Attorney General Leslie Rutledge announced today a $6.5 million settlement by Preferred Family Healthcare of state and federal Medicaid fraud claims.

The multistate health care provider once operated some 50 facilities offering mental health and other services in Arkansas, but no longer operates in the state. It departed after it was revealed at the center of a vast public corruption scandal for bribing and paying kickbacks to legislators, much of it overseen by a former lobbyist Rusty Cranford.

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This settlement pertains only to overbilling for services, a case begun by an informant’s tip. It already had led to state court charges against five former employees.

On the federal level, five former state legislators have pleaded guilty or been convicted, along with others, in various schemes related to PFH, Cranford or steering state surplus money to various beneficiaries, including PFH affiliates. Former Sen. Jeremy Hutchinson, the governor’s nephew, awaits sentencing, as do two other legislators. A federal trial is scheduled next year for a Springfield, Mo., couple, Tom and Bontiea Goss, who once led PFH.

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Rutledge’s news release on today’s announcement:

Arkansas Attorney General Leslie Rutledge today announced that multimillion dollar federal and state civil settlements have been reached with Preferred Family Healthcare (PFH).

Both settlements were based on an investigation conducted by the Attorney General Office’s Medicaid Fraud Control Unit (MFCU) into false claims submitted to the Arkansas Medicaid Program by former PFH employees. PFH has agreed to pay $4,555,632.10 to resolve a federal false claims case and $1,944,367.90 in a separate state settlement under the State False Claims Act. In addition to the larger settlement, five former employees of PFH have been charged in state court with Medicaid fraud and an additional employee settled false claims or actions.

“The false claims addressed in these settlements were the result of a culture of corruption at the highest levels of PFH in Arkansas, and as Attorney General, I will do everything in my power to hold any Medicaid provider accountable when Medicaid Program rules or the law is violated,” said Attorney General Rutledge. “This settlement shows we will aggressively pursue any company that deceives Arkansans or takes advantage of the Medicaid program which provides medically-necessary treatment for many Arkansans.”

Through most of 2016, the MFCU investigated fraud in the Rehabilitative Services for Persons with Mental Illness (RSPMI) program. In September 2016, an informant and employee of PFH made a complaint to the MFCU claiming PFH had been billing Medicaid for counseling services not rendered or over-billed. These allegations involved inappropriate billing by individual therapists.

In December 2017, the informant contacted the MFCU with additional information that indicated PFH may have been inappropriately billing an entire class of recipients known as Qualified Medicare Beneficiaries (QMBs). Using data analytics, the MFCU was immediately able to confirm that claims for services improperly provided to this population were being submitted to Medicaid for payment rather than Medicare.  While it was clear that the submitted claims were improper, it was not clear who within PFH was submitting the claims, whether they understood what they were doing was illegal, or how the claims were able to get through the edits in place in the Medicaid payment system that should have rejected the claims.

In early January 2018, the MFCU served PFH with a “Request for Information” seeking to determine how this had occurred. Later that same month the state’s informant filed a federal sealed qui tam action against PFH under the federal false claims act. A qui tam action is a federal lawsuit brought by a private citizen to stop or prevent fraud and abuse of federal dollars.

PFH, a large mental health care organization, offered a range of services which included mental and behavioral health, substance use, employment, developmental disabilities, child welfare, and medical. Until October 2018, there were approximately 50 clinics throughout Arkansas. PFH no longer operates in the State of Arkansas.

The MFCU was assisted in its investigation by the Office of the Arkansas Medicaid Inspector General and the HHS-OIG-Office of Investigations.

UPDATE: I’ve dug up the original complaint that led to this investigation, filed in 2018 on behalf of Frances Smith. It was unsealed recently as the federal government moved to its settlement. Smith was a counselor for a PFH affiliate in Salem (Fulton County). She observed fraudulent operations and was fired after complaining to management about them.

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Here’s the complaint by the ‘relator,’ or whistleblower.

For example, it said:

Defendant would frequently submit bills to the Government Insurance programs for a level or type of services different from what was actually provided. Indeed, Relator encountered what might be described as a culture of fraud at the company.

For instance, in 2015 Relator asked her then Regional Director, Matt Sullivan, for advice on how to run one of Defendant’s summer programs. Sullivan told Relator that she could just show the clients a movie and bill it as group therapy.

She said she later observed this fraudulent activity taking place. The complaint goes on to detail extensive billing irregularities.

Complainants in qui tam actions can received a portion of sums won. No information is on file relative to any claims by Smith. Her attorney has not responded to my query about how much she’s likely to receive.

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Here’s some additional information.

Here’s the settlement the news released mentioned with an individual. In it, Tangellah Mensah agrees to pay $1,838 restitution and $3,676 in penalties for submitting false claims to Medicaid in 2017. In return, the state agreed not to bring criminal charges.

Here’s the state’s settlement with PFH.

It signals an end to the state’s corporate investigation of PFH and acknowledges cooperation by PFH and resolution of some other matters. It says, however, that it excludes and has no bearing on criminal charges pending in Independence County against former PFH employees Robin Raveendran and Helen Balding. Raveendran has pleaded guilty to a federal charge. And the state may continue to pursue other individual employees, the settlement says. When completed, PFH will be able to be reimbursed for services provided before it left the state but after it had been suspended from Medicaid.

This partially answers a question I’d posed about the status of pending criminal cases and whether any might be resolved as a result of this. Otherwise, Rutledge’s office said:

The status of the state criminal cases can be found on Court Connect.  Ongoing criminal matters cannot be discussed.

Trials are currently scheduled in coming months for Balding and Raveendran.

I asked how the state’s share of the settlement will be handled. Said Rutledge’s office:

 The state’s share has not been fully calculated but we expect it to be approximately $1,250,000.  We estimate that $120,000 will be retained by the Attorney General’s Office to fund future Medicaid fraud investigations and  $1,130,000 will be deposited into the Arkansas Medicaid Trust Fund.

I’m also still seeking an answer to a question to the attorney general’s office about whether it will go after some semi-related ill-gotten money: The more than $600,000 steered to Ecclesia College in state money as part of a kickback-bribery scheme involving some of the same players in the PFH scandal.