While these efforts are impressive, Texas has so far recovered only $1.8 million from its investigations of dental Medicaid fraud -- and this in a state that spent $705 million on Medicaid orthodontics between 2008 and 2011, and whose Medicaid orthodontics reimbursements in 2009 alone totaled nearly 75% of the rest of the U.S. combined.
In fact, Medicaid spending habits in Texas have prompted numerous investigations of fraud and a flurry of activity at the state and federal levels designed to improve the Medicaid system. Last October, the Texas Attorney General's Office and the Office of Inspector General at the Health and Human Services Commission (HHSC) formed a task force designed to target Medicaid dental fraud. The task force is working to improve investigations of fraudulent charges to the children's Medicaid program and recover losses more quickly.
Small Smiles and All Smiles
The $1.8 million recovered to date resulted from three investigations conducted by state and federal agencies. The first case involved Forba Holdings, the dental management company that operated dozens of Small Smiles clinics in the U.S. In January 2010, Forba agreed to a $24 million multistate settlement, after a federal investigation found that many of its dentists were performing unnecessary procedures on children to profit from Medicaid. In that case, Texas recovered $546,000 as its share of the settlement.
The second case involved Richard Malouf, DDS, and the dental chain All Smiles, which in 2012 agreed to pay $1.2 million as part of a settlement agreement related to charges of Medicaid fraud. Texas' share of that case was $599,000.
The agreement resolved allegations that Dr. Malouf and All Smiles -- a 51-office chain in which he previously held a majority stake -- violated the civil False Claims Act and Texas Medicaid Fraud Prevention Act. Between 2004 and 2007, All Smiles submitted to Medicaid orthodontic-related claims for services that "were not furnished or rendered, were unbundled and/or not properly documented," according to the U.S. Attorney's Office for the Northern District of Texas.
The third case involved Carlos Armin Morales-Ryan, DDS, and his wife, orthodontist Nelia Patricia Garcia-Morales, DDS, of Laredo, who pleaded guilty to making false statements on bills to Texas Medicaid and agreed to pay Texas $686,545 in restitution as part of their plea agreement.
Drs. Morales-Ryan and Garcia-Morales owned and operated Orthogenesis International Centre, a dentistry and orthodontics business, and a substantial portion of their business was targeted toward Medicaid-eligible children.
An ongoing investigation by Texas TV station WFAA showed the state spent $705 million on Medicaid orthodontics between 2008 and 2011. Texas' spending on Medicaid orthodontics has more than tripled since 2006, growing from $72.8 million to $249.2 million in 2011, according to records the station requested from the Texas Department of Health and Human Services. In 2009, Texas spent 72% ($145.4 million) as much as the entire U.S. ($210 million) on Medicaid orthodontics.
In 2010, Texas spent $200.8 million on Medicaid orthodontics for 80,000 children, according to the records WFAA obtained. More than 18,000 of them, state records show, were kids younger than 12, who usually don't have their permanent teeth yet.
Last September, the FBI, Texas authorities, and the state attorney general raided the offices of Sun Orthodontix, a Texas chain that collected more than $9.6 million in Medicaid orthodontics reimbursements in 2010. The raid was the largest action so far against a dental firm in Texas, according to news reports.
The state now is holding payments back from 91 Medicaid providers, including dozens of dentists and orthodontists, for credible allegations of fraud, according to WFAA.
Yet some dentists whose Medicaid payments have been cut off due to fraud allegations complain they've been forced to close their practices and lay off their staffs.
Glenn Wood, MD, who owns Carousel Pediatrics, disputes fraud allegations made against his clinics by Texas investigators. He claims that losses of about $400,000 a month in Medicaid payments are forcing him to shut down his dental affiliate, Trueblood Dental Associates in Austin, and lay off 40 staffers and six dentists. The clinic had served about 28,000 low-income pediatric patients.
Dr. Woods said he will also be forced to close another medical clinic because its finances were already stretched thin by a similar fight with state health officials over allegations that Carousel's medical practice had defrauded the state of $18 million, he said. More than $343,000 in Medicaid payments have been withheld since last spring in that ongoing investigation.
According to Dr. Wood, the dental penalty was in retaliation for his criticism of the $18 million fraud allegation by the Texas Office of Inspector General.
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