Missouri nonprofit loses Arkansas Medicaid contracts, begins ‘transition timeline’ for operations

A Missouri nonprofit at the center of an ongoing federal bribery and corruption investigation announced late Tuesday (July 3) that it plans to downsize its Arkansas operations following a series of events last week that threw the company into chaos.

In a brief statement late Tuesday evening ahead of the Fourth of July holiday, Springfield, Mo.-based Preferred Family Healthcare (PFH) said it will begin a “transition timeline” with the Arkansas Department of Human Services (DHS) after state officials late last week indicated they were going to terminate the health care group’s state contracts due to alleged past misconduct by former employees.

“It is … understood that these contracts will be transferred to other providers. A transition timeline will be determined in consultation with DHS and will likely be impacted by the needs and challenges of the services provided in specific locations,” said PFH spokesman Reggie McElhannon. “Recognizing the realities of these decisions, it became apparent that Preferred Family Healthcare would be unable to adequately support our clients without the government contracts.”

On Friday, DHS suspended PFH from the state’s Medicaid program after former company executive Robin Raveendran, 62, of Little Rock, was arrested Thursday by the Attorney General’s Medicaid Fraud Control Unit. He has been charged with two counts of Medicaid fraud, one Class A felony and one Class B felony. He is accused of coordinating an effort which reimbursed his company for 20,109 illegally billed mental health services for a total of $2,277,816.05 from Jan. 1, 2015 to Oct. 19, 2017.

The federal Office of Medicaid Inspector General (OMIG) had first notified DHS a “credible allegation of fraud against PFH and Raveendran based on the affidavit used in the arrest.

“When a credible allegation of Medicaid fraud exists, suspension of Medicaid payments is required by federal law,” said Arkansas Medicaid Inspector General Elizabeth Smith. “I am carrying out my responsibilities as Medicaid Inspector General to protect the integrity of the Arkansas Medicaid program by issuing these suspensions.”

Earlier Tuesday, DHS officials provided a letter to Talk Business & Politics that was sent to PFH’s Medicaid beneficiaries in Arkansas regarding the suspension of the nonprofit’s ability to get payments as a provider of Medicaid services. According to DHS’ own internal data, PFH had submitted Medicaid claims for 10,408 individual clients since January 1, 2018.

“As we’ve mentioned before, DHS has been working with other providers statewide for some time, and continues to create plans with those providers, to ensure a transition for DHS clients and to continue services,” said DHS spokeswoman Marci Manley. “To be clear, however, not all of those individuals might be current clients of PFH now due to ‘churn’ of clients in and out of the system at any given time,” Manley said.

Financial and contract data provided to Talk Business & Politics by state human services officials show that the Missouri nonprofit was awarded 16 contracts valued at more than $28 million for the fiscal year ending June 30. Statewide, those services are provided at nearly 50 health care clinics across Arkansas, as well as numerous schools and other off-site locations.

According to the list of current contracts, DHS suspended 11 of those contracts valued at nearly $7.9 million mainly for substance abuse and drug treatment and education programs and community-based services for high-risk youth.

In its statement concerning the downsizing of its Arkansas operations, PFH officials said the Missouri health care group’s first priority remains the clients served and the more than 700 employees who support them across the state of Arkansas.

“To ensure an orderly transition with the least amount of disruption to client and employee needs, Preferred Family Healthcare is making every effort to work with DHS to learn and support their transition plans, which are unknown to us at this time,” said McElhannon.

Besides the collapse of PFH’s Arkansas operations, a Talk Business & Politics report earlier this week also reported on a lawsuit that accused the Missouri nonprofit of allegedly fleecing hundreds of its lowly paid hourly workers out of overtime pay while Raveendran, and other company executives were embezzling Medicaid funds and doling out millions of dollars in bribes and kickbacks to Arkansas lawmakers, public officials and its own well-paid executive team.

Over a year ago, the first shoe to drop in the federal government’s investigation of the Missouri health group occurred when the acting U.S. Attorney for the Western District of Missouri announced that PFH accountant David Carl Hayes had pleaded guilty to two embezzlement schemes totaling more than $3 million.

That investigation led federal prosecutors in Arkansas to file charges and get indictments and guilty pleas against several former Arkansas legislators and other public officials involving the disbursement of so-called GIF or General Improvement Funds.

PFH’s operations in Arkansas include more than 50 clinics that provide an array of difficult to get health care services in key rural and urban markets across the state. The Ozark region nonprofit, one of the largest healthcare organizations in the U.S., also has nearly 4,000 employees at its other operations in Missouri, Oklahoma, Kansas and Illinois.

In fiscal 2016, PFH reported program service revenue of $181.2 million, up 172% from $66.6 million in the prior year. Companywide, more than $127 million of the nonprofit’s $170 million in expenses was used to pay salaries of 4,927 employees on the nonprofit’s payroll, federal tax filings show.

Although the details of the nonprofit’s possible exit from Arkansas are still murky, McElhannon said PFH is determined to not let the “egregious behavior” of a few executives overshadow the amazing work of hundreds of Arkansas employees for the past 11 years.

“Many Arkansans have been positively impacted by the exceptional care they have received through the personal efforts of PFH employees,” he said. “Preferred Family Healthcare acknowledges this dedication and is saddened by the impact this will have on our staff.”

No PFH officials were made available to answer questions from TB&P concerning the agency’s efforts to recoup embezzled Medicaid funds and kickbacks handed out to top company officials. The Missouri nonprofit has also not indicated if any current executives, who have annual salaries in the range of $400,000 to nearly $1 million, would be fired or let go as part of the company’s “transitioning” efforts.