Texas Supreme Court Concludes No Evidence of Fraud and Reverses Summary Judgment Against Dr. Richard Malouf

In what can only be described as a bombshell decision, the Texas Supreme Court has sided with Dr. Richard Malouf and his legal team.  The Court not only reversed the $16 million summary judgment against Dr. Malouf but granted his original no-evidence summary judgment motion to end the prosecution that the trial and appeals courts had denied. The decision was not unanimous.  Two judges endorsed a dissenting opinion.

Didn’t see this coming

Not being lawyers, we didn’t see this coming.  We assumed that the Supreme Court at best might send the case back to trial in a lower court.  However the Court was persuaded by the defense’s legal arguments that Dr. Malouf had not violated the Texas Medicaid Fraud Prevention Act based on the wording of the Act and that the State had presented no evidence he had.  So they granted his original summary motion.

Unbelievable.  The $16 million dollar judgment against Malouf gone up in a puff of smoke.

No dentists or orthodontists guilty of fraud

This means not a single dentist or orthodontist has been found guilty of fraud despite years of media hype by WFAA back in the day, the myriad accusations by the OIG back then under Doug Wilson and Jack Stick, and the tireless 12-year pursuit by the Office of the Attorney General.

It also means the last stroke of the war against Medicaid dentists unless the Office of the Attorney General brings another Medicaid fraud case against Dr. Malouf based on other evidence.

Horrible legacy of injustice to Medicaid dentists

Jason Ray, the Austin administrative attorney involved with these orthodontic Medicaid fraud accusations from the start told TDMR, “This is a good day for Medicaid dentists, who already face a challenging combination of low reimbursement rates, a needy Medicaid patient population, and falling enrollment.  The prosecution of orthodontic providers like Dr. Malouf was wrong from the start, and it’s now clear that the State had to really stretch the language of the TMFPA in order to find something to gripe about.”

This outcome may be poetic justice, karma, or whatever you want to call it, but it does not undo a terrible legacy for Medicaid dentists that rests in the minds of the public and even legislators, which is a future TDMR article.  Many recall the allegations of Medicaid fraud from years ago and judge Medicaid dentistry today based on them.  So many careers ruined.  So many offices closed.  So many good doctors forced to pay back funds they earned for care the state approved.  Some going bankrupt or losing their retirement nest eggs.

Court’s decision

Here is what we consider the relevant portion of the Court’s decision.

The State asserted several claims against Malouf and others, including a claim under Section 36.002(8), which provides that a person “commits an unlawful act if the person . . . makes a claim under the Medicaid program and knowingly fails to indicate the type of license and the identification number of the licensed health care provider who actually provided the service.”  The State alleged that, under Malouf’s direction, All Smiles submitted 1,842 claims that stated Malouf’s TPI number even though a dentist other than Malouf actually provided the billed-for services. Based on this claim, the State sought to recover the amount Medicaid paid for those services plus prejudgment interest, statutory penalties, attorney’s fees, and expenses. The State filed a motion for partial summary judgment on only that claim.

Malouf did not dispute that All Smiles submitted 1,842 claim forms stating his TPI number for services a different dentist actually provided. He insisted, however, that he did not “knowingly” fail to indicate the actual provider’s information. Specifically, he testified he believed based on information provided to him by Medicaid that he was supposed to use his TPI number whenever (1) he personally supervised the dentist who provided the service or (2) Medicaid’s system suffered a “glitch” that prevented his staff from properly submitting a claim. He asserted that, except for those two circumstances, he had no knowledge that his staff submitted claims using his TPI number for services another dentist provided. This testimony, he argued, created fact issues as to which, if any, of the 1,842 claims actually constituted an “unlawful act.”

In addition, Malouf argued that none of the 1,842 claims constituted an unlawful act under Section 36.002(8) because they all
correctly indicated the license type of the provider who actually provided the billed-for services. In each case, Malouf explained, the services were actually provided by someone who—like Malouf—was a licensed dentist, so a form bearing Malouf’s TPI number in fact indicated the type of license held by the person who actually provided the service. And because all the claim forms indicated the actual provider’s license type, Malouf argued, none of them constituted an unlawful act under Section 36.002(8) because they did not fail to “indicate the type of license and the identification number of the licensed health care provider who actually provided the service.” Id. § 36.002(8) (emphasis added). Based on these arguments, Malouf filed a no-evidence-summary-judgment motion…

We conclude the State has failed to demonstrate in this case that Malouf committed unlawful acts under Section 36.002(8) by submitting the 1,842 claims at issue. When both sides move for summary judgment and the trial court grants one motion and denies the other, we review both sides’ summary-judgment evidence and determine all questions presented.

Here, the trial court denied Malouf’s summary-judgment motion and granted the State’s, and Malouf preserved his objection to the denial before both the court of appeals and this Court. We thus reverse the court of appeals’ judgment, and we render judgment in Malouf’s favor.

Slam dunk for due process, even if it is 12 years down the road.