Northwest Arkansas Democrat-Gazette
Medicaid fraud alleged
Ex-executive faces charges of improperly billing millions
Arkansas on Friday suspended Medicaid payments to a Springfield, Mo.-based, nonprofit after a former executive with the organization was arrested in the improper billing of almost $2.3 million in claims for mental-health services.
Robin Raveendran, a former executive vice president with Preferred Family Healthcare, was arrested Thursday evening on two felony counts of Medicaid fraud related to claims submitted from Jan. 1, 2015, to Oct. 19, 2017.
According to an investigator’s affidavit, Raveendran reported to Milton R. “Rusty” Cranford, a lobbyist who directed the nonprofit’s Arkansas operations and who pleaded guilty in federal court on June 7 to bribing state lawmakers.
Four former state lawmakers have pleaded guilty to or have been convicted of corruption charges stemming from a federal investigation into Cranford’s activities.
Three of the nonprofit’s senior managers were forced out last year after federal authorities briefed its attorneys on the investigation that led
to charges against Cranford and former Arkansas legislators. Those executives have not been charged with any crimes.
“We had received assurances that [Preferred Family Healthcare] had cleaned house,” Gov. Asa Hutchinson said Friday.
Raveendran’s arrest, he said, “is news, and indicates others who were involved may still be there, that there are still some in the organization who are under investigation.”
In a letter Friday to Preferred Family Healthcare, Arkansas Medicaid Inspector General Elizabeth Smith said a suspension of payments is required by federal law in response to a “credible allegation of fraud,” such as the information contained in the investigator’s affidavit.
The organization provides mental-health services and substance-abuse treatment in 47 locations in Arkansas, as well as in four other states.
The state Department of Human Services could grant a temporary “hardship exception” in areas where Preferred Family Healthcare is the only mental-health services provider, department spokesman Amy Webb said in an email.
She said the state also will terminate its contracts for state mental-health and substance-abuse services outside of the Medicaid program within 60 days.
“In most locations, providers have been identified who can expand services into these areas, and it is DHS’ intent to work with those providers to transition existing beneficiaries,” she said.
Preferred Family Healthcare received about $179 million from the state Medicaid program from 2011-16, including $33.4 million in 2016, according to federal court records.
The nonprofit will appeal the suspension, spokesman Reginald McElhannon said in a statement.
“The allegations against our former employees are egregious and not a reflection of PFH values,” he said. “For some time, we have worked in a cooperative manner to assist in identifying and addressing areas of concern and will continue to do so, while we work through the appeal process.
“Recognizing that Preferred Family Healthcare has many clients who are in critical need of non-interrupted service, including a significant number who receive 24/7 care, we will continue to support them while working with the various government entities to try and identify and resolve their concerns,” he said.
Raveendran, 62, of Little Rock is accused of using his expertise as a former administrator with the state Medicaid program to “target vulnerabilities in the Medicaid system” while working for Preferred Family Healthcare, Attorney General Leslie Rutledge said at a news conference Friday.
According to the affidavit by Rhonda Swindle, an investigator with the attorney general’s Medicaid Fraud Control Unit, Raveendran was a senior audit manager with the Human Services Department from August 1984 through May 2004, when he became chief program administrator for its program integrity unit.
After being hired by Preferred Family Healthcare at Cranford’s recommendation in 2014, Raveendran announced a decision on how the organization would bill for services provided to clients who were eligible for both Medicare and Medicaid, Swindle wrote.
Medicare is the federal health insurance program for the elderly and disabled. Medicaid is funded by the state and federal governments and covers low-income people.
According to provider agreements and Medicaid regulations, Medicaid is considered a “payer of last resort” and should be billed only for charges not covered by Medicare or other insurers, Swindle wrote.
But Raveendran directed employees at Preferred Family Healthcare to bill Medicaid for the full cost of services, even when a client was also eligible for Medicare, she said.
That resulted in more money for Preferred Family
Healthcare because Medicaid’s rates for the same services were higher, Swindle wrote.
The claims submitted to the Medicaid program were “manipulated” to appear as though they had already been processed by Medicare and represented only the part that Medicare didn’t pay, rather than the full bill, she said.
In some cases, the services were provided by staff members who were not doctors or licensed clinical social workers, as the Medicare program requires, she said.
Raveendran sought to protect the scheme when he and Cranford “aggressively attacked” a proposal by Smith in 2016 to limit Medicaid reimbursement for group psychotherapy, she said.
A federal contractor had found that Arkansas spent $147 million on the service from 2013-15 — more than the Medicaid programs in Alabama, Georgia, Louisiana, Mississippi, Tennessee and West Virginia combined.
In the end, state lawmakers approved rule changes that capped the length of therapy sessions at one hour, instead of 90 minutes, and limited recipients to 25 sessions a year.
But state officials dropped a proposal to reduce the reimbursement rate from $55.20 an hour to $40 an hour after the Legislature’s public-health committees gave the proposal an unfavorable recommendation.
Medicare limits reimbursement to $43 per session, Swindle wrote.
“What Elizabeth Smith and most of the legislature did not know during the heated debate was that Raveendran was engaged in an ongoing Medicaid fraud scheme that targeted the very vulnerabilities Cranford and Raveendran were fighting to keep in place,” Swindle wrote.
“If the original proposals made by the Inspector General had been fully implemented, a substantial portion of the fraud identified herein would have been prevented.”
The investigation that led to Raveendran’s arrest started in 2016 after the FBI asked the attorney general’s office to investigate whether another provider, identified by Rutledge spokesman Jessica Ray as Magnolia-based South Arkansas Youth Services, had committed Medicaid fraud.
The youth-services organization, which received lobbying services from Cranford, filed for bankruptcy in January, has ceased operations and is under FBI investigation, bankruptcy filings show.
Investigators with the attorney general’s office found “some evidence of criminal conduct involving the provider, but the case was eventually closed because all identified conduct was well beyond the State’s statute of limitations,” Swindle wrote.
But she said that inquiry led her office’s fraud unit to discover that several other providers that were under investigation or that had recently been audited “were all connected to a small group of individuals who had been providing lobbying and consulting services.”
“Instead of several small investigations, the MFCU began looking at one large investigation,” Swindle wrote.
“A list of individuals and companies all associated directly or indirectly with Rusty Cranford, Medicaid, and public corruption began to unfold.
“While Raveendran was a key leader of this scheme and the only person initially charged, the state does not believe he acted alone,” she added.
“Unfortunately this a is a very large, tangled web,” Rutledge said.
The charges accuse Raveendran of directing employees to submit 18,523 improper claims worth $2.1 million from Jan. 1, 2015, to July 31, 2017, and 1,586 improper claims worth more than $147,000 from Aug. 1, 2017 to Oct. 19, 2017.
Because of a change in state law that took effect Aug. 1, 2017, one count covers the earlier group of claims and carries a sentence of up to 20 years in prison. The other count covers the more recent claims and is punishable by up to 30 years in prison.
Each count is also punishable by a fine of up to $15,000.
Raveendran was booked into the Independence County jail on Thursday and released on $250,000 bond, Ray said.