‘Speculation’ in Medicaid Beds Blasted

DALLAS (CN) - In a bizarre tale of a dysfunctional health system, a nursing home claims two speculators fraudulently acquired rights to Medicaid beds from Texas to sell them for profit, escalating the cost of elder care in the Dallas area, and stymieing development of a much-needed nursing home.

Senior Care Resources dba Royse City Health and Rehabilitation Center claims Orson and Andrew Berry have made a business of acquiring rights to Medicaid-contracted beds from the Texas Department of Aging and Disability Services, and selling the rights to entities that actually serve elderly Texans.

The rehab center also sued the Berrys' business, OAC Senior Living. All of the defendants are based in Austin.

The nursing home, which is run out of Dallas County and neighboring Rockwall County, says Texas discourages the Berrys' sort of business because it violates the Department of Aging's goal of restricting Medicaid beds to facilities that demonstrate high standards of patient care.

The rehab center claims that because of the scarcity of approved Medicaid beds, legitimate patient service providers may be forced to deal with the speculators, "driving up the cost of providers' ability to provide Medicaid services."

According to the complaint in Dallas County Court, the Berrys gain control of Medicaid beds by exploiting the community-needs waiver clause of a longstanding state moratorium on creating any more such beds.

In 2010 the defendants sought to secure rights to 60 Medicaid beds in Rockwall County, a request that was denied, according to the complaint.

Rockwall County, part of the Dallas metroplex, is one of the fastest-growing counties in the United States, according to the county website.

In a request for reconsideration, the rehab center says, the defendants misrepresented to the state that Royse City Rehab and other nursing facilities in Rockwall County "had failed to timely seek Medicaid bed increases that were available to those facilities to accommodate the increasing numbers of Medicaid patients that require Medicaid beds."

The complaint continues: "Defendants also affirmatively represented to the Department that RCHRC had 'serious quality of care deficiencies' that caused residents 'actual harm or immediate jeopardy.' Plaintiff believes the defendants made additional libelous and defamatory statements to other parties."

Because state regulations do not include a process by which an interested party can oppose a waiver applicant's request for reconsideration, the department granted the defendant's request for a waiver, according to the complaint.

Royse City claims the libelous statements and misrepresentations severely damaged its reputation, and may obstruct its development of a new, $10 million nursing home facility in Rockwall County.

"Having fraudulently secured a waiver that entitles defendants to 60 Medicaid beds, defendants are now attempting to 'deal' those beds to the highest bidder," the complaint states. "Defendants' plan to sell their fraudulently acquired beds may impair the scheduled construction of RCHRC's new facility, which is currently scheduled to break ground in late fall 2011."

Royse City Rehab seeks declaratory relief voiding the waiver, and actual and exemplary damages for fraud, libel in the guise of business disparagement, and negligent misrepresentation.

It is represented by Jeffrey Cook with Sullivan & Cook in Dallas.

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