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Texas Supreme Court Says Medicaid Providers Cannot Blame Or Seek Financial Contributions From Other Potential Parties in Fraud Cases

August 22, 2018

In a significant departure from the long standing law that a person may only receive one recovery for an injury, the Texas Supreme Court recently rejected Xerox Corporation’s attempts to share responsibility with Texas dentists who submitted a reported $2 billion in claims for allegedly fraudulent orthodontia services that were approved by Xerox.

By way of background, Xerox served as Texas Medicaid’s claims administrator for almost a decade. After an audit revealed a large number of medically unnecessary orthodontia claims were approved by Xerox, the State filed suit against Xerox for allegedly falsely stating its qualifications and claims approval process. The State of Texas also filed suit against countless dentists who allegedly submitted the fraudulent claims for medically unnecessary orthodontia. In other words, the State sought to recover money from both Xerox and the dentists for the same injury, the State’s payment of medically unnecessary orthodontia claims.

As part of its defense, Xerox sought to invoke the proportionate responsibility protections provided for in Chapter 33 of the Texas Civil Practice & Remedies Code. On the State’s motion, the trial court struck Xerox’s third-party petition seeking contribution from twenty seven dentists who submitted the claims and denied Xerox’s motion to designate nearly seventy dentists as responsible third parties. The trial court also denied Xerox’s request to consolidate all of the State’s suits against it and the dentists. In other words, the trial court denied all of Xerox’s attempts to share responsibility with the dentists whose allegedly fraudulent claims Xerox approved.

On appeal, the Texas Supreme Court agreed with the State that Chapter 33 of the Texas Civil Practice & Remedies Code does not apply to cases filed under the Texas Medicaid Fraud Prevention Act. The Court explained that the statute provides for “a civil penalty scheme to deter, punish, and thereby prevent fraud on the Medicaid system” and, therefore does not constitute damages subject to apportionment under the proportionate responsibility provisions of Chapter 33. Thus, the Texas Supreme Court held that Xerox could not attempt to defend itself by holding the dentists partly responsible.

The harsh reality is that many administrative or civil “fraud” cases are brought because of a Medicaid provider’s failure to follow little known statutes or regulations that the contractor often unwittingly agreed to follow in a very lengthy and hard to understand contract. As made clear in the In re Xerox Corp. decision, you can still be accused of fraud even if your claim for services is approved, and you will not be allowed to defend yourself by apportioning responsibility to other people involved. The key takeaway for Medicaid providers is that you need sound legal advice to ensure your compliance with not only your Medicaid contract, but also the relevant statutes and regulations. And if the government is investigating you, the sooner you get help the better you can defend yourself and get back to taking care of your patients and family.

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