The big money in the Preferred Family Healthcare corruption scandal: Medicaid behavioral health services | Arkansas Blog

The big money in the Preferred Family Healthcare corruption scandal: Medicaid behavioral health services

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CRANFORD: Millions were at stake in backroom negotiations over Medicaid rules and regulations.
  • CRANFORD: Millions were at stake in backroom negotiations over Medicaid rules and regulations.

In a big story this morning, the D-G digs up some good details on a point I've made in this space a number of times regarding the web of public corruption involving Preferred Family Healthcare: While the most detailed information in federal court filings has involved one-off grants — for example, a $1 million grant steered to PFH by former Sen. Jon Woods — the big money was in behind-the-scenes fights over Medicaid policy.

The D-G also outlines some of the politicians who benefited most from PFH's campaign cash, including former Gov. Mike Beebe.

Until the state ended its association with PFH in the wake of the corruption scandal  uncovered by federal investigators, it was the state's largest Medicaid provider for behavioral health (the state's term for mental health services), including services for schoolchildren. For years, PFH — formerly known as Alternative Opportunities — and other big behavioral health providers have used a powerful lobbying presence at the Capitol to bend policies to increase their revenues. “We were untouched for about twelve years,” one lobbyist who has worked on behavioral health issues once told me, speaking on condition of anonymity. “You think somebody’s going to whip you? These folks will take you out and money-whip you.”

There have long been concerns expressed — including publicly during Legislative Health Reform Task Force meetings — that such efforts were overcharging the state to help the big providers' bottom lines, rather than helping the beneficiaries in need of care. I've heard as much from state officials from both the Hutchinson and Beebe administrations.

Tens of millions in Medicaid money was at stake in backroom fights over rules, policies, and regulations regarding billing, oversight, reporting requirements, patient assessment, payment reform, and other matters. PFH lobbyist Rusty Cranford and others pushed to water down rules, delay new policies that could impact their bottom line, and dicker and squeeze over any new regulation. Their foot soldiers in the General Assembly had the power to block agency decisions in the legislative review process. State officials knew it, so they would try to hammer out negotiated agreements rather than fight a battle they couldn’t win against powerful lobbyists at the Capitol. Such efforts were often hidden from public view; even most legislators were unaware of what was happening.



We now know that, according to federal court filings, Cranford and other PFH executives were bribing lawmakers to help ensure that they won these fights. What's more, at least some of these efforts appear to have been explicitly geared toward shielding illicit activities at PFH from assessment and oversight. According to the arrest affidavit for former PFH executive Robin Raveendran, Cranford and Raveendran were involved in an overbilling scheme from 2014 through 2017. They flexed their lobbying muscle to block attempts by the state to safeguard against the very schemes they were running, and continued to fight other efforts by the state to monitor and assess providers.

We also now know that, according to federal court fillings, executives at PFH were pulling in all these extra revenues not to provide better services but in order to embezzle the money and enrich themselves, and their friends and families. They made millions, and splurged on World Series tickets, vacation homes, cushy jobs, chartered flights for their pets, and on and on.

We also know from court filings that PFH executives were very aggressive about making campaign contributions to public officials, including improperly routing funds from the nonprofit for that purpose. They clearly concluded that there would be a handsome return on that investment in campaign cash.

Benji Hardy has previously documented for the Arkansas Nonprofit News Network the more than $150,000 that Cranford and his lobbying firm donated to various Arkansas lawmakers. According to court filings, in many cases, he was acting as a "straw" contributor and improperly getting reimbursed by taxpayer-enriched PFH.

The D-G researched this list of 12 Arkansas politicians who reported at least $4,000 in campaign contributions from executives with PFH, their family members, and related subsidiaries between 2010 and 2016. At least some of this money could have been illicitly reimbursed via PFH's funds (thought even if it was, there is no evidence that the recipients of contributions would have known, or that they knew about PFH's corruption):

Gov. Mike Beebe (D): $26,000
state Sen. Jeremy Hutchinson (R): $12,750
state Sen. Joyce Elliott (D): $11,000
state Rep. Dan Sullivan (R): $10,000
state Rep. Tim Summers (R): $9,000
U.S. Rep. Mike Ross (D): $8,600
state Sen. Robert Thompson (D): $7,500
state Sen. Gene Jeffress (D): $6,000
state Sen. Linda Chesterfield (D): $5,600
state Sen. Missy Irvin (R): $5,500
Gov. Asa Hutchinson (R): $5,000
state Sen. Bruce Holland: $4,000

Some other important details in the D-G's big investigative story this morning:

* The state's Rehabilitative Services for Persons with Mental Illness (RSPMI) brought $43.9 million in revenues to PFH, one in every seven dollars Arkansas spent on the program. Revenues increased even when the number of clients fell; in 2014, it was Arkansas Medicaid revenues alone that kept the nonprofit in the black, with the program accounting for 70 percent of PFH's revenues.

* PFH consistently billed for a higher volume of treatments per client, and a higher cost for each treatment, compared to other providers.

* Within 48 hours after former state Rep. Eddie Cooper, then a PFH executive, told Cranford about a rumor that Beebe was going to enact a policy that would allow more competitors to provide mental health services in the state (another PFH executive "responded with an expletive"), the nonprofit flooded Beebe's re-election campaign with $22,000 in campaign contributions. The contributions were routed through individual donations by various PFH executives, their family members, and lower-lever PFH staffers. The policy change that Cooper and PFH were worried about never happened; Beebe's chief of staff says that's because it wasn't on the table in the first place. Beebe told the D-G that he didn't remember these checks and that his policy decisions were not for sale: "No one has ever thought, in my opinion, nor has anyone ever approached me, in my opinion, [believing] that giving any money would in some way effectuate a decision I would make."

The D-G story also has a good roundup on systemic problems that left the state vulnerable to bad actors:

* The lack of independent assessment, allowing providers to overdiagnose or overprescribe.

* A broken RSPMI system that had overly high reimbursement rates. The rates were originally set up for the state's community mental health centers, which used to be the only Medicaid behavioral health providers allowed in Arkansas, because they were required to provide services to people not covered by Medicaid at that time. Those rates stayed in place after private providers successfully pressured the state, with the threat of a lawsuit, to change the rules in 2000 and allow all private providers to become RSPMI providers. From the D-G's report:

The state's Medicaid mental health treatment program expanded from 15 to 52 providers, with 300 sites, by 2008.

"Pure profit," said Tom Petrizzo, former chief executive for the provider Ozark Guidance, when asked why so many flocked to Arkansas.

* A ten-year moratorium, beginning in 2008, on new RSPMI providers that Cranford and company fought to preserve because it blocked new entrants from competing with PFH. When the RSPMI program was finally overhauled this summer, DHS described "long wait times for treatment, limited services, and a small group of providers owning the whole system."

* Ferocious opposition from the big behavioral health providers to payment incentives that rewarded quality of care rather than just paying by volume ("fee for service"). The providers' lobby was successful in stalling and limiting the state's efforts to implement programs such as the Payment Improvement Initiative or rating systems meant to evaluate quality of care.

Yet more details in the D-G.

And with the federal investigation still ongoing, there will be yet more still, I will confidently predict, to come. 

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