Texas Attorney General Ken Paxton (Photo: Diego M. Radzinschi/ALM)

The $236 million settlement this week of a lawsuit with a onetime Xerox subsidiary over Medicaid-paid orthodontic expenses underscores what many parents already know: Braces are expensive.

Lawyers involved said it was the largest single resolution in history for a Medicaid lawsuit filed by the Texas Attorney General's Office. They said the state spent more than $1 billion on orthodontics under the Texas Medicaid program during the same time frame. The trouble is, as Attorney General Ken Paxton noted, the Medicaid program “does not cover braces for cosmetic purposes.”

Paxton sued the companies the state had hired to administer the program, Xerox and its former subsidiaries, including Conduent Inc. Paxton alleged the companies “rubber stamped orthodontic prior authorization requests” without making sure they were reviewed by “qualified clinical personnel” as required. “As a result, expensive, taxpayer-funded orthodontic work was performed on thousands of children who either didn't meet the Medicaid standard for braces or didn't require treatment,” Paxton said.

Paxton and Conduent announced their settlement Tuesday, without any admission of wrongdoing. The settlement agreement called for “the Conduent defendants” to pay the state a total of nearly $236 million. That includes more than $212 million for reimbursement and almost $24 million for attorney fees, costs and legal expenses.

One day later, attorneys for the whistleblowers who sued over the same issues two years ahead of the state asked the court for their share. A joint motion for determination of the relators' share and expenses, attorney fees and costs was filed Wednesday in the 53rd Judicial District Court of Travis County.

The legal team for the relators includes: Rusty Tucker and the Law Office of James R. Tucker in Dallas; Mike Tibbals of Dallas; Ketan Kharod of Guerrero & Whittle in Austin; Charles Siegel and Caitlyn Silhan of Waters & Kraus in Dallas; Daniel Hargrove of the Hargrove Law Firm in San Antonio; and James Moriarty of the Law Office of James Moriarty in Houston. They said in a joint statement that their clients were former employees of dental offices that had provided orthodontic care to children whose families were in the Medicaid program.

“They faced vicious legal attacks in their courageous effort to set the record straight,” the lawyers said. They said the settlement “vindicated” the whistleblowers.

Asked to comment on the settlement, a spokesman for Xerox shared a statement from the company.

“The State of Texas sued several companies, including Conduent and its former parent, Xerox, for alleged losses between 2004 and 2014 related to the day-to-day management of a services contract for Medicaid-covered dental care. The original 2003 contract was between subsidiaries of ACS, Inc. (now Conduent) and the State of Texas and was signed before Xerox acquired ACS in 2010. Xerox was not responsible for performing services under the contracts and was not involved in the management of the contract or the services provided to the State. The parties have now agreed to a settlement whereby Conduent will pay the State over $235.9M. Xerox will not make any payment as part of the settlement.”

Conduent posted a statement on its website.

“All of these allegations relate to the 2004-2014 time period, when the company was owned by predecessor companies. In the settlement agreement, Conduent denied any improper actions occurred during the performance of the two contracts,” the company said.

“We are pleased to put this legacy issue behind us. This settlement provides clarity on the financial impact and we have sufficient liquidity to address it,” Conduent CEO Ashok Vemuri said. “Texas remains an important client for us and we are focused on continuing to bring value to our client and its citizens.”