BREAKING: Xerox Can’t Blame Doctors In $1B Texas Medicaid Fraud Row

Texas filed suit in May 2014 alleging the Xerox unit then known as ACS State Healthcare LLC, which administered claims for Texas from 2004 until 2012, signed off on $1.1 billion in claims for orthodontic services, a “substantial percentage” of which were allegedly paid in violation of Medicaid policies….…………….

Article Referred by Brian Klepper

By Jess Krochtengel

Law360 (June 22, 2018, 10:09 AM EDT) — Xerox Corp. can’t try to share the blame for what Texas alleges is a $1 billion civil Medicaid fraud with orthodontists who allegedly provided unnecessary services to poor children, the Texas Supreme Court held Friday.

The high court held Xerox and its claims processor subsidiary, Xerox State Healthcare LLC — which has since been spun off into Conduent Business Services LLC — can’t designate the orthodontists as “responsible third parties” under Chapter 33 of the Texas Civil Practice and Remedies Code. That leaves the company facing potential sole liability for allegedly rubber-stamping orthodontics claims and approving payments for medically unnecessary procedures.

The court said Chapter 33 does not apply to a suit brought under the Texas Medicaid Fraud Prevention Act because the statute’s penalties don’t constitute “damages” that can be apportioned between responsible parties. There’s an irreconcilable conflict between the Chapter 33 proportionate-responsibility statute and the TMFPA’s mitigation and fault-allocation scheme, the court said.

“The act adopts a civil-penalty scheme to deter, punish, and thereby prevent fraud on the Medicaid system,” the court said. “This is not an ‘action for recovery of damages’ subject to apportionment under the proportionate-responsibility statute. Chapter 33 is also incompatible with the unique method the Legislature chose to uncover and combat Medicaid fraud and, therefore, does not apply to actions under the TMFPA.”

In its appeal to the high court, Xerox argued Texas unfairly cast what should be treated as a breach of contract claim as fraud. The state filed suit under the Texas Medicaid Fraud Prevention Act, a statute it says prevents Xerox from using the theory of comparative fault to blame the state’s losses on the doctors who treated the patients.

Texas argued no one other than Xerox can be responsible for the harm caused by its alleged misrepresentations. It has argued the designation of third-party procedures found in Chapter 33 don’t apply to its claims because it has not filed a tort claim and is seeking to recoup civil penalties, not actual damages.

Texas filed suit in May 2014 alleging the Xerox unit then known as ACS State Healthcare LLC, which administered claims for Texas from 2004 until 2012, signed off on $1.1 billion in claims for orthodontic services, a “substantial percentage” of which were allegedly paid in violation of Medicaid policies.

The state alleges Xerox lied about the qualifications of its personnel reviewing orthodontics reimbursement requests, saying Xerox falsely assured the state health department each request for orthodontia received a clinical review of all submitted materials by a qualified person, and that the review ensured services were being authorized or denied in accordance with Medicaid policy.

Texas claims that while under state law, only the most acute cases where orthodontic disfigurement poses a health risk to a patient are eligible for Medicaid coverage, Xerox routinely approved payments for cosmetic orthodontics and other services that were not medically necessary and therefore ineligible for Medicaid coverage.

A Travis County district court judge in April 2015 denied Xerox’s motion to designate the orthodontists as responsible third parties. The Third Court of Appeals in February 2016 declined to overrule the decision.

Xerox is represented by Eric Nichols, Chris Cowan and Connie Pfeiffer of Beck Redden LLP, Rob Walters of Gibson Dunn & Crutcher LLP, and Andrew Weber of Kelly Hart & Hallman LLP.

The state is represented by Reynolds Brissenden, Nathaniel Danko and Raymond Winter of the Texas Attorney General’s Office.

The dentists are represented by J. Woodfin Jones of Alexander Dubose Jefferson & Townsend LLP and Jason Ray of Riggs & Ray PC.

The case is In re: Xerox Corp. et al., case number 16-0671, in the Supreme Court of Texas.

–Editing by Breda Lund.

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Article Referred By Brian Klepper

​904.343.2921, bklepper@gmail.com

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