Nazari v. State
| Decision Date | 17 June 2016 |
| Docket Number | NO. 03–15–00252–CV,03–15–00252–CV |
| Citation | 497 S.W.3d 169 |
| Court | Texas Court of Appeals |
| Parties | Dr. Behzad Nazari, D.D.S. d/b/a Antoine Dental Center ; Dr. Behzad Nazari; Harlingen Family Dentistry, P.C. a/k/a Practical Business Solutions, Series LLC; Juan D. Villarreal D.D.S., Series PLLC d/b/a Harlingen Family Dentistry Group; Dr. Juan Villareal; Dr. Vivian Teegardin; Richard F. Herrscher, D.D.S., M.S.D., P.C.; Dr. Richard F. Herrscher; M & M Orthodontics, PA; Dr. Scott Malone; Dr. Diana Malone; Michelle Smith; National Orthodontix, MGMT, PLLC ; Dr. John Vondrak; RGV Smiles By Rocky Salinas, D.D.S. PA; and Dr. Rocky Salinas, Appellants v. The State of Texas; Xerox Corporation; and Xerox State HealthCare, LLC, f/k/a ACS State HealthCare, LLC, Appellees |
Jason D. Ray, Riggs & Ray, P.C., Austin, TX, Hart Green, Weller, Green, Toups & Terrell, L.L.P., Beaumont, TX, for appellants.
Constance H. Pfeiffer, Christopher Cowan, Eric J.R. Nichols, Gretchen S. Sween, Beck Redden LLP, Houston, TX, Reynolds B. Brissenden, Raymond C. Winter, Assistant Attorney General, Austin, TX, John Campbell Barker, Phillip Andrew Lionberger, Office of the Attorney General, Austin, TX, C. Andrew Weber, Kelly, Hart & Hallman, L.L.P., Austin, TX, for appellees.
Before Justices Puryear, Goodwin, and Bourland
ON MOTION FOR REHEARING
David Puryear
Our opinion and judgment issued on February 26, 2016, are withdrawn, and the following opinion is substituted. The Dental Groups' motion for rehearing is denied.
The State initiated an enforcement action against the Dental Groups under the Texas Medicaid Fraud Prevention Act alleging that the Dental Groups engaged in various unlawful acts and seeking to impose civil penalties. In response, the Dental Groups filed counterclaims against the State and also filed third-party claims against Xerox. Subsequent to the Dental Groups filing their counterclaims and third-party claims, the State filed a plea to the jurisdiction asserting that the Dental Groups' counterclaims against the State were barred by sovereign immunity. In addition, the State filed a motion to dismiss the Dental Groups' third-party claims against Xerox. After considering the State's requests along with the Dental Groups' responses, the district court granted the State's plea and the State's motion to dismiss. Shortly after the district court made its rulings, the Dental Groups filed an interlocutory appeal challenging both rulings. Further, although Xerox is an appellee in this case, it also filed appellate briefing challenging the district court's decision to dismiss the claims against Xerox. We will affirm the portion of the district court's order dismissing the Dental Groups' counterclaims against the State, and we will dismiss for want of jurisdiction the Dental Groups' issue urging that the district court should not have dismissed their third-party claims against Xerox.
Before delving into the facts underlying this case, we provide a brief overview of the relevant statutes and regulations pertaining to this appeal. This appeal stems from orthodontic services that were provided to Texas citizens and paid for by Texas Medicaid. See Tex. Hum. Res.Code § 32.001
(); see also
Hawkins v. Dallas Cty. Hosp. Dist., 150 S.W.3d 535, 536 (Tex.App.–Austin 2004, no pet.) ( that “Medicaid is a federal-state assistance program, run by state governments within federal guidelines, that pays for health care services provided to eligible recipients—low-income people of any age—from federal, state, and local tax funds” (citing 42 U.S.C. §§ 1396 –1396v )). In general, “[o]rthodontic services for cosmetic reasons only are not a covered Medicaid service,” but Medicaid can be used for the “treatment of severe handicapping malocclusion and other related conditions as described and measured by the” Texas Medicaid Provider Procedures Manual. 25 Tex. Admin. Code § 33.71(a) (2015) (Tex. Dep't of State Health Servs., Orthodontic Servs. and Prior Authorization); see also id. § 33.2(8) (2015) (Tex. Dep't of State Health Servs., Definitions) (describing what services are medically necessary and explaining that services are not medically necessary if, among other reasons, they are “primarily for the convenience of the client or provider”); 2003 Texas Medicaid Provider Procedures Manual (“Provider Manual”), § 18.20.3, http://www.tmhp.com/TMHP_File_Library/Provider_Manuals/TMPPM/Archives(¨TMPPM2¨003,2¨004)/2003_TMPPM.pdf (outlining permissible orthodontic services, including “[c]orrection of severe handicapping malocclusion
,” “[c]rossbite therapy,” “[h]ead injury involving severe traumatic deviation,” and “[o]rthognathic surgery” needed for application of braces). In order for Medicaid to cover the limited types of treatment listed above, the orthodontic treatment “must be prior authorized.” 25 Tex. Admin. Code § 33.71(a) ; see also Provider Manual § 18.9 (). When seeking prior authorization, providers must submit documentation demonstrating the need for the treatment as well as a treatment plan. Provider Manual § 18.20.1.
Moreover, the Provider Manual in effect during the relevant time specified that “[p]roviders are responsible for obtaining authorization for a complete orthodontic treatment plan.” Id. In addition, the Provider Manual explained that when submitting a claim for reimbursement, “the provider certifies” that, among other things, “[t]he information on the claim form is true, accurate, and complete” and that the treatment is medically necessary. Id. § 2.2.7; see also id. § 2.3 (). Furthermore, the Provider Manual warned that providers who submit “a false statement or misrepresentation, or omit[ ] pertinent facts” in order to “obtain greater compensation” or “to meet prior authorization requirements” are “subject to review, fraud referral, and/or administrative sanctions.” Id. § 2.3.
To ensure compliance with the various Medicaid requirements and to prevent the improper depletion of Medicaid funds, several enforcement mechanisms have been created. See, e.g., Tex. Penal Code § 35A.02
(); 1 Tex. Admin. Code §§ 371.1601 –.1719 (2015) (Tex. Health & Human Servs. Comm'n, Medicaid & Other Health & Human Servs. Fraud & Abuse Program Integrity) (authorizing Office of Inspector General of Health and Human Services Commission to bring administrative enforcement proceeding against service providers). The enforcement mechanisms at issue in this case are found in the Texas Medicaid Fraud Prevention Act (the “Act”). See Tex. Hum. Res.Code §§ 36.001 –.132.2 The Act prohibits certain “Unlawful Acts,” id. § 36.002, and authorizes the State to collect a civil penalty from an individual who has violated the Act, id. §§ 36.007, .052. In particular, the Act states that “a person who commits an unlawful act is liable to the state for” “the amount of any payment ... provided under the Medicaid program ... as a result of the unlawful act” along with “interest on the amount of the payment” as well as “a civil penalty of ... two times the amount of the payment.” See id. § 36.052(a)(1), (2), (4). The Act also allows for the imposition of additional civil penalties in certain circumstances, id. § 36.052(a)(3), as well as “fees, expenses, and costs reasonably incurred ... including court costs, reasonable attorney's fees, witness fees, and deposition fees,” id. § 36.007.
The attorney general, acting on behalf of the State, initiated an enforcement action under the Act against the Dental Groups who provided services to Medicaid patients over an extended period of time.3 In its petition, the State alleged that the Dental Groups “submitted or caused to be submitted false statements, information or misrepresentations of material facts, or omitted pertinent facts to Texas Medicaid to obtain Medicaid prior authorization and payment for orthodontic services and appliances.” In particular, the State asserted that the Dental Groups misrepresented “the severity of the patients' dental conditions, filed claims based on those [misrepresentations], and [were] paid by Texas Medicaid for services for which the patients were not qualified to receive”; that the Dental Groups “submitted or caused to be submitted claims for payment to Texas Medicaid for products and services that were never provided to Texas Medicaid recipients”; that the Dental Groups “submitted or caused to be submitted claims for payment to Texas Medicaid for products and services that were more costly than the products and services actually provided”; that the Dental Groups “engaged in an unlawful ‘kickback’ scheme involving the referral of Texas Medicaid patients to a third party/parties for the provision of oral and maxillofacial surgery services”; that the Dental Groups misrepresented “that patients had a ‘crossbite
’ in order to obtain prior authorization, filed claims based on those false diagnoses, and were paid by Texas Medicaid for services for which the patients were not qualified”; and that the Dental Groups misrepresented “that proper, licensed employees” performed the orthodontic measures and made diagnoses, “which permitted them to receive Medicaid payments they should not have received.” In light of those allegations, the State sought to recover the amount of the allegedly improper Medicaid payments made to the Dental Groups, prejudgment interest on those payments, “two times the amount or the value of such...
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