Former employees of Preferred Family Health accused of stealing millions

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LITTLE ROCK, Ark. — Preferred Family Health will pay the State of Arkansas and the federal government $6.5 million in settlements after years of investigation by the State Attorney General’s Office into alleged Medicaid fraud by some of PFH’s former employees.

Some employees of Preferred Family Health are accused of stealing millions from the state and federal government by beating the system.

State Attorney General Leslie Rutledge called this “a very exciting day to close the chapter” on a long and challenging case.

The state alleges some employees of the mental health care organization cheated the state, all behind their computer screens.

“Employees at PFH figured out a way to get through the edits and to push through billing that was not authorized by the system,” said Deputy Attorney General Lloyd Warford.

Warford said these employees plugged in whatever numbers they wanted and got paid more than what they were due.  

“They used this open system, which DHA had been unaware of, to push through what we call crossover claims,” Warford added.

But an informant and PFH employee wouldn’t stand for it and filed a complaint with the Attorney General’s office in 2016.

“These allegations involved inappropriate billing by individual therapists,” said State Attorney General Leslie Rutledge.

According to Rutledge, just over a year later, the informant again contacted the Medicaid Fraud Control Unit with additional information about PFH inappropriately billing an entire class of recipients called Qualified Medicare Beneficiaries.

The Attorney General’s office admits this case had unique challenges.

“The records and the data that DHS had from what was submitted was not enough by itself to discover what had occurred,” Warford said.

Warford said the Medicaid Fraud Control Unit conducted over 100 interviews and reviewed more than 2.5 million documents.

“My office will not allow anyone to take advantage of vulnerable Arkansans who need medical treatment and healthcare,” Rutledge said.

Preferred Family Health no longer operates any facilities in Arkansas.

Five former employees of PFH have been charged in state court with Medicaid fraud.

The Deputy Attorney General said Medicaid fraud at this level is typically considered a Class-B felony.  

Preferred Family Healthcare released this statement after we reached out to them.

Read the full statement below:

Preferred Family Healthcare, Inc. (PFH) has reached agreements with the United States Attorney’s Office for the Eastern District of Arkansas (USAO) and the Arkansas Attorney General’s Office (AG) that provide complete resolution to all investigations involving PFH with those offices.  

“We are pleased to put these matters behind us and look forward to focusing on our mission of providing compassionate, integrated care to the individuals and communities we serve,” said PFH President and Chief Executive Officer Michael Schwend.

PFH worked cooperatively with the USAO and the AG throughout the investigative process and has denied engaging in any illegal conduct itself.  “The misconduct of former employees and executives associated with Alternative Opportunities, which merged into PFH, are disappointing,” Schwend added. The agreements allow all parties to avoid the potential expense of protracted litigation.

As part of the agreement with the USAO, PFH will enter into a Corporate Integrity Agreement (CIA) with the Office of the Inspector General of the United States Department of Health and Human Services (OIG-HHS).  “PFH has a comprehensive compliance program to ensure consistent, responsible practices. We are eager to demonstrate our commitment to high standards of ethical business conduct through the significant enhancements we have made to our compliance program,” said Schwend.

Pursuant to the agreements, PFH will remit $4.60 million to the USAO and $1.94 million to the AG offices, respectively. PFH has prepared accordingly for the possibility of these agreements and remittances to ensure there are no long-term effects on the financial position or business plan for the company.   

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