First Amended Complaint SA-99-CV-1093FB

U.S. ex.rel.Barron and Scheel vs. Deloitte & Touche Consulting Group, et alPage 1 of 49

UNITED STATES DISTRICT COURT

WESTERN DISTRICT OF TEXAS

UNITED STATES OF AMERICA, ex rel*

TONI R. BARRON AND VICKY J. SCHEEL,

Plaintiffs*

*

vs.

*CIVIL ACTION

DELOITTE & TOUCHE, LLP, DELOITTE NO. SA-99-CV-1093FB

TOUCHE CONSULTING GROUP, LLC., *

DELOITTE & TOUCHE CONSULTING

GROUP HOLDING, LLC, MEDICAID *

SOLUTIONS OF TEXAS, and NATIONAL

HERITAGE INSURANCE COMPANY,*

Defendants*

FIRST AMENDED COMPLAINT FOR DAMAGES AND OTHER RELIEF

UNDER THE FALSE CLAIMS ACT

This is an action to recover damages, civil penalties and equitable relief on behalf of Plaintiff, the UNITED STATES OF AMERICA (the “U.S.” or the “GOVERNMENT”), arising from DEFENDANTS knowing submission of false and fraudulent charges to the U.S., directly or indirectly, for payment under the Medicaid program in violation of the False Claims Act, 31 U.S.C. § 3729 et. seq. as amended (the “ACT”). It is also on behalf of TONI R. BARRON and VICKY J. SCHEEL (the “RELATORS”) through the undersigned counsel who, acting on behalf of and in the name of the U.S., bring this civil action under the qui tam provisions of the False Claims Act, and allege as follows:

JURISDICTION AND VENUE

  1. This Court has jurisdiction over the subject matter of this Complaint pursuant to the False Claims Act, 31 U.S.C 3729 et seq., 28 U.S.C.  1345 and 31 U.S.C.  3732(a). The Court has personal jurisdiction over the DEFENDANTS because the DEFENDANTS reside and/or transact business in San Antonio, Bexar County, Texas.
  1. Venue in this District is proper pursuant to 28 U.S.C.  1345 and 31 U.S.C.  3732(a), which provide that any action under  3730 may be brought in any judicial district in which the DEFENDANT or, in the case of multiple DEFENDANTS, any one DEFENDANT can be found, resides, transacts business, or in which any act proscribed by  3729 occurred. The acts and violations complained of herein occurred in San Antonio, Bexar County, Texas where DEFENDANTS reside and transact business.
  1. Under the False Claims Act, this complaint is to be filed in camera and remain under seal for a period of at least sixty (60) days and shall not be served on the DEFENDANTS until the Court so orders. The GOVERNMENT may elect to intervene and proceed with the action within sixty (60) days after it receives both the complaint and the material evidence and information.
  1. This action is not based upon any public disclosure of information within the meaning of 31 U.S.C. 3730 (e)(4)(A). The RELATORS have direct and independent knowledge, within the meaning of 31 U.S.C. 3730(e)(4)(B), derived through their employment and/or contracts with the Northeast Independent School District (“NEISD”), the Judson Independent School District (“JISD”) and the Southwest Independent School District (“SWISD”) and their own investigations, of the information on which the allegations set forth in this Complaint are based. RELATORS have voluntarily provided this information to the GOVERNMENT prior to filing this Complaint. To the extent any of these allegations may have been publicly disclosed, within the meaning of 31 U.S.C. 3730(e)(4)(A), the RELATORS were the source of the disclosures.
  1. RELATORS provided to the Attorney General of the United States and to the United States Attorney for the Western District of Texas, San Antonio Division. Pursuant to the False Claims Act, 31 U.S.C. Section 3730 (b)(2), shortly after the filing of this complaint, a statement of all material evidence and information related to the complaint was served on the United States. This Disclosure Statement supports the existence of overcharges and false claims by Defendants DELOITTE, NHIC, and MCST.
  1. This action is brought by RELATORS on behalf of the United States of America to recover all damages, penalties and other remedies established by and pursuant to 31 U.S.C. §§ 3729-3733 and RELATORS claim entitlement to a portion of any recovery obtained by the United States as a Qui Tam Plaintiff authorized by 31 U.S.C. § 3730.

PARTIES TO THE ACTION

  1. Relator TONI R. BARRON (“Ms. Barron”), a citizen of the United States and a resident of 646 Golfcrest Drive, San Antonio, Texas 78239, is suing on behalf of and in the name of the UNITED STATES OF AMERICA. Ms. Barron is a speech language pathologist. At the time of filing ,Ms. Barron is an independent contractor with the public schools of San Antonio, Texas. During all relevant times of the acts described in this lawsuit, Ms. Barron was employed and/or under contract with Judson Independent School District (JISD) and with the Southwest Independent School District (SWISD) to provide speech therapy services to those students qualified to receive her services.
  1. Relator VICKY J. SCHEEL (“Ms. Scheel”), a citizen of the United States and a resident of 16302 Tres Ritos, San Antonio, Texas 78247, is suing on behalf of and in the name of the UNITED STATES OF AMERICA. Ms. Scheel is a physical therapist. At the time of filing and during all relevant times of the acts described in this lawsuit, Ms. Scheel was employed by the Judson Independent School District (JISD)and the Northeast Independent School District (NEISD) to provide physical therapy services to those students qualified to receive her services.
  1. The CENTERS FOR MEDICARE AND MEDICAID SERVICES ("CMS"), formerly known as the HEALTH CARE FINANCING ADMINISTRATION (“HCFA”), is an agency of Plaintiff U.S. CMS operates within the United States Department of Health and Human Services (“HHS”), and its central office is responsible for setting federal Medicaid policy and coordinating the administration of the 50+ state and territorial Medicaid programs. CMS has 10 regional offices whose responsibilities include the oversight of the state Medicaid programs within their jurisdiction. CMS is the agency charged with ensuring that that each state’s Medicaid program meets federal Medicaid requirements. As such, CMS has oversight over the School Health and Related Services Program (“SHARS”) and the Medicaid Administrative Claiming (“MAC”) in the public schools.
  1. Defendant DELOITTE & TOUCHE, LLP (“DT- LLP”) , is a limited liability partnership organized under the laws of Delaware. Its mailing address is 10 Westport , PO Box 820, Wilton, Connecticut 06897-0820. It has been authorized to do business in the state of Texas and its agent for service is Corporation Service Company, 800 Brazos Street, Austin, Texas. DT- LLP is the manager member of DELOITTE & TOUCHE CONSULTING GROUP HOLDING, LLC.
  1. Defendant DELOITTE & TOUCHE CONSULTING GROUP, LLC, (“DTCG”) is a limited liability company organized under the laws of Delaware. It is authorized to do business in the state of Texas and its agent for service is Corporation Service Company, 800 Brazos Street, Austin, Texas. DTCG is in the business of providing consulting services to its clients. Its manager member is DELOITTE & TOUCHE CONSULTING GROUP HOLDING, LLC.
  1. Defendant DELOITTE & TOUCHE CONSULTING GROUP HOLDING, LLC, (“DTCG Holding”) is a limited liability company organized under the laws of Delaware. It is authorized to do business in the state of Texas and its agent for service is Corporation Service Company, 800 Brazos Street, Austin, Texas. Its manager member is DT-LLP.
  1. DT-LLP and its affliates, including, but not limited to, DTCG and DTCG HOLDING (herein collectively referred to as “DELOITTE”) provide accounting, tax, consulting, and management information services to clients in the United States and around the world. DELOITTE, a nationally recognized expert in the area of healthcare consulting, is an industry leader familiar with the laws and regulations that govern billing and reimbursement from federal health insurance programs.
  1. The NATIONAL HERITAGE INSURANCE COMPANY (“NHIC") is a wholly owned subsidiary of Electronic Data Systems, Inc., a public for-profit corporation. NHIC is the claims administrator for Texas Medicaid and the fiscal agent that pays valid Medicaid claims. Additionally, it is NHIC’s responsibility to ensure that all claims submitted for payment are adequately documented, medically necessary, and that the services provided and the level of reimbursement is in keeping with Medicaid rules and regulations. If the claims fail to meet the requirements set forth in the rules and regulations, it is NHIC's responsibility to deny payment. In the year 2000, NHIC earned $99 Million in administrative fees for the processing and administration of $3.5 Billion in Medicaid claims, or approximately 2.8%. This amount was exclusive of compensation for software development and other duties and incentives under the Texas Medicaid contract. Among its numerous duties, NHIC enrolls new providers, conducts state-wide seminars and training sessions on the Medicaid billing rules, monitors provider billing patterns, operates and maintains the Medicaid Management Information System (MMIS) of the state, seeks reimbursement from liable third parties, and monitors for fraud and abuse through desk and field audits and other activities.
  1. MEDICAID CLAIMS SOLUTIONS OF TEXAS (“MCST”) is a for-profit entity organized under the laws of the state of Texas. Gordon Harmon is a principal of the company, and actively participates in the day to day operations of the business. MCST provided consulting services to various school districts in the state of Texas. These consulting services included SHARS training and administration and third party billing of Medicaid claims for the districts. Its principal place of business is 747 Highway 287 North, Mansfield, Texas 76063 and its agent for service is Gordon Harmon who can be served at the same address.

RELATORS ARE ORIGINAL SOURCE AND

HAVE INDEPENDENT KNOWLEDGE

  1. The RELATORS have direct and independent knowledge, within the meaning of 31 U.S.C. 3730(e)(4)(B), To the extent any of these allegations may have been publicly disclosed, within the meaning of 31 U.S.C. 3730(e)(4)(A), the RELATORS were the source of the disclosures.
  2. In 1992-3, Relators were introduced to the SHARS program. After careful study of the program, Relators originally became concerned with possible deleterious effects to their professional licensure. Later, they identified serious problems with the billing of federal monies for school-based services.
  3. On January 25, 1993, Relators contacted Diana Pfaff, representative of NHIC to ask questions and voice their concerns with the overbilling of SHARS; billing for educational, not medical services; and aggressive tactics of revenue maximization consultants.
  4. In January, 1993, Relators contacted Ray Gudur, SHARS Specialist with TDH, to inquire about the billing of educational services under SHARS and to report concerns with the billing practices of DELOITTE, including the use of individual billing rates for groups services.
  5. On April 9, 1997 and on April 15, 1997, Relators conferred by phone and in person with Dick Barhem, Special Agent with the Office of Inspector General for the US Department of Health and Human Services. At this and a subsequent extensive meeting, Relators reported that DELOITTE and MCST were over billing the Medicaid Program for medically unnecessary and/or educational services and that proper documentation was not being maintained. They voiced their concerns with local funding matches of FFP, billing of transportation without travel logs, individual billing for group activities and other issues. They also discussed NHIC's failure to monitor and provide adequate training in the claims submission process.
  6. On April 8, 1998, Relators filed qui tam action ,SA-98-CA-0311OG , which was placed under seal in the court and served on the United States. In the Complaint and the subsequently served Disclosure Statement, Relators alleged billing violations of Medicaid for SHARS services by DELOITTE, MCST, and NHIC, including but not limited to, individual billling for group services, transportation with no documentation, billing for medically unnecessary services, improper matching of funds expended, and aggressive third party billing consultants. The Relators provided the United States with examples and supporting documentation of their allegations from the Disclosure Statement, including, but not limited to training material, billing instructions, portions of transcripts of audio taped meetings, samples and other relevant material.
  7. On June 18, 1998, Relators conducted a video conference with DOJ attorneys Winstanley Luke and Elizabeth Hack. Relators again presented their allegations against Defendants DELOITTE, MCST, and NHIC and supporting information with respect to billing improprieties, transportation charges, physician referrals, documentation and other issues.
  8. On January 24, 1999, Relators had a teleconference with Linda Peltz, HCFA- Maryland, in which they discussed billing violations in the SHARS program including, but not limited to, improper transportation charges, billing for medically unnecessary services, and the aggressive tactics of the revenue maximization agents, DELOITTE and MCST.
  9. On January 27, 1999, Relators also conducted a teleconference with Andy Frederickson, out of the HCFA office in Dallas regarding SHARS billing improprieties, and specific concerns with the individual billing of group services and They also discussed the problems of default billing for transportation and other issues.
  10. On February 9, 1999, Relator Scheel spoke with Edward Landicho of the OIG HHS Office in Washington D.C. on her concerns with SHARS billing violations by third party agents. She followed this conversation with a detailed letter of her allegations and observations to Mr. Landicho on February 10, 1999.
  11. The above examples of contacts do not reflect all communication with the federal, state and education agencies. Relators, in good faith, tried to apprise themselves of the rules and regulations regarding the proper billing of SHARS and used all available sources to glean information.

BACKGROUND

  1. The Individuals with Disabilities Education Act of 1991 (“IDEA”), reauthorized in 1997, requires that schools must provide each child regardless of disabilities or income, with a free and appropriate public education (“FAPE”). A FAPE includes special education and related services when necessary. These services have been provided by the local school districts with some federal assistance in funding. The Early Periodic Screening, Diagnostic and Treatment ("EPSDT") service is Medicaid's comprehensive and preventive child health program for individuals under the age of 21. ESPDT was defined by law as part of the Omnibus Budget Reconciliation Act of 1989 (OBRA 89)legislation and includes periodic screening, vision, dental and hearing services. In addition, section 1905 (c)(5) of the Social Security Act requires that any medically necessary health care service listed at section 1905 (a) be provided to an ESPDT recipient even if the service is not available under the State's Medicaid plan to the rest of the Medicaid population.
  1. Texas school districts have experienced a controversial change in their funding. A movement to “equalize” the payments received from the Texas for a district's students has resulted in many changes in the school place, including drastic reductions in funding that was previously allocated to many districts. School districts have looked for other funding sources, and Medicaid reimbursement for SHARS is viewed as an opportunity to capture needed dollars. DELOITTE and MCST took advantage of this political situation in Texas to sell their services.
  1. Today, in a majority of the states, Medicaid pays for covered services rendered in a school-based setting when these services are medically necessary. In Texas, medically necessary School Health and Related Services (“SHARS”) are covered under Medicaid. Over 1000 public school district providers in the state receive tens of millions of dollars in federal funds for the rendition of SHARS services to Medicaid-eligible children.
  1. Though Medicaid is jointly funded by the federal and state governments, each state individually administers its own program. Medicaid, enacted by Title XIX of the Social Security Act, is an entitlement program created to provide medical care to pregnant women and children and to needy individuals who are aged, blind, or disabled. Certain basic services to certain categories of eligible individuals must be covered. The mandatory services include physician services, family planning services and supplies, rural health clinic services, and early and periodic screening, diagnostic, and treatment services (EPSDT) for individuals under the age of 21. Section 1905 (a) of the Medicaid Act lists the mandatory and optional services a state can cover in its Medicaid program. Medicaid is the largest program financing medical and health-related services to the poor in the U.S. Over half of the Medicaid-eligible individuals are children.
  1. Under the Medicaid laws and regulations, states, like Texas, are permitted to establish their own state plan and may determine their own eligibility standards, set the rates for payment for services, and determine the amount, duration and scope of services within the general parameters of the federal Medicaid law. SHARS in Texas includes Medicaid coverage and payment for speech therapy, occupational therapy, psychological screening, medical screening, administrative services and assessment services when these services are medically necessary to insure that Medicaid-eligible children have unfettered access to a FAPE and so that these children may benefit from their educational program without medical impediments.
  1. CMS policy states that a state Medicaid program may cover health-related services if they are included in a child’s Individual Education Plan (IEP) providing that :
  • The services are medically necessary; and
  • Covered under a Medicaid coverage category (i.e. speech therapy); and
  • All other Federal and state regulations are followed including those for provider qualifications, comparability of services and the amount, duration, and scope provisions; and
  • The services are included in the state’s Medicaid Plan or available under EPSDT.
  1. In January 1991, TEXAS submitted a plan to Medicaid requesting coverage of SHARS under the federal insurance program.