Don’t Blame the Dentists: Medicaid Fiscal Agent Contractor on the Hook for Paying Back One Billion in Bad Claims

On June 22, 2018, a years-long dispute culminated with the Texas Supreme Court finding that Healthcare Partnership, a subsidiary of Xerox, the former fiscal agent contractor for the Texas Medicaid program, was solely responsible for the $1 billion in fraudulent payments made between 2004 and 2012 while overseeing the orthodontic pre-authorization process for Texas Medicaid’s dental program. In a lengthy opinion, the Court upheld the Court of Appeal’s ruling that Xerox – not the dentists who submitted the claims – must be held liable for allowing claims workers with little or no expertise to approve dental claims for the State’s Medicaid program. Evidence showed that Xerox clerks reviewing for pre-authorization processed 200 applications a day – essentially rubber-stamping the requests.

In 2008, Medicaid pursued a claims audit against providers directly for allegedly submitting false claims, pursuing payments for services allegedly never performed or misrepresenting the qualifications of those who provided orthodontic services, in order to obtain higher fees. In response, the dentists argued that it was Xerox’s fault – acting on behalf of Texas Medicaid – for pre-authorizing the claims for orthodontic work for children, thereby failing to alert the providers that the services were improper.

In addition to this lawsuit, Texas Medicaid went after Xerox directly – filing a lawsuit in 2014 for the mishandling of claims, in violation of their five-year $759 million contract. But from as far back as 2008, the program knew that Xerox’s review may have been faulty. An audit revealed that the contractor had just one dentist who reviewed only 10 percent of the faulty claims. The processing of the remaining dental claims was delegated to unlicensed claims processors, which the Medicaid program found to be problematic. Xerox contended that nothing in their contract required licensed dentists to review the claims. Regardless of these concerns, over the next several years, the State continued on with the Xerox contract, allowing millions of dollars to be paid on faulty claims. Xerox is no longer the fiscal agent for Texas Medicaid; a new contract was entered with Accenture.

To date, it does not appear that courts from other jurisdictions have similarly held Medicaid fiscal agent contractors responsible for mishandling claims. But this decision may serve as powerful persuasive authority for similar situations around the country where Medicaid contractors drop the ball when processing claims.