Maximus Settles Medicaid Case for $30.5 million; May be Open to Sale

Maximus, Inc. and the U.S. Justice Department announced Monday that the firm had settled a Medicaid fraud case for $30.5 million. Maximus also announced separately that it will be exploring strategic alternatives for the business, including a possible sale.

The fraud case involved accusations that Maximus (NYSE: MMS) facilitated false claims for Medicaid reimbursement under a contract with the District of Columbia’s Child and Family Services Agency (CFSA). The agency is eligible to receive reimbursement from Medicaid for what is called target case management (TCM) services provided to assist foster children with their medical, social and educational needs. Not all foster children under CFSA’s care receive the services, but Maximus filed claims for TCM reimbursement on behalf of CFSA for every child under the agency’s care. Some of the work in question dates back to 1999.

Maximus agreed to pay $30.5 million to the Justice Department and pledged to operate under a 24-month Corporate Integrity Agreement with the Department of Health and Human Services. Maximus did not admit guilt in the settlement. It said it would be taking charges of around $33 million on the case, including legal costs.

The Justice Department investigation followed the filing of a lawsuit by Benjamin Turner, a former division manager at Maximus. Turner filed the suit under the whistleblower provisions of the False Claims Act and will receive $4.93 million as his share of the settlement, according to a Justice Department statement.

Also on Monday, Maximus announced it is exploring strategic alternatives for the company, including its potential sale.  The company said that it had hired UBS Investment Bank to help explore alternatives.  Maximus CEO Richard Montoni said today in a conference call “[The settlement] represents an opportunity to clear the decks and pursue the best alternative for the company going forward.”

Maximus saw its stock price dip slightly yesterday on the settlement announcement.  But shares have rebounded today as the stock is up more than 6 percent after the conference call to discuss strategic alternatives.