Fraud suspected at SRS contractor

http://cjonline.com/news/2011-08-29/fraud-suspected-srs-contractor

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By Tim Carpenter

THE CAPITAL-JOURNAL

A top executive at a Kansas nonprofit corporation is suspected of embezzling as much as $1 million in Medicaid funding from a program serving thousands of mental health patients across the state, The Topeka Capital-Journal learned Monday.

Jason Sellers, chief financial officer of Kansas Health Solutions in Topeka, was either fired or resigned after the launch of an internal review into his involvement with $190 million moved annually through the corporation for treatment paid for by the Kansas Department of Social and Rehabilitation Services.

Michael Goldberg, executive director of KHS, confirmed in an interview Sellers had been ousted.

He said questions about potential embezzlement surfaced two weeks ago. He said SRS and FBI were subsequently notified of the organization's initial findings of possible Medicaid fraud.

It is unclear whether Sellers may have acted alone or with accomplices, Goldberg said. The precise amount of money missing from the organization's ledger has yet to be calculated, he said.

"We were recently made aware of suspicious activity involving our accounts," Goldberg said. "It's very disturbing. It is clearly in our interest to cooperate with any investigation."

Sellers, of Lyndon, couldn’t be reached for comment.

Kansas Health Solutions was created in January 2007 as a managed care corporation serving mental health needs of Kansans on Medicaid, which is a joint state and federal program.

The nonprofit's contract with the state covered Medicaid-reimbursed outpatient and rehabilitation services as well as home- and community-based services for children with profound emotional disabilities.

KHS is a subsidiary of the Association of Community Mental Health Centers of Kansas. The association is comprised of 27 mental health clinics and a provider network extending into all 105 counties.

Robert Siedlecki, hired by Gov. Sam Brownback in January to serve as SRS secretary, said allegations of fraud involved both state and federal funding.

"SRS takes this situation very seriously," Siedlecki said in a statement. "Fraud of any type will not be tolerated."

In this instance, issues of financial liability and criminal culpability must be sorted out by state or federal authorities.

Siedlecki said the state agency's assessment indicated no SRS clients were denied benefits "as a result of what is alleged to have happened."

On that point, Goldberg said there had been no disruption in services to people seeking mental health assistance through KHS nor had there been delay in payment to providers affiliated with KHS.

"SRS has launched its own audit of KHS and has notified all appropriate criminal authorities of the allegations," Siedlecki said.

On Tuesday, Siedlecki said the state's investigation indicated Sellers had arranged a contract with a Baltimore, Md., printer for materials that had to be sent to clients. Apparently, he said, each time the printer charged for services rendered an amount was credited to a consulting firm set up by Sellers.

Goldberg said wasn’t fully clear how SRS could obtain reimbursement, but Goldberg said the corporation had insurance that might apply to the case.

Complicating the situation has been ongoing negotiation between SRS and KHS on a new contract for third-party administration of payments for mental health services.

The current two-year contract, which expired July 1 but was temporarily extended, was structured as a "no-risk" pact. That meant SRS reimbursed KHS for mental-health service costs plus a fee, essentially holding the contractor harmless for unexpected escalation of treatment costs.

The new contract was to be amended to an "at-risk" arrangement, whereby KHS would be paid a specific amount to serve clients and would be held responsible for cost overruns. SRS officials and KHS executives anticipated the revision had the potential of saving the state money.

Status of those contract deliberations hasn't been made public.

Goldberg said the corporation would strive to fully investigate the suspected fraud and create safeguards to prevent a repeat episode. It is too early to know how mental health providers and clients will react to the scandal, he said.

"I think if KHS can do everything in our power to right the wrong, then people will end up respecting that," he said.