FOCUS DC News Wire 12/17/13

 

 

Federal investigators are looking into whether former leaders of the District’s Options Public Charter School committed Medicaid fraud by, among other things, exaggerating the needs of its disabled students and paying students with gift cards to ride school buses, according to several people familiar with the criminal investigation.

 

Court documents filed in a related civil case, combined with numerous interviews, indicate that city officials and criminal investigators are examining the school’s busing program and other ways it obtained nearly $2 million in Medicaid reimbursements from June 2012 to June 2013. That included a sharp one-year increase in the number of Options students classified by the school as having the most intensive special education needs.

 

Increased bus ridership and elevated special education needs would have allowed the school to increase the amount of local and federal taxpayer dollars it could claim. Court records show that a for-profit company founded by school leaders received hundreds of thousands of dollars in contracts from Options, including a fee of 25 percent of all Medicaid reimbursements.

 

The school — which serves about 400 at-risk teens, most of whom have disabilities — was thrust into turmoil in October, when the D.C. attorney general filed a civil complaint alleging that three Options managers and others created a contracting scheme to divert more than $3 million from the school to two for-profit companies they founded. Those allegations spurred the criminal probe, according to people familiar with the case.

 

Criminal investigators are examining Options’s Medicaid reimbursements, which funnel tax dollars to schools so they can recover some of the cost of educating students with disabilities. But there are strict rules about which students and services are eligible for reimbursement, and experts said that willfully breaking those rules to inflate payments could constitute fraud.

 

Options is now overseen by a court-appointed receiver, Josh Kern, who has assumed control of operations and finances and who placed a hold on all Medicaid billing pending evaluation of reimbursable expenses. “We are aware of reports that there is an ongoing criminal investigation that may include issues concerning Medicaid billing,” Kern’s attorney, Jonathan Stoel, said in a statement.

 

No one has been criminally charged in the Options case, but a grand jury is investigating, according to people with knowledge of the case. William Miller, a spokesman for Ron C. Machen Jr., the U.S. attorney for the District, declined to comment on the existence of a grand jury but confirmed that federal officials are continuing to investigate Options.

 

The D.C. Public Charter School Board voted Monday to take the first step toward closing Options.

 

Each of the defendants named in the civil lawsuit has denied any wrongdoing, and they are seeking to be dismissed from the case, arguing that the city’s complaint is sensationalized and riddled with errors. They also have said that they followed the city’s rules for charter operators and managed Options responsibly, leaving the school with a $4 million surplus.

 

William Lawler — an attorney for Donna Montgomery, who was the chief executive of Options and the executive director of Exceptional Education Services (EES), a for-profit Options subsidiary — said that his client was driven by a desire to serve children and did not do anything, or direct anyone to do anything, to get money that Options was not entitled to.

 

“There was never any intention to do anything fraudulent,” Lawler said. “There was an intention to ensure that students received the educational resources that they needed.”

 

The civil lawsuit does not specifically allege Medicaid billing improprieties, but it does draw attention to several issues that people familiar with the case said are among those of interest to criminal investigators, including a dramatic increase in 2012 in the number of special education students at Options with the most intensive needs.

 

The complaint also details a fast-growing bus transportation program that the school sought Medicaid reimbursement for; students and parents said students were encouraged to ride Options buses and received $50 weekly gift cards from the school if they did.

 

Options received $1.9 million in Medicaid reimbursements between June 2012 and June 2013, according to a spokeswoman for the D.C. Department of Health Care Finance, which administers the city’s Medicaid program.

 

Court records filed with the civil complaint show that during that same period, Options paid about $450,000 to EES. The company, which Options leaders created, handled Medicaid billing for the school in exchange for 25 percent of its reimbursements, according to contracts and invoices filed in court.

 

Pamela Marple, an attorney for EES, did not return requests for comment for this article. Previously, she has said that the company and Options managers did nothing wrong, disclosed their actions to the city’s charter board and managed the school in a fiscally responsible way.

 

Schools may bill Medicaid to recover part of the cost of providing certain medically necessary services to students with disabilities, including counseling, speech therapy, and some transportation to and from school. But schools can bill only for transportation on days when the student also receives a medically necessary service — such as counseling or speech therapy — at school, according to D.C. Medicaid rules.

 

Transportation was a key service that EES and Options sought federal reimbursement for, according to court records.

 

In the District, the daily billing rate for a student’s round trip to and from school is $79.64, according to the D.C. Medicaid fee schedule. The federal government reimburses 70 percent of that cost, or $55.75 per child.

 

Most D.C. students with disabilities who require busing are transported by the Office of the State Superintendent of Education, but Options handled its own transportation arrangements. The school paid EES — the same company that did its Medicaid billing — nearly $1 million to run its school buses in 2012-13, according to court records.

 

EES was originally supposed to receive a $450,000 payment, with the possibility of a $100,000 bonus if at least 150 students rode the bus regularly. But far more students rode the bus than anticipated, leading to a new agreement with EES for $750,000, according to court records.

 

The higher rate was meant to reward “EES’ ability to generate more income for Options through transportation billing through DC Medicaid,” according to the agreement.

 

Bus ridership increased about the same time that the school promised $50 cash gift cards to students if they rode the bus to school each day.

 

School officials have described the payments as part of an anti-truancy initiative, but students did not receive the gift cards unless they rode the Options-provided bus, according to teachers and parents.

 

One parent said her daughter received the payments until she decided to take a Metrobus. “They told her if she doesn’t ride the yellow bus, they wouldn’t give her the money,” Dell Brown said.

 

Thomas E. Zeno, a former prosecutor for the U.S. Attorney’s Office for the District of Columbia who specializes in white-collar crime, including health-care fraud, said it’s illegal to pay anyone to use a Medicaid-funded service.

 

“It could be a kickback,” Zeno said. “It is against the law to either give or receive an incentive to use Medicaid.”

 

EES sought to provide therapy for students aboard the bus via an “on-board therapeutic program . . . required to better service student ridership and increase Medicaid billing proceeds,” according to an Options document submitted as part of the city’s civil complaint.

 

An Options employee who was paid extra to ride the bus with students each morning and afternoon said the therapy consisted of making conversation with students to get their day off to a good start. The employee said she was not a therapist and did not have the kind of professional license — such as in social work, counseling or psychiatry — that is required for Medicaid reimbursement.

 

The number of special education students, and their level of needs, also has drawn scrutiny from investigators.

 

According to court records, Options revised its budget in the middle of the 2012-13 school year to reflect a dramatic increase in the number of special education students with the most intensive needs, whose numbers rose 42 percent — much faster than the school’s 15 percent enrollment growth overall.

 

Such students bring additional local tax dollars to the schools they attend — an extra $28,284 each on top of the regular per-pupil funding of about $9,000. And Options could probably seek federal Medicaid reimbursement for some of the services it provided to those students.

 

Wrongly identifying students for special education services or inflating the services students need — and then billing Medicaid for them — could constitute federal fraud, said Zeno, the former prosecutor.

 

But evaluating students’ levels of need is a judgment call, a gray area that can be hard to prosecute unless there is evidence that someone plainly lied, Zeno said. Fraud cases are difficult to pursue, he said, because a person generally can’t be found guilty just for making a mistake. It has to be proved, beyond a reasonable doubt, that they willfully broke the rules.

 

“There has to be some sort of corrupt intent,” Zeno said. “You have to show somebody’s lying about something.”

 

A. Scott Bolden, an attorney for David Cranford, Options’s former clinical director, said his client had only limited involvement with the evaluation of student needs. “But to his knowledge, there was never any inflation of students’ special education needs for any reason, much less to increase Medicaid billing opportunities,” Bolden said.

 

Bolden said his client was not involved in Medicaid billing and could not comment on the school’s billing practices.

 

Many charters don’t bill for reimbursement because it is technical and time-consuming and — particularly for small schools with few disabled students — often doesn’t bring in a lot of money, according to Monica Lesperance, of the D.C. Special Education Cooperative, a consortium of charter schools that offers its members technical assistance and training.

 

The Options managers who founded and ran EES hoped that the private company could reap significant profits by selling its Medicaid billing services to other schools, according to minutes of a March 2012 Options board meeting. “Through EES, we hope to become the Medicaid biller for other schools and get additional income for Options,” said Paul Dalton, director of EES and the school’s provost and general counsel, according to the minutes, which were filed in court. An attorney for Dalton did not respond to requests for comment.

 

But Options officials also appeared interested in bringing in additional income for themselves and other Options employees. In an April 2012 e-mail obtained by The Washington Post, a senior Options official — who was not named in the civil complaint — asked the school’s attorneys at Covington & Burling for advice on a proposed bonus structure for Options staff and administrators.

 

The size of the bonuses, as proposed, would have been tied to the amount of Medicaid reimbursements Options received, with bigger payouts as reimbursements increased.

 

It is not clear whether the bonuses were ever approved or paid. An attorney for Covington & Burling declined to comment, citing attorney-client confidentiality.

 

 

In a move perfectly suited for the cold December weather, last night the D.C. Public Charter School Board voted unanimously to begin the process to close Options Public Charter School. The move essentially takes Christmas away from 386 students, 65 percent of which live in Wards 7 and 8, 65 percent of which are classified as having disabilities, with 75 percent of this group designated at Level 4, the highest level of special needs.

 

The PCSB asserts the decision is a result of being required to follow the legal rules. According to the Washington Post's Emma Brown, "staff states that the [School Reform Act] law doesn't allow for discretion in cases of financial mismanagement." The move seems particularly static for a body that operates in such a dynamic environment.

 

Of course, there appears to have been significant financial mismanagement at the school. It is alleged that $3 million in public money was diverted from the charter to companies founded by the school's leadership. Ms. Brown details new allegations today about the way Options handled Medicare billing. However, as the court-appointed Receiver Josh Kern pointed out in a letter to the PCSB these problems have been corrected with controls put in place to prevent them from every happening again.

 

In fact, reading Mr. Kern's report makes clear that although the name of the school has not changed everything else about it, from staffing, to special education services, to budgetary control, to overall management of the facility, has been drastically improved in an extremely short amount of time. Yes, there is more to be done, but it is clear that the charter has been reinvented.

 

So new schools will now have to be found for these children due to no fault of their own. In disrupting the academic home for these students the PCSB takes not responsibility for the situation. Remember that last July the CHARM Report, compiled by the PCSB, OSSE, and the CFO that evaluated the financial health of charters, painted a positive picture of Options PCS. In addition, keep in mind that as a result of the problems associated with this school the authorizer is proposing stricter rules on reporting contracts and is increasing the information it requires from the facilities it oversees.

 

The PCSB staff states that they have been in contact with DCPS which is confident that it can serve the children that currently attend Options. Last night, Mr. Kern, according to Ms. Brown, "asked the board to be realistic about Options students' ability to find schools that can actually meet their needs." Sadly, we are about to embark on this path.

 

Tomorrow evening the case of Arts and Technology PCS goes before the board.

 

 

A charter school in Northwest Washington is investigating a fight in which pepper spray was discharged and five students were taken to an area hospital, according to police and the school’s principal.

 

The incident occurred about noon at Booker T. Washington Public Charter School for Technical Arts.

 

D.C. police and fire officials had initially said the fight occurred outside the school. They also described it as a large brawl. But the principal, G. Hope Asterilla, said in an e-mail that the fight involved two students and occurred inside the school in the 1300 block of Florida Avenue NW.

 

She said the altercation was the “result of an outside issue that spilled into the school.” D.C. police said one of the students taken to a hospital was unconscious; officials now say that student is expected to recover.

 

It was not clear who discharged the pepper spray. Asterilla said that the school resource officer and additional police officers who sped to the school “were on top of the situation.”

 

The principal said students quickly returned to class. “School administration will continue to investigate this situation for appropriate administrative actions,” Asterilla said.