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Judge Upholds Arkansas’ Suspension of Medicaid Payments to Provider; Halt Ordered After Former Exec’s Arrest

July 24, 2018

Arkansas officials acted properly in suspending Medicaid payments to a Missouri-based behavioral health provider, an administrative law judge ruled Monday.

Arkansas Medicaid Inspector General Elizabeth Smith suspended the payments to Preferred Family Healthcare on June 29 after a former executive with the nonprofit was arrested in the improper billing of almost $2.3 million in claims for mental health services.

Springfield-based Preferred Family appealed the suspension, leading to Monday's ruling by Administrative Law Judge Vicki Pickering.

Pickering cited a federal regulation requiring states to suspend Medicaid payments in response to a "credible allegation of fraud."

"OMIG does not have to prove the validity of the fraud, but simply must establish ... that there are credible allegations of fraud that have been verified and have an 'indicia of reliability,'" Pickering wrote, using an abbreviation for the inspector general's office. "OMIG has met its burden in this case."

Smith said she was pleased with the decision and believes the suspension was "the right thing to do under the circumstances."

Asked whether Preferred Family will appeal the decision to circuit court, spokesman Reginald McElhannon said in an email that the organization is "reviewing the decision and its impact."

The nonprofit is the biggest provider of counseling for troubled youths and adults in the state.

A federal investigation involving Preferred Family has led to the conviction of four former state lawmakers: Micah Neal and Jon Woods of Springdale, Eddie Cooper of Melbourne and Henry "Hank" Wilkins IV of Pine Bluff.

Preferred Family has 47 locations in Arkansas and others in Missouri, Kansas, Illinois and Oklahoma.

Rusty Cranford, a lobbyist who was a director of Preferred Family's Arkansas operations, pleaded guilty last month to a multimillion-dollar bribery scheme in Arkansas.

Jerry Walsh, executive director of the now-shuttered South Arkansas Youth Services agency in Magnolia, pleaded guilty last week in federal court to funneling more than $380,000 of the agency's money to Cranford with the goal of preserving the agency's state contracts.

The Medicaid payment suspension came after Robin Raveendran, a former executive vice president, was arrested June 28 on two felony counts of Medicaid fraud related to claims submitted from Jan. 1, 2015, to Oct. 19, 2017.

According to an investigator's affidavit, Raveendran, a former administrator with the state Medicaid program, directed Preferred Family employees to bill Medicaid for the full cost of services provided to patients who were enrolled in both Medicare and Medicaid, instead of just the part of the bill that Medicare didn't cover.

The scheme resulted in more money for Preferred Family Healthcare because Medicaid's rates for the same services were higher than Medicare's, Rhonda Swindle, an investigator with the state attorney general's office, wrote in the affidavit.

The claims submitted to the Medicaid program were "manipulated" to appear as though they had already been processed by Medicare and represented only the part that Medicare didn't pay, rather than the full bill, Swindle wrote.

Medicare is the federal health insurance program for the elderly and disabled. Medicaid is funded by the state and federal governments and covers low-income people.

In addition to suspending the Medicaid payments, the state Department of Human Services has said it will terminate Preferred Family's contracts for mental health and substance abuse services outside the Medicaid program. In a letter to employees in early July, the nonprofit said cancellation of those contracts would leave it unable to continue operations in Arkansas.

At a July 13 hearing over the suspension appeal, Medicaid Director Dawn Stehle said the program began working on a plan in April, after she learned of the attorney general's investigation, to help Preferred Family patients switch to other providers, according to Pickering's order.

Smith said the suspension will stay in place at least until Raveendran's criminal case is concluded. If he is convicted, the state could make the payment suspension permanent, she said.

The article mentioned above was written by Andy Davis at the Arkansas Democrat Gazette and can be found here

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