Texas Demands Medical Records From Xerox

     AUSTIN (CN) - Texas has sued fired Medicaid claims administrator Xerox for the second time in four months, claiming its failure to return client medical records exposes the state to massive federal fines for violations of privacy.
     The Texas Health and Human Services Commission sued Xerox State Healthcare in Travis County Court on Tuesday.
     The commission claims that on July 31, Xerox employees removed company laptops and 244 boxes of documents from its offices after the state terminated the parties' agreement and sued.
     The commission believes the information includes client names, photographs, birthdates, medical and billing records.
     Texas's first lawsuit , filed in May, claimed Xerox approved millions of dollars in illegal and medically unnecessary dental claims. It claimed that during Xerox's 8-year tenure as Texas's Medicaid administrator, more than $1.1 billion was spent on orthodontic services. A "substantial percentage" of the claims violated Medicaid policy, the state said.
     "Xerox permitted an unprecedented loss of Medicaid funds to predatory and unscrupulous dental providers," according to the May lawsuit. "Although a comprehensive damage estimate has not been completed, initial reviews of those expenditures indicate that a substantial percentage was paid in violation of Medicaid policies, policies Xerox repeatedly assured Texas it was enforcing. Additionally, because of its misrepresentations, Xerox was paid tens of millions of dollars for services it was, in fact, not performing."
     HHSC officials said Tuesday that the state has been forced to inform the U.S. Office of Civil Rights that Xerox is out of compliance with health information privacy regulations that could result in fines for the company and Texas.
     "Federal law also requires the state to notify individuals when information related to their state case may not be protected," the commission said in a statement. "HHSC is preparing to send notices to current and former Medicaid clients who were approved for braces by Xerox staff and will maintain a call center to answer questions from concerned clients."
     Kyle Janek, HHSC executive commissioner, said Xerox has refused to tell the state what information it has, who has access to it and how it is being protected.
     Janek said Xerox has acknowledged that at least one other company is storing the data, along with its attorneys.
     "We don't know anything about the security of the servers now housing the information, staff training, background checks, nothing," Janek said Tuesday. "Once again, the reckless and irresponsible actions of this company put Texas tax dollars at risk. It really makes you wonder what they're trying to hide."
     Xerox did not immediately respond to a request for comment Tuesday evening.
     Texas seeks declaratory relief and an injunction ordering the return of the records.