Centralia Schools Reach Agreement with Health Care Authority on Medicaid Program Allegations


The Centralia School District has agreed to pay $372,000 to the Washington State Health Care Authority following allegations of improperly claiming reimburseable time through the Medicaid Administrative Match program at Centralia Middle School.

In a meeting Thursday evening, the Centralia School Board voted 5-0 to agree to the settlement reached between its legal counsel, Cliff Foster, and the Office of the Attorney General. That settlement was reached at 4:30 p.m. Wednesday.

The Attorney General’s Medicaid Fraud Control Unit began an investigation July 2013 into allegations that the district was knowingly submitting false claims for reimbursement under the Medicaid Administrative Match program from March 2011 to June 2013.

That program, administered through the Health Care Authority, or HCA, is intended to allow schools to be reimbursed for time they spend educating students and families on — and referring them to — services they could use under the Medicaid program. Through the program, staff members are directed to keep time study sheets notating how much time they spent performing any education or referrals to students and their families.

The state Attorney General’s office had sent a letter to the Cliff Foster of Porter, Foster, Rorick, LLP of Seattle, who functions as the school board’s legal counsel, in March. That letter expressed the Medicaid Fraud Control Unit’s intent to sue the Centralia School District, and offered that the district could pay $1.65 million to settle the claims.

In the letter, senior counsel Steve Dietrich said the investigation focused primarily on Centralia Middle School and said the state believed the district “knowingly filed scores of false time study forms to obtain MAC reimbursement payments that it was not legally entitled to receive.”

The agreement voted upon Thursday night essentially functions as a compromise between the district and the state, with the school district denying the allegations made and the state standing behind its investigation. But the district and state agreed to the settlement “to avoid the delay, uncertainty, inconvenience, and expense of protracted litigation of the above claims,” the agreement states.

The March 13 letter from Dietrich to Foster provides a clearer picture of the state’s claims against the district.

According to that letter:

The issue came to the attention of the Medicaid Fraud Control Unit when they received a copy of an email entitled “Big Money! Big Money! Big Money!” written by principal Greg Domingos that “encourages participants to manufacture reimbursable activities on time study days in order to generate funds for the school.”

Dietrich explained that the fraud control unit became concerned when they found Centralia Middle School’s reimbursement claiming rate was the highest of any middle school in Washington participating in the program. Domingos also claimed an average of more than three hours per day, of eight contract hours, over 35 time study days on activities that can be reimbursed through the program, the state alleged.

“Based on interviews with people familiar with Middle School operations and data from other schools throughout Washington, it appears the Principal’s claims are grossly exaggerated,” the letter reads.

Other staff also submitted time study forms that “lacked detail narratives or supporting information” that could show whether or not the staff were actually doing activities that were reimbursable, the letter stated.

“At this point in our investigation, we can prove, at a minimum, that the CSD acted ‘in deliberate ignorance of the truth or falsity of the information’ contained in its time study forms, which is sufficient to establish CSD liability,” the letter states.

The letter also states the school district failed to “seriously examine the issue” of a system of fund disbursement to the schools in proportion to how much that school generated. It called the administration’s “evident lack of interest” in the claiming process “surprising.”

It also noted, "The topic was reported in the local newspaper and we understand that administrators met with the reporter in an effort to convince her that there were no problems with CSD claiming."

Dietrich, in the letter, stated the fraud control unit found that the claims issue was brought up in the 2013 school board elections and that “various CSD administrators repeatedly contacted the HCA and MFCU purporting to seek information about our investigation so that they could assuage community concerns about the allegations.”

However, the state said they knew of no evidence that the district examined the allegations of “a well-placed whistleblower” despite the topic being a matter of importance to the school district and community. The state said its investigation revealed “repeated and widespread efforts to discredit the former CSD employee” who brought forth credible information on the issue.

“However, instead of fulfilling their oversight obligations, it appears that they instead chose to attack the employee’s motives and credibility,” the letter states.

The letter contained an offer to settle for $1.6 million, broken down into two components: a treble damage civil penalty -- basically three times the amount of actual damages, as allowed by state law -- of $558,000, and a civil penalty of $1.1 million. That $1.1 million itself consisted of a $5,500 fine per instance of 200 false time study forms submitted at Centralia Middle School.

The district declined the offer, and as a result, depositions were taken of Superintendent Steve Bodnar, Assistant Superintendent Matt McCauley, Finance Director Mitch Thompson, Director of Teaching and Learning Scott Niemann, and school board member Neal Kirby.

Bodnar and Niemann resigned their posts near the end of the school year and took jobs with other school districts. It's unclear if their resignations are connected to the investigation, as the resignation letters for both do not mention the process taking place at the time in any capacity.

Foster, in speaking with The Chronicle immediately after the school board voted on the negotiated settlement of $372,000, said he negotiated with the Attorney General’s office beginning July 3, with the settlement agreed to in principle Wednesday.

The agreement basically releases the district and its employees from any future liability, and means the state won’t pursue civil damages against any former or current employees and board members.

Foster said the district’s stance is adamant that no one was intentionally deceiving anyone in relation to the reporting process, and that the findings were rather the result of instruction district personnel received on how to submit claims under the system -- in effect, employees were doing exactly as they were trained to do.

“The district relied on debatable, yet aggressive claiming advice,” Foster said. “This is an extraordinarily difficult program to administer and expect randomly designated staff members to fill out forms when their primary job is to teach.”

Foster said the Health Care Authority understands the claiming system is “problematic” and that they have been pushing to move to a different system.

The investigation did, however, show the district the importance of how the program is administered, Foster added.

“We will have an ongoing effort with the Health Care Authority and the Attorney General’s office,” Foster said.

Media contacts for the Attorney General’s office did not return a call late Thursday evening seeking comment on the matter.

Board president Kim Ashmore told The Chronicle late Thursday evening that the payment will come from the district’s cash reserves.

He called the negotiation part of the district’s need to be responsible with its money, and stressed the importance of being able to make the payment while keeping current staffing levels and programs intact.

“We have a fiscal responsibility to the taxpayers,” Ashmore said. “It’s the most fiscally responsible outcome.”

Ashmore also praised interim superintendent Steve Warren for tackling the issue in his first few days as the new chief of schools. Warren started July 1, and Thursday was only his sixth day on the job.

“I think Steve has been a workhorse since he has come aboard,” Ashmore said. “It’s unfortunate this issue was placed in his lap, but he has done a good job.”

Meanwhile, superintendent Steve Warren told The Chronicle Friday morning that he will take an in-depth look into the situation himself. He said the 2013-14 forms that have been turned in will not be submitted to the state until he has a chance to personally review them.

"The Attorney General's investigation is complete, but my own look into this has just begun," Warren said.

The district could theoretically mete out disciplinary action if it feels a need to do so to an employee or employees. That duty would fall upon Warren -- but Ashmore and Warren both said they would not speculate as to anything that could possibly happen in that area.

Instead, Ashmore said the district has already held a training on how to conduct the Medicaid Administrative Match claiming process. He hopes the district can move forward, and that the public can trust the board and administration as the next school year quickly approaches.

“I do expect the public to question,” Ashmore said. “But I hope the community, parents and staff trust that we’re doing what’s best to teach our kids.”


Christopher Brewer: (360) 807-8235