complaint us ex rel.barron and scheel v deloitte and touche consulting, false claims act

7/31/2019 Complaint US Ex Rel.Barron and Scheel v Deloitte and Touche Consulting, False Claims Act

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First Amended Complaint SA-99-CV-1093FBU.S. ex.rel.Barron and Scheel vs. Deloitte & Touche Consulting Group, et al Page 1 of 53

UNITED STATES DISTRICT COURT

WESTERN DISTRICT OF TEXAS

UNITED STATES OF AMERICA, ex rel *TONI R. BARRON AND VICKY J. SCHEEL,

Plaintiffs *

*vs.

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

TOUCHE CONSULTING GROUP, LLC., *DELOITTE & TOUCHE CONSULTINGGROUP HOLDING, LLC, MEDICAID *SOLUTIONS OF TEXAS, and NATIONALHERITAGE 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:


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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.

2. 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.

3. 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.

4. 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


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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.

5. 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.

6. 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.


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PARTIES TO THE ACTION

7. 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/orunder 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.

8. 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 physicaltherapist. 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.

9. 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


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responsibilities include the oversight of the state Medicaid programs within their

jurisdiction. CMS is the agency charged with ensuring that that each states

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.

10. 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 beenauthorized 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.

11. 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.

12. 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


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manager member is DT-LLP.

13. 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 insuranceprograms.

14. 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 NHICs 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


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reimbursement from liable third parties, and monitors for fraud and abuse

through desk and field audits and other activities.

15. 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 andadministration 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 KNOWLEDGE16. 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.

17. 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.

18. 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


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maximization consultants.

19. 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.

20. 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 overbilling 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.

21. 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.

22. On June 18, 1998, Relators conducted a video conference with DOJ attorneys


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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.

23. 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.24. 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.

25. 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.

26. 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

27. The Individuals with Disabilities Education Act of 1991 (IDEA), reauthorized in

1997, requires that schools must provide each child regardless of disabilities or


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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 medicallynecessary 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.

28. 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.

29. 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.


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30. 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) forindividuals 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.

31. 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.

32. CMS policy states that a state Medicaid program may cover health-related

services if they are included in a childs Individual Education Plan (IEP)


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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 states Medicaid Plan or available

under EPSDT.

33. In January 1991, TEXAS submitted a plan to Medicaid requesting coverage of

SHARS under the federal insurance program. It was approved by CMS on or

about September 1992. Rates of reimbursement for SHARS were originally

established by the Texas Interagency Council on Early Childhood Intervention.

34.Since 1993, school districts in Texas have organized systems, trained staff andhired outside consultants in an effort to capture reimbursement for these

charges from Medicaid. The federal financial participation (FFP), that is the

federal GOVERNMENTs share for the states Medicaid expenditures, is

generally claimed under two categories- administrative and medical assistance

payments. In Texas the match is approximately 65% federal to 35% state

monies. With respect to school services, the state match must come from state

and local funds expended for medically necessary services as covered by

Medicaid and certified as such by each participating school district. The state

match cannot come from dollars expended on educational services. These

federal SHARS dollars have provided states and their schools with tremendous

incentives to become Medicaid providers, to qualify all Medicaid eligible children


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in their schools, and to aggressively structure their programs and charge

systems so that they can qualify for reimbursement from the Medicaid program.

35. In 1994, DELOITTE was hired by the Texas Education Agency ("TEA") and the

Texas Department of Health ("TDH") to develop new SHARS reimbursement

rates. DELOITTE's new rates were 13%-164% (an average of 98%) higher than

those SHARS rates being used at the time.

36. In fiscal 1994, three billing agents, DELOITTE, MCST, and the TexasAssociation of School Boards, provided billing and consulting services to 79% of

the enrolled SHARS providers in Texas. DELOITTE and MCST continue to

maintain a strong, if not dominant, market share in Texas.

37. DELOITTE has within its management consulting area, a component that

consults with school districts throughout the United States on SHARS

reimbursements from Medicaid. The SHARS component, sometimes known byD&T as the Medicaid Schools Initiative, is headed by David Bankard and/or Al

Haight in the Management Consulting Section of a DELOITTE affiliate located at

180 North Stetson Avenue, Chicago, Illinois 60601. Mr. Haight/Mr. Bankard and

DELOITTE staff from DELOITTE offices throughout the country offer many

services, including, but not limited to, organizing training sessions on Medicaid

billing for local school district personnel, consulting with school districts on

SHARS revenue maximization, Medicaid administrative claiming, and serving as

a third party billing agent for more than 1,500 school districts nationwide.

DELOITTE was instrumental in developing the SHARS reimbursement rates for

the State of Texas. Additionally, DELOITTE positions itself as being in the

business of Medicaid Revenue Maximization.


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38. Until the early 1990s , public school districts had never billed for any of the

services provided in the schools , and for the most part, they operate in an

organizational culture that is ill-equipped to create the charge systems and

billing infrastructure required to efficiently bill Medicaid. DELOITTE has created

a powerful and lucrative niche in the SHARS community as a third party billing

agent and consultant, often charging up to 20% of amounts recovered from

Medicaid on behalf of the school districts. This is not unusual, as school

districts are inexperienced Medicaid service providers, and most are only too

happy to relinquish these duties to those perceived as being the SHARS billingexperts.

39. DELOITTE is a "Big Five", that is, one of the top five accounting firms in the

United States. It is an organization with a wealth of resources and expertise with

medical billing. Relators have long contended that DELOITTE'S key role in

developing the SHARS reimbursement rates for the State of Texas and then

serving as the SHARS billing agent to hundreds of school districts has created

an inherent conflict. DELOITTE works on a contingency basis (15-20% of

Medicaid recovery) with the school districts, and, as such, its compensation is

performance-based. The higher the SHARS rates are set, the higher

DELOITTEs contingency fee for billing services. Furthermore, DELOITTE has

served as both independent auditor and SHARS billing agent for several school

districts, including Fort Worth ISD and Houston ISD. Texas school districts are

required to have an annual financial audit by an outside auditor. Under oft-

repeated scenarios in districts nationwide, DELOITTE, the independent auditor,

has been in a position to audit the work of DELOITTE, the billing consultant. In

the wake of egregious accounting abuse involving large U.S. corporations,

federal regulators seek to prohibit a professional firm from providing both audit


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and consulting services to the same client. In February, 2002, DELOITTE spun

off its consulting division into a separate, independent entity in an effort to

defuse public outcry and federal regulators' concerns about pervasive conflicts

of interest.

RELEVANT FACTS AND ALLEGATIONS:

40. NEISD, JISD, SWISD, Northside Independent School District (NISD), San

Antonio Independent School District (SAISD), and Edgewood Independent

School District (EISD), (collectively the DISTRICTS) are providers of SHARS

services in their respective schools. Additionally, the DISTRICTS do Medicaid

outreach and bill under the Medicaid Administrative Claiming Program (MAC).

The Relators are familiar with many of the practices within the DISTRICTS, other

Texas school districts, and other U.S. school districts as the result of personally

having provided professional SHARS services in several of the DISTRICTS and

through interaction with their nationwide colleagues from 1992 to the present.

DELOITTE: NATIONAL INDUSTRY LEADER

41. On or before September 1, 1993 and through May, 2001, NEISD engaged

DELOITTE to consult , implement and assist NEISD in the setup of systems to

do the SHARS billing of Medicaid. Specifically, DELOITTE was hired to provide

various services, including, but not limited to, data collection, claim processing,

training, and computer software. During the period of its SHARS contract with

NEISD, DELOITTE submitted all SHARS claims for reimbursement to Medicaid.

42. On or September 1, 1998 and through May, 2001, JISD engaged DELOITTE to

consult, implement and assist JISD with the setup of systems to do the SHARS


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billing of Medicaid. Specifically, DELOITTE was hired to provide various

services, including, but not limited to, data collection, claim processing, training,

and computer software. During the period of its SHARS contract with JISD,

DELOITTE submitted all SHARS claims for reimbursement to Medicaid.

43. From the period September 1, 1992 through the present time, DELOITTE has

been engaged by many school districts locally and hundreds of others in Texas.

SHARS and MAC billing services were delivered under individual school district

contracts or under contracts with the lead school district member of a consortium

of smaller districts. Said consortiums, or "umbrella provider models", wereprototyped by DELOITTE and have been organized for the specific purpose of

billing Medicaid for school services. During the period of its SHARS contract

with various Texas school districts, Relators will show that , DELOITTE

submitted all SHARS claims for reimbursement to Medicaid for each of their

client districts.

44. DELOITTE has over 1500 school district clients nationwide and it prides itself

on being the "initial designer and architect of both school-based Fee-For-Serviceand Administrative Claim Program" in the nation. ( See Exhibit 1,Deloitte's "A

Proposal to Provide Medicaid Reimbursement Services" ("PROPOSAL", p. 9),

May, 1997) DELOITTE characterizes itself as "uniquely qualified" to process

Medicaid claims for schools- "No other firm in the nation possesses the breadth

of clients, the experience with this program, of the claim maximization

capabilities.."(See PROPOSAL, p. 20).

45. In 1994, the Texas Legislative Board, in assessing the vulnerability of ill-

prepared school districts in the new SHARS environment, reported that " This

program [SHARS] is being implemented in a nontraditional setting and the

providers (local education agencies and special education programs) are

unfamiliar with billing third-party payors (in this case, Medicaid and private health


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insurance companies) for health-related services. As a result, there is a greater

need for technical assistance and program policy clarification. The Texas

Department of Health, the Medicaid operating agency is not familiar with local

school district operations, special education services, or the implementation of a

medical program in the school setting".

46. In this confused environment it was easy to see why school district clients

eagerly relied on DELOITTE's representations that its "knowledge of the

Medicaid Programprovides [school district] with the assurance that the claims

we file on your behalf will be detailed, accurate, and in full conformance withboth State and Federal Medicaid law". (PROPOSAL, p. 10)

MEDICAID CLAIMS SOLUTION OF TEXAS: TEXAS BILLING AGENT

47. MCST was the Medicaid billing agent for JISD from approximately 1994-1998.

48. MCST was the Medicaid billing agent for EISD from approximately 1994-2000.

49. MCST served as billing agent and consultant to over 500 school districts in the

state of Texas since the inception of the SHARS program in 1992. MCST didnot do MAC billing. MCSTs compensation is primarily a contingency fee based

on the Medicaid monies recovered for SHARS. MCSTs fees ranged from 10%-

13%.

50. Gordon Harmon ("Harmon"), the owner and President of MCST, positioned

MCST as the company contracted by your school district to help you receive

these funds and to make sure that we are abiding by all the rules and regulations

and doing what we are supposed to do and me telling you and then being

responsible for telling you what you can do and what you cant do.. (G. Harmon

Training Presentation for JISD- 8/28/97-1997 MCST Training).

51. MCST was aware of the uncertainty school districts were experiencing in setting

up reliable and compliant systems to bill Medicaid. MCST was also aware of


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school districts interest in generating new sources of revenue. At the 1997

MCST Training, Harmon made the following remarks tin an effort to reassure

the staff of his experience and to allay their fears of improper billing:

In response to staffs comments about the additional workload, If

were [staff] not doing it [billing Medicaid], whats the biggest reason

why were not?.we [MCST] feel that once this [initial] paperwork is

out of the way, this is a minimal thing that you would have to do.

About less than two minutes would get you $220.So its not big-time

paperwork.I know that your time is important, but with the districtmoney situation and its that way all over the state.

In response to a psychologist who asks about the consequences of

wrongly billing for the supervision time of his psychology trainees,

Harmon responds, Theyd [Medicaid/NHIC] probably go ahead and

pay ya. If they came in and audited, and found that to be not the way,

you dont even have to put it back. Theyd take it back against future

services, so theres no penalties. Theyre not going to put you injail.or take your certificate away or any of that garbage.

In response to questions from attendees about jeopardy to

professional licenses and personal responsibility for submitted claims,

Harmon reassures staff that this program will not be audited and

responds,..as far as having him (the psychologist) take responsibility

and all that, I wouldnt go that far because it will never have to be

With respect to billing for SHARS services and addressing staffs

concerns about more paperwork, Were the only company that does a

full turn-key job. We do it allIve built my company on that concept.

In trying to motivate the staff to bill for services by illustrating the

revenue potential of Medicaid billing, Harmon says, NEISD asked me


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to give you an idea of what you should be receiving, or could expect to

be receiving. This is gonna blow your mind. Gonna blow mine

too..The potential of this program with all ten services being tapped

into.conservatively at $500 per [Medicaid-eligible] child, the

potential for Judson. Thats half a million.

DELOITTE: DUTIES AS THIRD PARTY BILLING AGENT UNDER SHARS

CONTRACT

52. DELOITTE assumed responsibility in its standard contracts for certain pivotalactivities, most notably the proper documentation of services and the SHARS

claims billing and processing. Other responsible activities included, but were

not limited to:

Identify, coordinate and conduct revenue enhancement services

Identify Medicaid eligible students

Develop software to create and maintain a database of all necessary

records Design, program, install and operate DELOITTE's proprietary billing

system

Maintain current files of students who are eligible for services

Develop procedures for the recording, documentation and processing

of claims

Design and present periodic training for school staff on the use and

operation of procedures, forms and other methodologies related to thepreparation of SHARS claims

Data entry of all service tickets and other files required to process

Medicaid claims

Submit the Medicaid claims to the designated Medicaid Administrator


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53. DELOITTE explains that the higher-than-the-competition contingency rates it

charges are justified because DELOITTE not only processes claims, but

provides enhancements and the aggressive pursuit of reimbursement, as

evidenced by its track record:

"Our close working relationship with State officials allows us to

negotiate expansion of the Medicaid Program which benefits our

clients" (PROPOSAL, p.18)

"Unlike our competitors[DTCG] Staff are consistently available toyou to both train and support the ongoing processing of your claim"

(PROPOSAL, p.19)

"Our involvement .distinguishes our firm from our competitors, who

provide only claims processing services.." (PROPOSAL, p.10)SHARS

"..our clients in Texas are the most successful ISDs in capturing

disproportionately higher Medicaid revenues than are generated by

our competitors" (PROPOSAL, p. 10) "As a result of our involvement with Dallas, that ISD's Medicaid

reimbursements increased fivefold."

54. DELOITTE's package of services for its MAC clients includes the "Negotiations

with State Medicaid agency and/or HCFA for the purposes of expanding the

scope of school district activities which are potentially reimbursable as

Administrative Outreach Activities and obtain a signed agreement with the State

reflecting the intent to reimburse these school district activities" (PROPOSAL, p.

13). DELOITTE used federal Medicaid monies to underwrite its efforts to lobby

state officials and agencies in an effort to secure higher reimbursement rates for

a broader span of SHARS and MAC services, which under a performance-based

contract would increase DELOITTEs compensation. ( See the definition of


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"lobbyist" in Barron's Business Guide, Dictionary of Tax Terms (1994).)

55. Allan Haight and David Bankard of DELOITTE state that the activities and

responsibilities listed in DELOITTE's Proposal are ".. standard descriptions of

activities which [DELOITTE] and our clients routinely perform in cooperatively

developing MAC and SHARS.. claims in the State of Texas . We encourage you

to confirm these work activities with any of the Texas client

references..provided. We are confident that our references will advise you

that DTCG assumes responsibility for virtually every aspect of the claim

development process and that only minimal client[School District] support isrequired by DTCG in developing Medicaid claims." (PROPOSAL, p. 15).

56. DELOITTE represents to its client DISTRICTS that it has the knowledge to

insure compliance in claims submission and states ".. we possess the detailed

understanding of the Medicaid regulations which is essential in order for school

districts to maximize their potential revenues from the Medicaid Program.."

(PROPOSAL, p. 9- Letter from Allan Haight, (DTCG Partner).

57. DELOITTE reiterates in its contracts and bombards in its promotional

presentations to school districts that, not only is it intimately familiar with

Medicaid regulations, but has the inside track since "DTCG maintains a network

of specialists at both the State and Federal level who are charged with both

preserving and enhancing Medicaid reimbursements for our school district

clients". (PROPOSAL, p.20)

MCST: DUTIES AS THIRD PARTY BILLING AGENT UNDER SHARS CONTRACT

58. MCSTs primary duties under its standard contract and as delineated in the

scope of work for its school district clients, such as EISD, included, but were not

limited to:


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Determine Medicaid eligibility of children in Special Education

Develop and implement a training program for the staff on such topics

as Medicaid policies and procedures, progress notes, billable

services, audits, compliance issues and orientation for employees

Prepare claims for the reimbursement of SHARS claims

Provide the school district a capability to validate claims per the rules

and regulations issued by Medicaid and the Texas SHARS program

Submit claims to Medicaid for reimbursement

Serve as billing agent and provide claims summaries to the school

district

Provide a toll free hotline for customer support

DELOITTE AND MCST: TRANSPORTATION BILLING BY DEFAULT

59. Generally, Medicaid will not pay for school-based transportation. Section

1903(c) of the Social Security Act provides, though, that CMS may not prohibit

or restrict payment for medical assistance for covered services becausesuch services are included in the childs IEP. Medicaid is allowed to pay for

transportation for school-based services for children under IDEA when both of

the following conditions are met :

The child receives transportation to obtain a Medicaid-covered service

(other than transportation), and

Both the Medicaid-covered service and the need for transportation are

included in the childs IEP.60. Transportation was one of the top three SHARS reimbursable services in terms

of total revenue dollars during the relevant periods of this Complaint.

61. During training sessions in 1993-1999 , DELOITTE trained and instructed its

client DISTRICTS and their staffs on the financial benefits of including


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transportation as a covered service in a Medicaid-eligible childs IEP when , in

fact, there was no often no justification for special transportation for many of the

children. Additionally, DELOITTE encouraged staff to maximize transportation

recovery by scheduling no more than one SHARS service a day, thereby

increasing the number of transportation charges per week.

62. During all times relevant to this Complaint and for all client DISTRICTS, Relators

will show that DELOITTEs software billed automatically for a childs

transportation on those days Medicaid services were provided at school.

Relators were apprised by DELOITTE and by school administration that thesoftware program had a default that billed a transportation charge on any given

day when a SHARS service was entered into the system for a child with

transportation in their IEP. This made it unnecessary for staff to do anything to

get the transportation billed. No transportation logs were maintained, and there

is no documentation to support that any SHARS child actually rode the bus or

other special transportation in the DISTRICTS during all times relevant to this

Complaint. During the time DELOITTE administered this default billing for round

trip transportation, there was no documentation to reflect when children came or

left with Mom, Dad or the daycare center van. Relators will show that some

children often had their regular SHARS service substituted on another weekday

so they could participate in a field trip or special event. Nevertheless,

transportation charges would be automatically billed.

63. Relators will further show that , during all times relevant to this Complaint, MCST

also billed Medicaid for transportation charges by default, first manually and

then with a program adjustment to the billing software.

64. Relators have numerous examples of the default billing for transportation. (See


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Exhibit 2). The attached are service delivery forms (SDFs) from JISD. Service

Provider #30 performed speech therapy on Krystal and an SDF was completed

on 9-7-95 for three sessions. Another SDF was completed for speech therapy

on 1-15-96. Both SDFs are signed by #30. Many months later on 6-7-96, an

SDF for all of the transportation is being manually billed default. The provider is

listed as #30, but the signature is that of the Special Education Supervisor who

had no knowledge or documentation to support the charges. She billed under

the directions and instructions of MCST resulting in a false claim against

Medicaid for the ten (10) transportation charges, but there is no supportingdocumentation for the charges as required by Medicaid.

65. At the 1997 MCST Training Presentation, Harmon tells the staff, This year

were going to do your transportation for you, and you wont have to worry about

that anymore. The only thing you will have to do ..is designate.. the

transportation eligible children. Because what we will do is we will put it into

the system and itll cover all those things that are transportation eligible by

service and it will match it up with transportation and well file the claim for youand youll no longer have to worry about it I wanted you to know that there is

money for transportation and we will handle that for you. He is referring to the

automatic default in the MCST computer program commencing with the school

year 1997-98.

66. During the relevant times, DELOITTE and MCST 1) falsely prepared and

submitted bills for transportation services to Medicaid even when they were

generated by default and when there were no records/documentation or

transportation logs to substantiate usage of service; 2) instructed staff how to

schedule classes with an eye to spread out the days of service in order to

maximize transportation billings: and 3) pressured the staff through their

seminars and through the administrators of the DISTRICTS to bill for Medicaid


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transportation in violation of professional standards which are the basis of many

of the permissible charges. Both DELOITTE and MCST benefited financially as

the result of these false transportation charges.


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DELOITTE AND MCST: BILLING INDIVIDUAL RATES FOR GROUP SERVICES

67. There are general rate principles that state Medicaid agencies must follow in

setting rates for SHARS. Payments must be reasonable and adequate to meet

the costs incurred by efficiently and economically operated providers in

conformity with state and Federal laws, regulations, and quality and safety

standards. The rates should only include the cost of the covered services.

68. In DELOITTE';s claims training sessions from 1993-1997, DELOITTE instructedtheir client DISTRICTS to bill individual service rates for each Medicaid-eligible

child receiving services in a group. For example, in a one hour speech therapy

group with five (5) children, where three (3) are SHARS-eligible, Medicaid

should be billed for each of three hours. In this example, Medicaid only allows

for reimbursement of costs for direct services. DELOITTE instructed the school

DISTRICTS' staff to bill for the whole hour rather than prorate the charges to

reflect the time spent with each of five children one-on-one. Despite itsexpertise in the rules of Medicaid billing, DEFENDANT DELOITTE knowingly

made, used or caused to made or used, a false record or statement to get a

false claim paid or approved by the United States and is liable under 31 U.S.C.

3729(a)(2).

69. Billing for Admission, Review, and Dismissal (ARD) meetings is strictly

prohibited by Medicaid. In an August, 1998 training session, Brenda Luske of

DELOITTE, explains to staff the multiple billing procedures and comments,

"..you might say..gosh, that sure looks like double, triple charging for a therapy

session". She goes on to explain that Ken Crow, DELOITTE representative, " is

a great resource because he actually set those things [rates] up.he [Ken Crow]


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said it's more difficult to actually plan and conduct a group session that it is just

a one-on-one individual session. So they [Ken Crow] actually rolled all that in the

rate to make it all allowable. ..one hour of time for each child " Ken Crow adds,

"It still comes up time and time again that people really feel like, you know,

they're [double billing]But when we did the rate study back in 1990-91 to

establish rates, we took individual therapy time, planning time, ARD time and ..all

that involved in group Rather than having to keep track of every little thing, we

rolled it into one rate..that way it covers ARD time.. within the rate ". At all times

relevant to this Complaint, DELOITTE had DISTRICTS' staff complete servicedelivery forms (SDF) for these group sessions, knowing that the rates bundled

services, many of them unallowable. DELOITTE later took these SDFs,

processed them and submitted them for reimbursement from Medicaid. As such,

Defendant DELOITTE has knowingly presented or caused to be presented to an

officer or employee of the United States false claims for payment of approval

and is liable under 31 U.S.C. 3729(a)(1).

70. MCST followed this same line of billing and instructed staff to bill for each

eligible child in the group therapy situation and no direction was given to only bill

for "hand-on" time. Harmon justified billing for each child in the group because

groups are harder to manage than individual sessions. Relators will show that

MCST submitted bills at individual rates for group therapy services. As such,

Defendant MCST has knowingly presented or caused to be presented to an

officer or employee of the United States false claims for payment of approval

and is liable under 31 U.S.C. 3729(a)(1)

71. In a training session in JISD, DELOITTE's Ken Crow is addresses the issue of

co-teaching. "That's right , just like you do in group therapy, because that a very


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good example of the emphasis back on inclusion, and so that we have 3 kids

that we would ordinarily pull out to see in session for speech therapy but

because you want to be inclusive, we go into the classroom. You're still trackin'

those kids IEP, but you're doing it in an exclusive setting. As long as the reason

you are there are those 1-2-3 kids. And you can claim that regardless of the

setting- that's a heckof a question.." In this way, DELOITTE instructs staff to bill

individual rates for services performed with a child in the classroom where there

might be 20-30 other children, but Relators contend that there is no justification

for this billing as it should be allocated based on "hands-on" time with the child.72. On March 24, 1998, the Texas Education Agency (TEA) issued a letter

prohibiting group billing of SHARS, unless it was for the "hands-on" time with

each student. TEA went so far as to warn "Programs that are found to be out of

compliance could be required to return funds that were generated by the speech

therapy portion of the SHARS Program." This would have entailed a return of

significant federal funds, by many of DELOITTE's and MCST's school district

clients. DELOITTE contacted state officials to for clarification of this policy.

73. On May 3, 1998, TEA issued another letter "clarifying" the requirements for

billing group therapy at individual rates. It stated that the 1) service must be in

the IEP, and 2) the student must be actively involved in the therapy during the

entire session.

74. DELOITTE and MCST continued to train staff to bill for all children in a group

therapy setting and copies of the TEA letter were provided to them. Staff at the

various DISTRICTS was left on their own to interpret what "actively involved in

the therapy during the entire session" meant from a regulatory perspective. No

special instructions or materials were given to staff by either DELOITTE or


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MCST to ensure that services were properly documented so as to substantiate

that each child received the service specified in their IEP.

75. Relators would show that DELOITTE and MCST continued to submit bills for

their school district clients knowing that for most of the group therapy services

billed, there was no documentation to support that the service had been

performed as specified and for the entire period. As such, Defendants

DELOITTE and MCST knowingly presented or caused to be presented to an

officer or employee of the United States false claims for payment of approvaland is liable under 31 U.S.C. 3729(a)(1)

DELOITTE AND MCST: LACK OF SUPPORTING DOCUMENTATION FOR

CHARGES

76. In CMS' publication, "Medicaid and School Health: A Technical Guide"

("Technical Guide"), the United States sets forth guiding principles and

procedures for billing Medicaid for SHARS.

77. The Technical Guide addresses the level of detail that must be included in a

student's documentation. It states, "A school, must keep.records that detail

client specific information reagarding all specific services provided for each

individual recipient. Relevant documentation includes the dates of service, who

provided the service, were the service was provided, any required medical

documentationlength of time required for service.. and third party billing

informationThis information will be necessary in the event of an audit.."

78. Cathy Barrett , NHIC, in a 9/30/99 training session discusses retention of

records, "retain all of your records which should include the following:


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details and documentation of the services rendered and when and what services

were rendered"

79. The Medicaid Manual for the state of Texas requires that progress notes be

maintained when providing SHARS services (Chapter 38).

80. Relators would show that DELOITTE and MCST, in their staff training did not

direct providers to maintain the required documentation to support the billing of

SHARS services and to support the premise that the services are medicallynecessary.

81. DELOITTE tells staff that the SDF is the most important documentation, "Once

you sign the service ticket, that's the only official record..that's the only

documentation." "Keep a record, just a record of attendance and if you have

your record [a calendar] of attendance for those kids, then you know ..your back-

up is your IEP." "All the audit file requires that there would need to be some

doctor somewhere in the eligibility file or something that the doctor has

reviewed"These instructions do not meet the stringent documentation

guidelines of Medicaid for the performance and support of services billed.

82. In August., 1998, DELOITTE's Ken Crow/Brenda Luske answer questions about

the minimal documentation in the SDF and the likelihood of government audits,

"They [the United States] may come back and say, OK [will audit] , but they

neverhave since I've been doing this, since SHARS has been in effect in 1992,

they never have come in and surveyed, sooner or later they will and they'll look

at the records. So what do you have to support your SHARS documentation?

You have the attendance, you have the IEP". These instructions do not meet the


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stringent documentation guidelines of Medicaid for the performance and support

of services billed.

83. MCST tells it staff in training meetings with respect to the SDF, "..when it finally

gets right down to itthat's the only document that you as a service provider

have to deal with. " "They're [ the United States] not gonna question you about

what you charged. You are the professionals..they don't worry about that."

84. Even knowing the importance of mandatory record retention, MCST's Harmoninstructs the group during a 1998 training session in JISD, to throw away the

"pink copy" of a three part SDF, " I wouldn't fill up a file cabinet with 'em, I'd

destroy em". He further comments that "Those other people that do this

[competing billing agents] have a real paper trail". Teaching staff oppose

additional paperwork.

85. Relators have observed that as a result of DELOITTE'S and MCST's

inadequate instruction, the Permanent Student File for many SHARS students is

wholly complete.

86. The Districts, under the direct guidance and instructions of DELOITTE and

MCST, and under the supervision of NHIC, have billed Medicaid for SHARS

services when in fact there was no supporting documentation in the way of

progress notes or clinical records to substantiate the claim for reimbursement.

The Districts, as a matter of routine practice, only maintain an Individual

Educational Plan (IEP) on each child. In Texas , the IEP, developed annually,

is where the educational and related services of each child are detailed. In the

IEPs, the DISTRICTS are not distinguishing between educationally necessary

and medically necessary services. The Districts, furthermore, are not collecting

and maintaining a medical chart or comprehensive record with CMS required


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information such as dates of service, services performed at each contact, and

the progress of the child in achieving the goal of the medical service

87. DELOITTE and MCST submitted claims to Medicaid on behalf of their school

district clients knowing that the required level of documentation of services was

not being maintained and, furthermore, trained the staffs to maintain minimal

records of services performed. All the while, DELOITTE and MCST were aware

that the school district clients of each was relying on their expertise and

knowledge of Medicaid billing. As such, Defendants DELOITTE and MCST

knowingly presented or caused to be presented a false statement to an officer oremployee of the United States for payment or approval and is liable under 31

U.S.C. 3729(a)(1).

DELOITTE AND MCST: BILLING FOR MEDICALLY UNNECESSARY OR NON-

COVERED SERVICES

88. Medicaid rules provide that SHARS cannot be billed for physical therapy

services unless the child is present. That is, training teachers and aides to useequipment required by a child is not a covered expense unless the child is

present. DELOITTE tells staff in it training sessions, that if they have to make

anl adjustment on a piece of equipment and they have to leave the room for a

few minutes to do it elsewhere, that they should just go ahead and bill it, even if

the child is not technically present during the provision of the service, " So you

remove the childhave somebody look at it.. bring it backwe're not gonna

say, OK once I leave the room, I'm off the clock"

89. DELOITTE's Ken Crow and Brenda Luske coach staff at a 1998 training

meeting to use the phrase "as needed" in the IEP so that as opportunities come

up to bill for services, the IEP will cover it. "If they anticipate there may be a


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need, there's not a current need , to say this child needs counseling or psych or

group therapy once a week, could be just right there , but if you anticipate that

the need may occur, then you just put it in the IEP- 'counseling and psych on an

as need basis'" . Ken Crow further comments, "..so the opportunity is there for

an ARD Committee to, if they're experienced in ..an IEP".

90. MCST's Harmon admonishes his clients that if they are billing less than four to

four and half hours for an assessment, "you're cheating yourself". He further

encourages them to do an assessment on every Medicaid child and hawks,"Every child that you assess, every child ..that is eligible, qualified for special

education, and is Medicaid eligible is worth at least $220. How many students

do you have in Special Ed?". Harmon further comments, " Every speech student

is worth $1000 a year for thirty minutes a week."

91. More specific information, such as the dates and amounts of each claim

submitted by NHIC, is exclusively within the control of Defendant NHIC. Until

discovery proceeds, Relators cannot plead with greater specificity.

92. Relators will show that DELOITTE and MCST trained their clients to bill for

services even if there was not a medical necessity and when services were not

covered. DELOITTE and MCST would submit bills for these services knowing

that they were improper. As such, Defendants DELOITTE and MCST knowingly

presented or caused to be presented a false statement to an officer or employee

of the United States for payment or approval and is liable under 31 U.S.C.

3729(a)(1).

DELOITTE: OVERBILLING FOR NURSING SERVICES


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93. DELOITTE and MCST instructed nurses to bill for what was determined to

FAPE, "Free Care", that is for services that are not covered because they must

be provided to all children, whether or not Medicaid-eligible. Relators observed

that Medicaid was being billed for SHARS that included cleaning a cut, putting

on a Band-Aid, or removing a splinter. For the most part, there is no

documentation to support any service. Medicaid rules provide that if a service

takes less than 8 minutes, it is not billable because one billable unit equals 15

minutes.

94. In DELOITTE's training presentation in August, 1998, Brenda Luske addressesthe fact that the nurses have the most services of any provider group within the

school districts. MCST acknowledges the same thing in his session. Both billing

agents encourage the nurses to keep records of time no matter how small so

that it can be accumulated and then billed.

95. DELOITTE and MCST would submit bills for these services knowing that they

were improper and not sufficiently documented. As such, Defendants DELOITTE

and MCST knowingly presented or caused to be presented a false statement to

an officer or employee of the United States for payment or approval and is liable

under 31 U.S.C. 3729(a)(1).

DELOITTE AND MCST: BILLING FOR SERVICES OF UNLICENSED

PROFESSIONALS

96. Relators observed that many SHARS services were being rendered by certified

educational professionals who were not licensed to practice healthcare within

Texas outside of the school environment and who were not properly supervised

within the schools in order to meet the billing criteria. In order for schools to

participate in the Medicaid program and receive Medicaid reimbursement, they

must meet the Medicaid provider qualifications. It is not sufficient to use TEA


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provider qualifications for reimbursement of Medicaid-covered school health

services. Medicaid regulations require that states cannot have one set of

provider qualifications for school providers and another set of provider

qualifications for all other providers. The services of uncertified professionals

were billed by Defendants DELOITTE and MCST.

97. In a 1998 training session for school staff, MCST's Harmon discusses the

importance of billing using the correct procedure code for a person's

certification. He acknowledges that MCST has billed for assessments that were

miscoded and generated higher revenues. " I'll pick on the speech therapistscause I know I have some of those [submitted claims], and they've gone through

[been paid]well, technically, if they ever wee to audit that, they could throw it

out because they're (service providers] are not certified under that. They are

certified to charge but they charge a little too much by doing it under [Code]

7015X cause it's more than speech."

98. DELOITTE and MCST would submit bills for these services knowing that they

were improper and performed by individuals not certified to bill or not properly

supervised so that there services were billable. As such, Defendants DELOITTE

and MCST knowingly presented or caused to be presented a false statement to

an officer or employee of the United States for payment or approval and is liable

under 31 U.S.C. 3729(a)(1).

DELOITTE: FALSE CLAIMS FOR MAC SERVICES

99. DELOITTE performs MAC services for many school districts. Under the terms of

its standard contract, it provides its client school district or consortium the

following:

Review the client's programs to identify opportunities for revenue

enhancement from Medicaid

Develop and conduct a Time Study with client personnel for the purposes


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of developing formulas for the allocation of cost to Administrative

Outreach Claim

Train and provide technical assistance to staff

Develop forms and procedures for submitting claims

Negotiations with State Medicaid agencies for the purposes of expanding

the scope of school district services which are reimbursable as

Administrative Outreach

100. The DISTRICTS, under the direct guidance and instructions of DELOITTE, have

been submitting claims for Medicaid Administrative Claiming (MAC). They haveconducted time studies to determine billing rates and MAC rates. Relators

would show that Defendants DELOITTE have caused the DISTRICTS to submit

inflated charges for activities that were not properly allocable to MAC costs.

Furthermore, they have provided poor training for participants further eroding the

reliability of the time studies.

101. More specific information, such as the dates and amounts of each claimsubmitted by DELOITTE, is exclusively within the control of Defendant

DELOITTE. Until discovery proceeds, Relators cannot plead with greater

specificity.

102. DELOITTE has submitted bills for MAC services for its client DISTRICTS

knowing that they were incorrect and inflated. As such, Defendant DELOITTE

knowingly presented or caused to be presented a false statement to an officer or

employee of the United States for payment or approval and is liable under 31

U.S.C. 3729(a)(1).

DELOITTE : FALSE CERTIFICATION OF STATE MATCHING FUNDS


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103. Relators observed that DELOITTE consulted with its client DISTRICTS on the

proper manner to match state and local funds to certify for matching federal

funds. Relators observed the improper matching of Special Education salaries

and fringe benefits, when , in fact, many of the staff did not perform any SHARS

services. The match must come from SHARS services that have been paid for

with state or local funds.

104. DELOITTE has consulted with client DISTRICTS often improperly advising them

on proper matches of state and local funds knowingly causing them to submit a

false record or certification to the United States upon which payment would bedetermined and is liable under 31 U.S.C. 3729(a)(1).

DELOITTE AND MCST: OTHER QUESTIONABLE PRACTICES

105. In the 8/1998 JISD Training Session, Ken Crow of DELOITTE and the JISD

Special Education Supervisor comment to the group on IEP authorization for

counseling and mental health services, "All those behavior adjustment

kids..they've all got two hours of time for counseling and it doesn't even saygroup or individual You can place them all in a 'social skills group', all of those 8

children in a group and they're ARD's for counseling". Ken Crow agrees, "Then

that's a counseling session! ..Now that is medically related under the mental

health umbrella. Cause you're trying to improve their ability and their adjustment

in whatever setting with their peers". Relators observed that DELOITTE's

instructions and suggestions to the staff were often aggressive and unjustified,

and motivated by compensation.

106. DELOITTE is aware that Special Education staff in each school holds the key to

the billing and ultimately, their compensation. By and large, school staff is

reticent to take on more paperwork. DELOITTE and MCST have found it a

valuable marketing tool, to de-emphasize the documentation requirements of


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Medicaid billing in order to ensure the cooperation of school staff. Since staff

has no personal financial incentive in billing or not billing Medicaid, DELOITTE

uses other techniques to ensure that bills are turned in. In JISD and other

DISTRICTS, Deloitte conducts a "Documentation Day" every six months. It is a

mandatory workday for the staff and they must show up at a given location with

their calendars and pre-printed SDFs to spend the entire day billing. DELOITTE

provides raffles and door prizes on Documentation Day in an effort to minimize

the staff's resentment at having to do more paperwork. This practice provides

DELOITTE a mechanism to control data collection and data entry.107. For the billing agent, it is a very effective way to get all the bills completed and

only requires two meetings a year. DELOITTE brings in their employees to assist

DISTRICTS' staff with completion of the SDFs. Once complete, DELOITTE

takes the SDFs to their worksite and processes and submits the SDFs for

payment. Staff is asked to bring their calendars and IEPS. It is clear that the

emphasis is on billling documentation and not medical documentation of the

record. Relators would show that DELOITTE's billing practices have resulted in

a lack of supporting documentation for services billed.

108. DELOITTE purports in its contracts and promotional literature to have had no

denied claims in the time it has been processing SHARS claims in Texas, an

unlikely scenario. It can be assumed that there has never been an audit or

review of these claims.

109. DELOITTE and instructed the DISTRICTSs and/or its other respective school

district clients all over the U.S. on procedures and practices to maximize the

capture of Medicaid dollars for SHARS services. This was done in such a

manner as to overbill and defraud the U.S. while at the same time maximizing

fees for DELOITTE. This resulted in a nation-wide practice by DELOITTE of

defrauding the Government for Medicaid services in the school that were, in


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fact, not billable under the Medicaid programs guidelines.

110. DELOITTE and MCST, with the approval and under the supervision of NHIC,

have billed Medicaid on behalf of the DISTRICTS for purportedly necessary

medical services that were not properly prescribed by the child's attending

physician. SHARS services in the Districts were prescribed by a physician

employee of the Districts who largely never had physical contact with the

children for purposes of examination and who often prescribed services with no

supporting documentation or testing. Additionally, the Districts would often

provide SHARS services to children and bill Medicaid with no signedprescription or referral from a physician(s) in direct violation of Medicaid law.

111. DELOITTE and MCST, under the supervision of NHIC, have billed Medicaid for

services that were not medically necessary, but were merely educational, and

were, therefore, not subject to reimbursement under the Medicaid SHARS

Program.

112. Under the direct guidance and instructions of DELOITTE and/or MCST, and with

the approval and/or supervision of the NHIC, the Districts have billed Medicaid

for services that were not medically necessary, but were merely educational,

and were, therefore, not subject to reimbursement under the Medicaid SHARS

Program.

113. DELOITTE and MCST, under the supervision of NHIC, have billed Medicaid on

behalf of the DISTRICTS for purportedly necessary medical services that were

not properly prescribed by the child's attending physician. SHARS services in

the Districts were prescribed by a physician employee of the Districts who

largely never had physical contact with the children for purposes of examination

and who often prescribed services with no supporting documentation or testing.

Additionally, the Districts would often provide SHARS services to children and


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bill Medicaid with no signed prescription or referral from a physician(s) in direct

violation of Medicaid law.

114. The DISTRICTS, under the direct guidance and instructions of DELOITTE and

MCST, brought pressure on RELATORS because of their refusal to bill Medicaid

for services that are clearly illegal, non-medical, non-reimbursable, and in

violation of professional precepts. The DISTRICTS conducted and continue to

conduct extensive training sessions in an effort to increase Medicaid revenues

to the Districts. The refusal of RELATORS to bill created cracks within theranks. DISTRICT administrators have found it difficult to keep a billing

discipline within the professional staff. RELATORS have been retaliated

against by the DISTRICTS and DEFENDANTS with loss of privileges, exclusion

from training meetings, public humiliation, and other coercive tactics employed

by DEFENDANTS. The facts regarding retaliation are presented here as further

evidence of Defendants influence over the DISTRICTS, not as a separate claim

for employee retaliation

NHIC: CONTRACT DUTIES AND RESPONSIBILITIES

115. NHIC has been the administrator and fiscal agent for the Medicaid Program in

Texas at all times relevant to this Complaint.

116. NHIC earned over $99 Million in administrative fees in 1999

117. Under the terms of the 1995 Title XIX Contract with the State of Texas, NHIC

assumed various responsibilities including, but not limited to:

Operate a system for the processing and payment of valid Medicaid

Claims

Reject invalid claims

Submit Medicaid claims to the United States requesting payment of


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the FFP

Monitor the payment of Claims both on a prepayment and

postpayment basis

Conduct concurrent and retrospective reviews

Develop information and instructional materials for the purpose of

interpreting to Eligible Providers the nature and scope of the Texas

Medical Assistance Program and its policies, procedures, and

requirements

Employ and assign health care professionals, as necessary, to

establish suitable standards for the audit of Claims for payment for

services rendered by Eligible Providers

Develop and maintain methods of audit and analysis of Claims which

reveal the excessive or inappropriate provision of services or unethical

practices on the part of Eligible Providers

Assure that medical care and services for which payments are made

were medically necessary for the diagnosis or treatment of thecondition for which benefits were provided

Review by health care professionals of all questionable Claims for

overutilization or misutilization of services

In the event fraud is suspected, conduct an internal investigation to

determine if any violation or misutilization has taken place

Collect payments made in error and/or make a record of such credit

Prepare periodic financial report of Medicaid payments made toProviders

Prepare Certification of Expended Funds Letter (attestation that non-

federal funds have been expended in order to receive matching FFP)

for SHARS providers and maintain signed copies


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118. NHIC is compensated by the State of Texas for its work as Medicaid

administrator in various ways, including :

Premiums for coverage groups

Adjudication and Transaction Fees per claim

Performance and incentive bonuses

119. With respect to SHARS and MAC claims, it is NHIC's responsibility to monitor

submitted claims for accuracy and validity before submitting them for final

reimbursement to the United States.

NHIC: SUBMISSION OF FALSE CLAIMS TO MEDICAID

120. NHICs submission of claims to the United States includes an implied

certification that NHIC is entitled to these federal funds and that it has complied

with all legal requirements of the Medicaid Program.

121. For all times relevant to this Complaint, NHIC has processed and submitted

claims to the United States for every SHARS and MAC dollar reimbursed to

Texas providers. In 1999, this amount was in excess of $78 million dollars.122. Despite its contracted duty to provide oversight and review of claims submitted

for reimbursement, Defendant NHIC has knowingly provided no meaningful audit

or testing of such claims or the underlying supporting documentation. Save for

a small number of denials based on the data matching of ineligible provider and

recipient identifying numbers, nearly 100% of the SHARS claims submitted for

FFP reimbursement by providers were forwarded to the United States and then

paid out by NHIC.

123. As an example, SAISDs quarterly Certification of Expended Funds Letters to

NHIC for the period from July 1, 1998- December 31, 2001 show that, invariably,

SAISD received the maximum corresponding FFP for all claims submitted.

There were virtually no claims denied by NHIC.


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124. A further example of NHICs practices are revealed in a 1997 comment made by

DELOITTEs partner for SHARS, Allen Haight, During the past five years,

DTCG has processed almost $500 Million in Medicaid claims for our 1500 school

district clients. Not one cent of those claims has ever been denied or disallowed

by the State Medicaid Agency. DELOITTE enjoys a dominant share of the

SHARS billing

125. Defendant NHICs defacto denial of 0% of submitted SHARS and MAC claims is

the type of outcome that should normally trigger flashing red lights and an

investigation into the statistical probability of such an occurrence. DefendantNHIC, nonetheless, knowingly failed, year after year, to actively investigate,

review and/or audit these claims to test for validity and accuracy year after year.

126. In fact, Relators will show that from 1993-1999, millions of dollars in SHARS and

MAC claims were submitted for services that were medically unnecessary,

improperly documented, and overbilled. Defendant NHIC has failed to comply

with its administrative duties in the monitoring and validation of improper claims,

as well as design for comprehensive provider training programs. As such,

Defendant NHIC has knowingly presented or caused to be presented to an

officer or employee of the United States false claims for payment or approval

and is liable under 31 U.S.C. 3729(a)(1).

127. Furthermore, Relators will show that the matching state and local monies used

to certify expended funds to NHIC by the school districts were often monies

spent on non-SHARS services and therefore, ineligible for FFP. Defendant

NHIC knowingly presented or caused to be presented a false statement that

resulted in the avoidance or decrease of an obligation to the United States in

violation of 31 U.S.C. 3729(a)(7).

128. Defendant NHIC submitted SHARS claims for reimbursement to the United

States accompanied by signed certifications of compliance representing that

7/31/2019 Complaint US Ex Rel.Barron and Sc

complaint us ex rel.barron and scheel v deloitte and touche consulting, false claims act

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