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Attorney General Announces $6.5M in Settlements with Preferred Family Healthcare

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Arkansas Attorney General Leslie Rutledge announced Thursday $6.5 million in settlements with Preferred Family Healthcare of Springfield, Missouri, the result of an investigation conducted by her office’s Medicaid Fraud Control Unit.

The company has agreed to pay nearly $4.6 million to resolve a federal false claims case and $1.9 million in a separate state settlement under the State False Claims Act. 

PFH had about 50 clinics and service sites around the state that employed a reported 700 at one time and served more than 5,000 Arkansas Medicaid clients. That was before federal corruption cases toppled notorious lobbyist and former PFH executive Milton “Rusty” Cranford, a half-dozen Arkansas legislators and eventually the company’s Arkansas operation. 

The state canceled its contracts and halted Medicaid reimbursement to PFH amid the fraud and bribery scandal. Cranford was sentenced to seven years in prison, but is serving the remainder of that at home, while the coronavirus pandemic has delayed former state Sen. Jeremy Hutchinson’s sentencing in the same Medicaid fraud scandal that ensnared Cranford. 

Quapaw House Inc. of Hot Springs, now insolvent, bought PFH’s assets in 2018

The attorney general’s office said Thursday that five former employees of PFH had been charged in state court with Medicaid fraud and another employee settled false claims or actions.

“The false claims addressed in these settlements were the result of a culture of corruption at the highest levels of PFH in Arkansas, and as attorney general, I will do everything in my power to hold any Medicaid provider accountable when Medicaid Program rules or the law is violated,” Rutledge said in a news release. 

Through most of 2016, the unit investigated fraud in the Rehabilitative Services for Persons with Mental Illness program. It was assisted by the Office of the Arkansas Medicaid Inspector General and the HHS-OIG-Office of Investigations.

In September of that year, a PFH employee told investigators that certain therapists with the company had been billing Medicaid for counseling services not given or had been over-billing for those services.

In December 2017, that same employee claimed PFH may have been inappropriately billing an entire class of recipients known as Qualified Medicare Beneficiaries. Using data analytics, the unit confirmed immediately that claims for services improperly provided to this population were being submitted to Medicaid instead of Medicare for payment.

But investigators couldn’t determine at that time who had submitted the improper claims, whether he or she understood that was illegal or how the claims were able to get through a Medicaid payment system that should have rejected them.

In early January 2018, PFH was given a “request for information” seeking to determine how this had occurred. Later that same month the employee filed a federal sealed “qui tam” lawsuit against PFH under the federal false claims act. A “qui tam” action is a federal lawsuit brought by a private citizen to stop or prevent fraud and abuse of federal dollars.

PFH, a large mental health care organization, offered mental and behavioral health, substance use, employment, developmental disabilities, child welfare and medical services.

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