The Arkansas Department of Human Services and the Office of Medicaid Inspector General suspended Medicaid payments to one of the state's largest behavioral health providers Friday, June 29, hours after the arrest of a former executive vice president.
Preferred Family Healthcare, a nonprofit based in Springfield, Mo., that employs some 700 people at 47 locations across Arkansas, said it would appeal the state's decision. Robin Raveendran, 62, was charged June 28 with two counts of felony Medicaid fraud in Independence County district court after an investigation by the state attorney general's office. The affidavit for his arrest alleges Raveendran and others conspired to illegally charge Medicaid for almost $2.3 million from 2015 to 2017 by exploiting weaknesses in the program. Raveendran was uniquely positioned to navigate Medicaid's complex billing rules: Before joining PFH in March 2014, he worked for 28 years at DHS and served as chief administrator for the agency's Program Integrity Unit from 2004 to 2014.
Raveendran's arrest was first reported in the Batesville Guard.
Raveendran is only the latest former PFH executive to be entangled in a criminal investigation. Three members of the nonprofit's top leadership team — former Chief Financial Officer Tom Goss, former Chief Operating Officer Bontiea Goss and former Chief Executive Officer Marilyn Nolan — were fired in January after being implicated by federal prosecutors in an alleged kickback scheme involving Arkansas legislators. A fourth, Chief Clinical Officer Keith Noble, was placed on administrative leave June 13 after a reporter with the Arkansas Times inquired as to his continued employment at PFH.
At the center of the FBI's investigation is yet another former PFH employee, Milton "Rusty" Cranford, who on June 7 pleaded guilty to funneling hundreds of thousands of dollars in bribes to Arkansas lawmakers of both parties. Of the PFH executives listed above, only Cranford has been named outright by federal prosecutors, but the others match the descriptions of unnamed individuals who "devised and executed multiple schemes to embezzle, steal, and unjustly enrich themselves at the expense of [PFH]," according to the criminal information attached to Cranford's plea.
Cranford, who was also a lobbyist, admitted to paying former state Sens. Henry "Hank" Wilkins IV (D-Pine Bluff) and Jon Woods (R-Springdale) in exchange for their support of legislative action favorable to his lobbying clients and PFH, his employer. In April, Wilkins pleaded guilty to accepting bribes from Cranford; in May, Woods was convicted on separate corruption charges, some connected to Cranford. The criminal information attached to Cranford's plea also implicates at least one sitting legislator, Sen. Jeremy Hutchinson (R-Little Rock), who matches the description of an unnamed "Senator A." Hutchinson has denied wrongdoing.
The affidavit in Raveendran's arrest does not accuse him of bribing public officials. However, it says that the investigation into his alleged Medicaid fraud scheme was itself initiated when the state's Medicaid Fraud Control Unit was tipped by the FBI as part of "an ongoing public corruption investigation." It notes that Raveendran was "one of Cranford's closest associates" and that Raveendran was hired at PFH "on the recommendation of Cranford."
Raveendran also appears to match the description of an unnamed "Person 9" who appears in the Cranford plea information. The information says Person 9 worked for PFH from March 23, 2014, to Dec. 1, 2017. That matches, within one day, Raveendran's employment with PFH: According to the affidavit for his arrest warrant, he worked at PFH from March 24, 2014, through Dec. 1, 2017. PFH confirmed that these dates were accurate.
The information says Person 9 was "a former Arkansas state employee" and "employed Cranford as a lobbyist to represent the interests of health service providers." Raveendran formerly worked for DHS; it is not clear whether he employed Cranford, though the two men lobbied the legislature on mental health issues during the time period covered by the information.
Shortly after Cranford's plea, on June 11, Raveendran was contacted by a reporter to ask whether he was "Person 9." Raveendran said that he was heading to a meeting and would call back.
The following day, an attorney representing Raveendran, Jordan Tinsley, returned the call. "Mr. Raveendran has no comment on any of the ongoing matters related to Mr. Cranford or Mr. [Jeremy] Hutchinson at this time," Tinsley stated. "I can neither confirm nor deny the identity of Person No. 9. The identity of various people that had business relationships with Mr. Cranford have not been publicly revealed by prosecutors, and the reason for that is that these people are uncharged and their reputations are at stake and they're deserving of privacy." Tinsley did not return calls following Raveendran's arrest.
A player at the Capitol
Person 9 is not explicitly accused of criminal wrongdoing in the Cranford information, but, according to the government, he was involved in Cranford's efforts to seek policies that benefited PFH and other behavioral health providers. The information says Person 9 received income directly from the dues charged to an advocacy organization for health providers, along with Cranford and Sen. Hutchinson. This group is identified only as "Entity I" in the information.
The government depicts examples of how Person 9 worked with Cranford and Hutchinson to influence policy in ways that would benefit providers. Providers paid dues of $5,000 and $10,000 per year for membership into Entity I. Cranford, Hutchinson and Person 9 all received a percentage of the membership dues in exchange for their work for Entity I — income that came directly from these provider dues, according to the federal information. Hutchinson was paid $8,125 by Entity I in early 2015. Around the same time, Hutchinson began receiving payments as an attorney from PFH affiliates.
On March 4, 2015, Person 9 sent an email to Hutchinson and Cranford about a statute regarding the legal definition of "independent contractor" and "employee" in Arkansas, the information states. The email suggested a specific revision that would have been favorable to health care providers. "We need to file a shell bill to take care of this issue," the email said.
Hutchinson filed a shell bill in March 2015 titled "An Act to Amend the Law Concerning the Definition of 'Independent Contractor.' " He later voted for a separate bill that enacted the requested change — "the same specific revision to Arkansas law as that forwarded to him by Person 9 and Entity I," according to the federal information.
The affidavit for Raveendran's arrest Friday also says he worked in concert with Cranford at the state Capitol "to keep the Medicaid vulnerabilities he exploited in place." Raveendran's method of allegedly gaming the Medicaid system involved billing for certain so-called "dual-eligible" beneficiaries who are covered by both Medicaid and Medicare. Typically, the two government-run systems should split the cost of these claims in such a way that Medicare would pay the majority of the cost. However, Raveendran allegedly manipulated the billing such that dual-eligible beneficiaries were billed almost entirely to Medicaid and instructed PFH employees to do the same. This was advantageous to PFH both because Medicaid reimbursement rates were higher than Medicare's and because its program rules were more lenient.
"In 2014, an internal report revealed a significant vulnerability created by the rate and credential defenses within the Medicaid and Medicare programs," the affidavit says. "Both Cranford and Raveendran fought proposed changes. This event occurred near the time when Raveendran initiated the billing fraud at PFH."
DHS must now find a way to avoid gaps in essential services in rural Arkansas where PFH operates.
"In most locations, providers have been identified who can expand services into these areas, and it is DHS's intent to work with those providers to transition existing beneficiaries. DHS anticipates that the transition of services and termination of current PFH contracts will be completed within a 30-60 day time period," DHS said in a statement Friday. The agency said it may allow certain PFH sites to keep receiving Medicaid reimbursements "for a short-term limited duration."
A PFH spokesman said wrongdoing was limited to certain former employees.
"The allegations against our former employees are egregious and not a reflection of PFH values," spokesman Reginald McElhannon wrote Friday. "For some time, we have worked in a cooperative manner to assist in identifying and addressing areas of concern and will continue to do so, while we work through the appeal process."
PFH also does business under the names Health Resources of Arkansas and Dayspring Behavioral Health Services. It received about $36.2 million in Medicaid funds in 2017 in Arkansas. It also operates in five other states.
This reporting is courtesy of the Arkansas Nonprofit News Network, an independent, nonpartisan project dedicated to producing journalism that matters to Arkansans. Find out more at arknews.org.