CAO overbilled Medicaid $18.16 at a time; files $1M lawsuit for being ‘lulled into complacency’

[MM Curator Summary]: A substance abuse provider is suing its software vendor, claiming the software vendor is at fault for $1M in overbillings to the state.


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Patrick Lakamp

An $18.16 mistake – made over and over again – has put the Community Action Organization of Western New York in a half-million dollar bind.

The organization mistakenly added a weekly charge of $18.16 when billing Medicaid for many of those in its outpatient chemical dependence services program, according to an audit by the New York State Office of Medicaid Inspector General.

Extrapolating the mistaken charge for all 271,809 claims during a three-year audit period, the audit estimated the CAO overcharged the government potentially as much as $992,268.

The office said the CAO could settle the matter by paying back $491,508. But the nonprofit, which spends millions of state and federal dollars fighting poverty, spent the improper reimbursements and does not have the money to repay the amount, according to a lawsuit it recently filed in State Supreme Court.

The CAO blamed the overbilling on its software vendor, TenEleven Group Inc. of Amherst. The lawsuit alleges the vendor “lulled CAO staff into complacency by making false and misleading representations.”

The lawsuit seeks “not less than $1 million” from TenEleven Group. 

“The complaint speaks for itself,” said attorney James J. Zawodzinski Jr., who represents the CAO. “Because the matter is in litigation, we are limited in the comments we can make.”

The lawsuit relates to billings and services provided by TenEleven Group from 2014 to 2016.

“Audit findings are common, and these findings are a relatively small percentage of the agency’s overall billings,” Zawodzinski said. “The litigation seeks to recover the resulting audit finding from the software vendor who the complaint alleges made errors which caused the bulk of the audit finding.”

TenEleven Group said it’s not responsible for the mistaken billing.

“CAO’s lawsuit is nothing more than a deflection tactic, seeking to cast blame on a third party for CAO’s own failure to ensure it followed proper billing practices and appropriately handled public funds,” the company said in a statement. “TenEleven merely provided software to CAO, and is not, nor was it ever responsible for CAO’s billing, processing, accounting, or reporting practices to state and federal agencies. We believe the lawsuit is meritless and intend to vigorously defend against the allegations in the complaint.”

It is not clear from the CAO’s lawsuit whether any overbilling occurred after the audit period, and if so, how much. If the improper $18.16 charges continued after the audit period, the organization has the ability to report overpayments through the inspector general’s self-disclosure program.

Thomas Kim, president and CEO of the CAO, did not return messages seeking more information about the overcharges.

“To date, TenEleven Group has not responded to, in any meaningful fashion, CAO’s attempts to resolve the present dispute,” according to the CAO’s March 22 lawsuit.

The Office of Medicaid Inspector General audited a random sample of claims from January 2014 through December 2016 submitted by the CAO’s Drug Abuse and Treatment Program. In all, the program submitted 271,809 claims totaling $7.9 million during the period.


Audit of CAO opioid treatment program

New York State’s Medicaid inspector general audited a random sample of Medicaid claims submitted the the CAO of Western New York’s Drug Abuse …

Most of those receiving services in the program are enrolled in Medicaid, the federal-state health care insurance program that helps pay for health care for low-income people of any age.

When the DART clinic provides services to those on Medicaid, it bills Medicaid for reimbursement.

For years before the audit, TenEleven Group provided software to CAO under an agreement that both sides modified from time to time. In May 2014, TenEleven Group and CAO amended it to put in place “an enhanced suite” of software and services, according to the lawsuit. The software included an upgraded billing component enabling reimbursement claims to be submitted electronically.

In its lawsuit, the CAO said it paid “substantial sums” for the software package, including licensing fees and ongoing maintenance costs.

The CAO, according to the lawsuit, relied on, and continues to rely on, TenEleven Group’s software to manage billings, primarily for the Medicaid program. CAO employees continue to input weekly billings for services provided to DART clinic patients into the TenEleven Group billing and financial module. TenEleven Group’s software transmits the nonprofit’s claims to the electronic Medicaid New York claims system portal in CAO’s name for payment directly to CAO, according to the lawsuit.

Staff at the DART clinic became aware the software had “a significant defect” after using the upgraded software for a period of time, according to the lawsuit. After learning of the $18.16 additional weekly charge, the staff alerted TenEleven Group, according to the lawsuit. Either an error in the software or in the billing submissions protocol appeared to trigger additional payments from Medicaid for which the CAO had not submitted claims for reimbursement.

TenEleven Group investigated the source of the overcharges and offered assurances the DART staff was correctly inputting claims information, according to the lawsuit.

TenEleven Group told the CAO that it had identified the cause of the defect and addressed it with Medicaid and “repeatedly assured” the CAO that the billing software “was functioning properly” and transmitting accurate information to the eMedNY claims system, according to the lawsuit.

The CAO renegotiated its agreement with TenEleven in 2018, paying higher services fees to continue using the software.

The CAO’s lawsuit alleges TenEleven Group “fraudulently induced CAO to continue as a customer … despite knowing that they had not mitigated the defect CAO previously brought to their attention.”

“TenEleven failed to disclose what is now apparent: that whatever actions TenEleven, through its representatives, may have been taking, those actions were not effective either to rectify the software defect or to reduce CAO’s now-expanding liability to the Medicaid program,” according to the lawsuit.

The CAO received $36.9 million in government grants, according to a 2019 tax filing.

The CAO in 2018 served 642 people in its outpatient opiate treatment clinic, according to the tax filing. The DART clinic conducted 177,252 dispensing visits and 14,883 “clinical episodes of care” that year, and it reported that 78% of those in the program established and maintained abstinence from drug and alcohol use.




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