Firm won $147.7M state contract after settling fraud suit

A company that in 2019 settled a $2 billion Medicaid fraud lawsuit with the state of Texas for $236 million was less than three years later awarded a contract similar to the one that had sparked the previous litigation, according to records on file with the Texas Health and Human Services Commission.

Conduent State Healthcare, a former Xerox subsidiary based in New Jersey, was selected by the commission in December for a $147.7 million contract to "provide both acute and long-term care fee-for-service claims-processing services" related to the state's Medicaid program that provides health coverage for qualifying Texans who cannot afford private insurance.

The contract, awarded without a news release being issued by the state agency or the company, followed the February 2019 settlement of a lawsuit filed several years earlier by the Texas attorney general's office that accused Conduent and Xerox, then its parent company, of approving billions of dollars for Medicaid-funded dental procedures that were deemed medically unnecessary.

Many of the employees who approved the claims had little or no medical training and were pushed by the company to process claims as fast as possible, court records associated with the state's lawsuit showed.

The settlement, announced simultaneously by Conduent and Attorney General Ken Paxton in February 2019, contained no admission of wrongdoing by the company and included a provision that the state would not initiate additional legal action in connection with the matter.

In its 2019 statement, Conduent noted that the allegations stemmed from actions that had taken place between 2004 and 2014 before it was spun off by Xerox as an independent entity.

In February 2022, a jury in Delaware rebuffed Conduent's effort to force three insurance companies to pay $37.5 million of the amount it owed in the Texas settlement.

In a statement last week, Conduent spokesman Sean Collins said the now-reorganized company was selected by the Texas agency after a "a competitive and rigorous bidding process."

"We fulfilled the terms of a settlement with the state more than three years ago to resolve an unrelated matter going back to the 2004–2014 time period," Collins said in an email.

"Conduent supports 23 states with the same government health technology and eligibility services that we expect to provide to Texas, and we are committed to supporting the Commission's focus on providing excellent service and support to meet the needs of the state's residents."

Tiffany Young, spokeswoman for the state health commission, did not address the agency's past issues with Conduent, but expressed confidence that the state's interests will be protected under the current contract.

"Texas Health and Human Services has a strong, competitive procurement and contract-management process to ensure that vendors meet their obligations," Young said in a statement.

The 24-page contract contains provisions stating that the company must meet specific performance measures and that its progress will be monitored monthly by the state. It also gives the Health and Human Services Commission the authority to conduct audits of the company.

The state agency may terminate the contract "at any time" without having to pay a penalty to the company.

Conduent, which on its website bills itself as "one of the original pioneers in business process outsourcing," was spun off from Xerox into its own company in 2016. Before that, Xerox and the subsidiary were accused in court filings of using untrained workers to determine which dental procedures should be covered under Texas Medicaid in the early 2000s. The state fired Xerox from its contract in 2014.

Meanwhile, the U.S. Department of Health and Human Services' Office of Inspector General had concluded that Texas owed the federal government $133 million for the unnecessary dental payments the company had allowed. Medicaid is a federal program administered by the states, which pay a portion of the costs. Texas was required to repay the money that had been charged to the federal government for the unauthorized services.

During the litigation process and after the settlement was announced, state officials were unsparing in their criticism of the company's processes while it was doing business with Texas.

The attorney general's office said at the time it had "determined that employees of Xerox, Conduent and related companies rubber-stamped" requests for payments "without assuring the required review of each request by qualified clinical personnel."

"As a result, expensive, taxpayer-funded orthodontic work was performed on thousands of children who either didn't meet the Medicaid standard for braces or didn't require treatment," the office added.

In a statement of his own regarding the settlement, Paxton said the companies and their employees "compromised the integrity of the Medicaid program."

The attorney general's office did not respond to a request for comment about the new contract with Conduent.

The document signed in December is actually the second post-settlement contract the state health agency has reached with Conduent. In 2019, the state signed the company to a $10 million deal for the development and maintenance of a highly specialized software system.