Texas Healthcare Fraud/Medicare Fraud Enforcement

In Texas, major healthcare fraud is civilly and criminally prosecuted by 3 separate United States Attorney’s Offices — the Southern, Northern, and Middle Districts of Florida.

The federal government often accomplishes this task with the assistance of the Texas Medicaid Fraud Control Unit (MFCU). Both entities are, in turn, often assisted in their efforts by the bravery and actions of whistleblowers.

Modeled after the federal False Claims Act, the Texas False Claims Act permits private citizens to bring qui tam actions on behalf of the State of Texas to recover treble damages and civil penalties. Tex. Hum. Res. Code § 36.001 et seq.

Nolan Auerbach & White represents whistleblowers in federal court only. We will bring cases on behalf of whistleblowers under the Texas qui tam statute as part of an action under the federal False Claims Act. We do so under the Court’s pendent jurisdiction.

The liability provisions of the Tex. Hum. Res. Code § 36.002 provide liability for any person who:

(1) knowingly makes or causes to be made a false statement or misrepresentation of a material fact to permit a person to receive a benefit or payment under the Medicaid program that is not authorized or that is greater than the benefit or payment that is authorized;

(2) knowingly conceals or fails to disclose information that permits a person to receive a benefit or payment under the Medicaid program that is not authorized or that is greater than the benefit or payment that is authorized;

(3) knowingly applies for and receives a benefit or payment on behalf of another person under the Medicaid program and converts any part of the benefit or payment to a use other than for the benefit of the person on whose behalf it was received;

(4) knowingly makes, causes to be made, induces, or seeks to induce the making of a false statement or misrepresentation of material fact concerning:

(A) the conditions or operation of a facility in order that the facility may qualify for certification or recertification required by the Medicaid program, including certification or recertification as:

(i) a hospital;

(ii) a nursing facility or skilled nursing facility;

(iii) a hospice;

(iv) an ICF-IID;

(v) an assisted living facility;  or

(vi) a home health agency;  or

(B) information required to be provided by a federal or state law, rule, regulation, or provider agreement pertaining to the Medicaid program;

(5) except as authorized under the Medicaid program, knowingly pays, charges, solicits, accepts, or receives, in addition to an amount paid under the Medicaid program, a gift, money, a donation, or other consideration as a condition to the provision of a service or product or the continued provision of a service or product if the cost of the service or product is paid for, in whole or in part, under the Medicaid program;

(6) knowingly presents or causes to be presented a claim for payment under the Medicaid program for a product provided or a service rendered by a person who:

(A) is not licensed to provide the product or render the service, if a license is required;  or

(B) is not licensed in the manner claimed;

(7) knowingly makes or causes to be made a claim under the Medicaid program for:

(A) a service or product that has not been approved or acquiesced in by a treating physician or health care practitioner;

(B) a service or product that is substantially inadequate or inappropriate when compared to generally recognized standards within the particular discipline or within the health care industry;  or

(C) a product that has been adulterated, debased, mislabeled, or that is otherwise inappropriate;

(8) makes a claim under the Medicaid program and knowingly fails to indicate the type of license and the identification number of the licensed health care provider who actually provided the service;

(9) conspires to commit a violation of Subdivision (1), (2), (3), (4), (5), (6), (7), (8), (10), (11), (12), or (13);

(10) is a managed care organization that contracts with the commission or other state agency to provide or arrange to provide health care benefits or services to individuals eligible under the Medicaid program and knowingly:

(A) fails to provide to an individual a health care benefit or service that the organization is required to provide under the contract;

(B) fails to provide to the commission or appropriate state agency information required to be provided by law, commission or agency rule, or contractual provision;  or

(C) engages in a fraudulent activity in connection with the enrollment of an individual eligible under the Medicaid program in the organization’s managed care plan or in connection with marketing the organization’s services to an individual eligible under the Medicaid program;

(11) knowingly obstructs an investigation by the attorney general of an alleged unlawful act under this section;

(12) knowingly makes, uses, or causes the making or use of a false record or statement material to an obligation to pay or transmit money or property to this state under the Medicaid program, or knowingly conceals or knowingly and improperly avoids or decreases an obligation to pay or transmit money or property to this state under the Medicaid program;  or

(13) knowingly engages in conduct that constitutes a violation under Section 32.039(b) .

Cases completed in Texas that were originally brought in a Texas federal court include:

Oklahoma Center for Orthopaedic and Multi-Specialty Surgery (OCOM) its management company, USP OKC, Inc. and USP OKC Manager, Inc. Southwest Orthopaedic Specialists, PLLC, a physician group, and others. When the 2020 settlement was consummated, the defendants agreed to pay $72.3 million settlement under the False Claims Act and the Oklahoma Medicaid False Claims Act of improper relationships between OCOM and SOS, resulting in the submission of false claims to the Medicare, Medicaid and TRICARE programs. The settlement resolved allegations involving USP’s preferential offering of investment opportunities to physicians at four surgery facilities in Texas.

Accutrack Medical Claims Service, LLC and El Paso Integrated Physicians Group, P.A. , in a 2019 resolution in the amount of nearly $3 million. The False Claims Act case arose out of allegations that the defendants double billed as well as overbilled the Government for Remicade (Infiximab,) an infusion drug sold in single-use vials. It was alleged that they would split vials and billed for the drug that was either diluted or not used.

The Methodist Hospital, located in Houston, TX, settled allegations of Medicare fraud by agreeing to pay the federal government a $9.9 million settlement. The False Claims Act violations were alleged to have taken place between January 2001 and August 2003 and involved inflated billing by improperly claiming outlier payments. When Medicare beneficiary treatment and care costs are unusually high, the typical Medicare reimbursement to the care provider can be supplemented by outlier payments. This category of payments was established to ensure that care providers would treat Medicare patients with exorbitantly high care costs. The complaint alleged that Methodist Hospital knowingly and erroneously elevated charges Medicare patients , often for services that were not rendered, resulting in higher reimbursement rates from the federal government.

Infusion Management Systems, Inc. agreed to pay the Government $10 million to settle two qui tam suits alleging that the company falsified Medicare reports, billed Medicare for services not rendered, and sought reimbursement for unallowable services. Infusion had been purchased by HomeCare Concepts of America Inc., and at the time at least, was one of the largest home health care companies operating in Texas.

McAllen Hospitals L.P., d/b/a/ South Texas Health System (a subsidiary of Universal Health Services Inc.) agreed to pay $27.5 million to settle claims that it violated the False Claims Act, the Anti-Kickback Statute and the Stark Law between 1999 and 2006, by paying illegal compensation to doctors in order to induce them to refer patients to hospitals within the group. The government alleged that these payments were disguised through a series of sham contracts, including medical directorships and lease agreements. $25,208,333 of the settlement went to the federal government and $2,291,667 went to the Texas Medicaid program. The hospital also agreed to enter a 5-year Corporate Integrity Agreement. Former McAllen employee Bruce Moilan filed the qui tam action in 2005, and the settlement provided $5.5 million for him as a relator’s share. He was represented by Nolan, Auerbach & White.

Harris County Hospital District in Texas agreed to pay almost $15.5 million to settle charges that it defrauded Medicare/Medicaid by knowingly submitting ineligible reimbursment claims. Relator Robert McCaslin, a former patient-account representative with Harris County Hospital District (HCHD), filed a qui tam suit in 2003, upon learning that his division had allegedly been routinely submitting claims which were not allowed under Medicare/Medicaid regulations. Specifically, McCaslin alleged that HCHD had failed to comply with the Medicare as Secondary Payer (MSP) regulation which requires health care providers to bill private insurance coverage before it seeks restitution from Medicare/Medicaid. Additionally, HCHD would bill Medicare/Medicaid for medical servies provided to patients who were in the custody of law enforcement, an unlawful practice under Medicare/Medicaid regulations.

HealthSouth Corp. had agreed to pay $325 million to settle allegations of Medicare fraud involving outpatient physical therapy services. The Government alleged that HealthSouth, the country’s largest provider of outpatient surgery, submitted claims to Medicare, TRICARE, and the Department of Labor Federal Employees’ Compensation Act program for outpatient physical therapy services that lacked a properly certified plan of care, were rendered by persons other than licensed physical therapists, or were billed as one-on-one services when the services were not provided. HealthSouth agreed to pay $169 million for seeking reimbursement on such claims. The Government also alleged that HealthSouth submitted Medicare reimbursement claims for unallowable health costs like entertainment and travel costs for the HealthSouth administrators’ annual meeting at Disney World. HealthSouth agreed to pay $89 million for seeking reimbursement on such claims. The Government also alleged that HealthSouth submitted reimbursement claims for falsified hospital cost reports and false inpatient discharges. HealthSouth agreed to pay $66 million for seeking reimbursement on such claims.

Driscoll Children’s Hospital (Driscoll) agreed to pay the U.S. Government and the State of Texas a total of $14.5 million to settle a qui tam lawsuit alleging false claims under the Disproportionate Share Hospital (DSH) program for uncompensated care. Driscoll received large DSH payments from Medicaid because it serves a disproportionate number of low-income patients. The complaint alleged that Driscoll falsified data in order to increase Medicaid reimbursements under the DSH program. In addition, Driscoll is alleged to have claimed reimbursement for unallowable lobbying expenses, and provided kickbacks to physicians for patient referrals. The relator, William Goodwin, was the former CFO of Driscoll. The relator’s share of the federal settlement is 27 percent or $2.06 million.

The Pfizer Corporation agreed to pay $49 million to settle allegations that it defrauded Medicaid in a settlement of $27,913,300 plus accrued interest. The remainder of the settlement was to be divided among 40 states. The Government alleged that Pfizer fraudulently avoided fully paying the rebates owed to the states and federal government for the cholesterol-lowering drug Lipitor. The Medicaid Rebate program requires drug manufacturers to report to CMS the best price they offer to any commercial, for-profit customer, and to pay a quarterly rebate based on that best price. Pfizer failed to disclose $250,000 of cash discounts given to a managed care customer in Louisiana, which allegedly allowed Pfizer to retain over $20 million in Medicaid Rebates owed to Medicaid.

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James Conrad, Former Director of Program Integrity at CMS, and Former FBI Health Care Fraud Analy
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