Hoosegow HMO

A contained experiment in Medicaid

That habit led to multiple trips through the Dallas County courts, where Flemons was given chance after second chance to kick his habit in court-ordered rehabilitation programs. While his co-addicts searched for a higher power, Flemons found ways to expand the Trauma Resolution Center.

As the center's new chief executive officer, Flemons determined he could increase the company's earnings by increasing the number of "patients" he could bill for. So he dispatched a team of recruiters into low-income neighborhoods in Oak Cliff and South Dallas. When the recruiters found Medicaid participants, they offered to help them pay their rent or utility bills in exchange for their personal Medicaid numbers.

Back at the office, Flemons installed a new software program that allowed him to modernize the center's billing operations. Flemons and Coates then used the Medicaid numbers the recruiters rustled up to bill Medicaid. Soon, the couple began submitting computerized bills for patients they never saw, including entire families. At one point, they even submitted bills for a 3-month-old infant Coates had diagnosed as suffering from "anxiety."

"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."

"When it came down to the billing...the state would only pay for one-on-one sessions. So I'm saying, 'Well, OK, we'll stretch the imagination a little bit, you know. I'll see the whole family one-on-one. So I billed for the whole family," Coates says. "What can I say?"

The numbers speak for themselves: On December 6, 1997, for example, Coates submitted bills for 696 hours' worth of counseling that day. A week later, she billed for 688 hours in a single day. The week after that, the number topped 850 hours.

Flemons, meanwhile, never stopped growing the business from his end. After moving the Dallas office into a new suite inside the Bank of America building in north Oak Cliff, he opened a branch office in Houston, leasing a suite inside an office building near the Astrodome. The expansion, Coates says, was an idea Flemons got while he was attending a court-ordered rehab program in that city.

"The counselor there was a drug addict, and they became friends, so they opened an office there," Coates says.

Business was booming. In 1995, they took in just $9,200 worth of Medicaid payments. By 1999, with the new Houston office open for business, they had netted more than $970,000 and were well on their way to passing the million-dollar mark when the feds arrived in May 2000. In just more than four years, the couple netted a total of $2.8 million.

As a free man, Flemons would tap the company's bank account for spending money, according to automated-teller transactions that FBI agents reviewed. They discovered that it wasn't unusual for Flemons to go through $3,000 in a week. That money didn't include the six-figure salary Flemons paid himself, even while he was confined. Perhaps he justified the salary by the work he accomplished inside his jail cell, where he monopolized the communal telephone.

Usually, Flemons called the office on Mondays to see how many billable hours the staff had submitted to Medicaid. He'd call back on Wednesdays to ensure that the reimbursements had been automatically deposited in the company's bank account. Other days, Flemons would guide his staffers through computer glitches and other routine problems that arose, according to Ginny Thorpe, who ran the Dallas office and later testified against Flemons.

"Michael would walk me through over the phone sometimes," Thorpe testified, adding that the conversations came in spurts. "He would call back because the phone would get disconnected."

During his trial in January, public defender Richard Goldman argued that Flemons couldn't have carried out the scheme because he was in jail. The defense strategy might have worked if it weren't for the memos.

"They showed he was just up to his ears in it," says Read, the assistant U.S. attorney.

In one memo, Flemons scolded his employees for billing errors that caused the company's rejection rate by Medicaid to reach 19 percent. In another memo, titled "Corporate Goals and Objectives," Flemons promised his staff that the year 2000 was going to offer "unique opportunities" for the company to "solidify itself in the current ever changing health industry." At the end of the memo, he wrote, "see the vision, catch the fire, walk the victory!"

At his sentencing hearing, Flemons stood humbly before Judge Lynn. Dressed in his jailhouse jumpsuit, his shoulders hunched together to reduce his 6-foot-6-inch presence, Flemons confessed that he "neglected" his responsibilities as a manager.

"In my pursuit of drugs, I guess I left no stones unturned. I've been paying the price for it and rightfully so," Flemons said. "I'd hate to think of the number of people who could have received services but didn't because of this fraud."

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