AUGUSTA – The pharmacy once owned by House speaker nominee Robert Nutting received more than $1 million in excess MaineCare payments that were never repaid, according to recently released state records.

True’s Pharmacy, which Nutting owned from 1970 until it closed in 2003, was found to have overbilled the state-and-federal program by about $1.6 million for sales of adult incontinency products, such as diapers and bed liners, according to an audit in 2001. Nutting was a member of the Legislature at the time.

Unable to repay the money fast enough, the company went into bankruptcy and its assets were liquidated, leaving nearly $1.2 million in remaining debt, according to state records obtained by MaineToday Media. That balance was wiped out in the bankruptcy, and the state and federal governments were forced to absorb the loss.

The issue resurfaced after Nutting, a Republican from Oakland, was chosen by his party last week to lead the House of Representatives. Republicans gained control of the Legislature on Election Day, thanks largely to their message of fiscal responsibility.

Nutting, who was not charged in the case, said the overpayments occurred because of an honest mistake by his pharmacy’s billing department, and the money was used “to pay employees, to keep the lights on, to buy materials.”

“We admitted from Day One that, according to their interpretation of the rules that we now understood, that we had been overpaid for a five-year period,” he said. “It was our intention that, once we reached some number that kind of made sense to everyone, that then it was our responsibility, True’s Pharmacy’s responsibility, to reimburse the state that money.”

But the state wanted the money repaid faster than the company could afford to do it, Nutting said.

“The problem became their demands to have it paid back in a short period of time — so short that we couldn’t meet that demand,” he said. “Then when we asked them, ‘So what do we do?’ They said, ‘Then we suggest you file for bankruptcy.’

True’s did just that, filing for bankruptcy protection in 2004, which led to the layoffs of more than 20 employees.

With garnished MaineCare reimbursements and the pharmacy’s assets completely liquidated, the company paid about $433,000 of the estimated $1.6 million it was overpaid from 1997 to 2001.

Because MaineCare is a joint state-federal program with a two-thirds contribution from the federal government, Maine received one-third of the recouped funds. The federal government received the rest.

Press accounts and legal documents from that time show that Nutting and the state were close to agreeing on a settlement of nearly twice what was finally paid. The deal was scuttled when federal officials told state officials that they could not settle for less than the total overpayments documented in hearings, said Marc Fecteau, program audit manager for the Maine Department of Health and Human Services, who supervised the investigation.

At issue was the formula Nutting’s business used to bill the MaineCare program for reimbursement, and some missing records.

After a series of hearings by the Maine Department of Human Services in 2002 and 2003, a hearing officer found sufficient evidence that confusion over the billing rate was legitimate. Still, Nutting’s company was found responsible for reimbursing the overpayments.

The president of the Pharmacy Group of New England had testified that 16 of 23 independent pharmacists surveyed said they used Nutting’s formula for billing. Thirteen other medical supply providers audited at the same time as Nutting used the state’s calculation for billing.

Fecteau said that even when the formula Nutting said he was using was applied to a sampling of bills, the state was overbilled 100 percent of the time.

“When we applied his formula to what was actually being charged, it didn’t work,” he said.

Fecteau said the audit was done by a firm that was hired to help his office, which had only three staff members overseeing the MaineCare program. The firm was paid by earning a percentage of the money it helped the state recoup.

“They identified those medical supply providers that had a high reimbursement and average cost per client for incontinent products,” Fecteau said.

Nutting said he did not feel he was personally targeted by the agency, though some people suggested it at the time.

“We were the big target because we had gone out of our way to increase our business. We were a big supplier of incontinent products all over the state of Maine,” he said.

Originally, the state claimed that True’s Pharmacy had been overpaid by $3.6 million. That number was revised downward as more records proving delivery of products were turned over. Nutting said his company eventually found and turned over 96 percent of the records the state requested.

Nutting, who most recently served on the Legislature’s Appropriations Committee, said he was not upset by the audit, and wished it had happened sooner, or more often.

“The fact that they did an audit and found that we had been overcharging was what I would encourage them to do,” he said.

“Had I known from an annual audit or something that my mistake was a smaller amount of money and was given a reasonable amount of time to pay it back, then my people would still be at work and I would still own the pharmacy,” he said.

 

Kennebec Journal Staff Writer Matthew Stone contributed to this report.

 

MaineToday Media State House Reporter Rebekah Metzler can be contacted at 620-7016 or at:

rmetzler@mainetoday.com