Hoosegow HMO

A contained experiment in Medicaid

Michael Flemons was like a lot of tough bosses. As president of MDF Enterprises, a Dallas company that provided "trauma" therapy to Medicaid patients here and in Houston, Flemons always kept one eye fixed on the company's bottom line and the other open for opportunities that could help him reach new heights.

Flemons was also strict with his employees, never allowing the smallest details to escape him. His favorite management tool was the memo. When Flemons suspected employees of drawing out the noon hour, he sent them a memo regarding the company's one-hour lunch break. In another memo, he reminded employees to sign out whenever they left the office.

Flemons had no tolerance for unprofessional behavior. When he caught wind of some in April 2000, he penned a memo in which he listed the most frequent types of "counterproductive" behavior in the workplace. The failure to offer proper telephone greetings topped the list.

"We became the snuggle bunny family," federal inmate Debra Coates says. "He was the snuggle bunny husband. I'm the snuggle bunny wife."
Mark Graham
"We became the snuggle bunny family," federal inmate Debra Coates says. "He was the snuggle bunny husband. I'm the snuggle bunny wife."

"Remember that our clients or costumers [sic] are the primary reason we are in business," Flemons wrote. "Without the clients this is no business."

Flemons' memos are now known as government exhibits 247 through 266. And as a resident of the Dallas County jail, confined there as a result of crack cocaine addiction, he had lots of time to draft them.

But Flemons' biggest problem was his clients or, rather, the lack of them, who received treatment at his business, known as the Trauma Resolution Center, a criminal enterprise Flemons ran with his wife and co-conspirator, Debra Coates.

"To me, what was incredible was they saw no patients. Yet you have to look at what they were billing for," says Shane Read, an assistant U.S. attorney who recently prosecuted the couple. "The amount of Medicaid bills is mind-boggling."

Last month, Read wrapped up his unusual case against the couple, the prosecution a culmination of a joint, three-year investigation by the Texas Attorney General's Office and the FBI. On May 24, U.S. District Judge Barbara Lynn sentenced Flemons to 10 years and three months in prison, a jury having found him guilty on 13 counts of health-care fraud and one count of conspiracy to commit health-care fraud. Last summer, Coates pleaded guilty to similar charges and is currently serving a 70-month prison sentence.

The case won't go down in legal annals as the biggest Medicaid scam ever, but it may well be remembered as the most bizarre. Unlike most Medicaid schemes, which involve overbilling practices, this one had no patients. More remarkable was Flemons' computer skills, which were so efficient he and Coates raked in millions without having to show up at the office. That was a good thing for them, because neither one of them could make it into the office: Flemons, 49, was usually in jail, while Coates, a 50-year-old transplant patient, spent most of her days in bed.

If the dual convictions prove anything, it is that there are some people who society just can't help. Take Coates, for example, who sat for an interview at her new home inside the Federal Medical Center in Fort Worth. The place is a prison, but Coates' life here is easy. Her days consist of rising from bed, eating, watching her favorite soap operas, eating and going back to bed.

"Actually, it isn't too much different from the way I was living on the outside," Coates says, "except I have a lot more company."

If it weren't for Dallas County taxpayers, Coates wouldn't even be alive. In 1988, Coates, a licensed social worker and Dallas County employee, was diagnosed with renal failure, meaning both her kidneys gave out. It was a death sentence, and she nearly served it in 1990. But that December, a young man died in a car crash and doctors transplanted one of his kidneys into Coates. While she recovered, Coates watched television and discovered that the city's crack cocaine epidemic had exploded into daily incidents of homicide.

"I would listen to the news, and all I could hear was all this stuff about drive-by shootings, multiple people getting killed and all this tragedy with families," Coates says. "I wondered how these people are really making it."

There in her county bed, Coates got the idea to start a counseling center where she would help people who lost relatives to homicides and other traumatic incidents. The Trauma Resolution Center was born two years later, when Coates registered the assumed name with the Dallas County district clerk.

As a licensed social worker, Coates was qualified to do business under the federal Medicaid program, which provides health care for the poor. The way the program worked was simple: Coates would provide counseling sessions to Medicaid patients and, afterward, bill Medicaid for reimbursement. The process requires the patients' Medicaid numbers to be included with every bill, along with a description of their illness and the services they received.

Initially, Coates says, she really did help people. That changed in 1995 when she married Flemons and asked him to take over the center's operations. At the time, Coates was aware that her new husband, whom she called "snuggle bunny," had a taste for cocaine.

"I didn't know how severe it was. I thought, 'Oh, I'll just send him to rehab, and he'll be just fine,'" Coates says. "That shows how much I knew about drug addiction."

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