AG Sues Xerox; HHSC Cancels Xerox Medicaid Contract

The Texas Attorney General's (AG's) Office filed a civil lawsuit in state district court this week against Xerox Corporation and its wholly owned subsidiary, ACS Healthcare LLC. The state's legal action seeks to recover fraudulent Medicaid payments for orthodontic and dental services improperly approved by Xerox.

Since 2003, Xerox has been responsible for reviewing dental and orthodontic claims submitted to the Medicaid program. Under state law, orthodontic services are not generally eligible for Medicaid coverage. Only the most acute cases in which orthodontic disfigurement poses a health risk to a patient are eligible for Medicaid coverage; Medicaid does not cover cosmetic orthodontics.

The state's lawsuit seeks to recover the fraudulent Medicaid payments. The state is seeking injunctive relief, civil penalties, and restitution of Medicaid overpayments as a result of Xerox's unlawful conduct.

Additionally, the Texas Health and Human Services Commission (HHSC) notified Xerox the state is terminating the company's Medicaid claims administration contract after Xerox staff approved thousands of requests for braces that weren't medically necessary.

"Xerox failed to perform the medical reviews that our contract required and taxpayers deserved," said HHSC Executive Commissioner Kyle Janek, MD. 

"We are committed to recovering the money from these fraudulent claims from all parties involved. Dentists were putting braces on children who clearly didn't meet the Medicaid standard for that care, and Xerox didn't have the processes in place to review those cases before paying them."

HHSC is finalizing an agreement with Accenture, the largest subcontractor under Xerox, to take over as the lead vendor until the state can competitively rebid the work. Accenture has been operating the Medicaid claims payment system under the contract since 2004. 

Xerox employees handle business operations under the contract, including processing requests for services that require prior authorization or advance approval before Medicaid will pay for the treatment. 

Accenture will take over the work performed by Xerox on Aug. 1.

During the rebid, HHSC will break the large contract into as many as five contracts to make it easier to take action against a vendor without disrupting medical care for people with Medicaid. In addition to processing Medicaid claims and requests for prior authorization of services, the current contract covers several other tasks, including maintaining data on Medicaid managed care transactions, collecting drug manufacturer rebates, and staffing call centers for Medicaid providers. In 2013, HHSC paid $168 million to Xerox for those services.

Action, May 16, 2014