme Court was entering its ruling on the Xerox case, the Texas House General Investigating and Ethics Committee was hearing hours of testimony from state Medicaid officials, Medicaid Managed Care Companies (MCOs), and other witnesses regarding alleged deficiencies in providing Medicaid Managed Care services to needy children.  The hearing was spurred by a heartbreaking series of stories in the Dallas Morning News that ran in early June 2018, alleging that Medicaid MCOs were unreasonably denying needy children necessary medical services.  The media stories and subsequent hearing highlighted individual examples:  a child rendered brain dead after the Medicaid MCO denied him individual in-home nursing services; another child hospitalized when the Medicaid MCO denied coverage of a prescription antibiotic that he had previously taken.

Adding to the angst of the situations discussed in the articles and the hearing, the medically needy children had been adopted from Texas foster care with the promise of continued Medicaid coverage of necessary medical service.

Moreover, former Texas Health Commissioner Nancy Toll testified that oversight of the Medicaid MCOs was complicated by access concerns:  the state needed to keep the MCOs in the Medicaid Program.  So while the state legally had authority to oversee the Medicaid MCOs and impose fines if an MCO unduly limited necessary health services: "I was told that if we implemented all of those fines, I would put the managed care organizations out of business.  If we can't punish them...then how are any changes going to take place?"

Lawmakers attending the hearing pressed state officials about lack of care coordination, including reported indifference to helping sick children and their families even locate providers who would treat Medicaid patients.  One state official acknowledged that perhaps Texas had "focused too much on partnership [with the MCOs] and not enough on accountability."

Moral of the Story

Medicaid oversight often resembles the fabled Push-Me-Pull-You.  If you closely monitor fraud, waste and abuse, providers will balk at even enrolling as Medicaid providers.  If you don't closely oversee the providers, you run the risk of that fraud, waste and abuse going unchecked.

Hiring private companies or MCOs to manage Medicaid services does not change the difficult balancing dynamic.  It only changes the responsibility for maintaining that balance.  And it is important that private companies and MCOs fully understand how that dynamic has played out in an individual state before assuming Medicaid responsibilities in that state.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Ellyn Sternfield
Similar Articles
Relevancy Powered by MondaqAI
Foley Hoag LLP
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Foley Hoag LLP
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions