State Cuts Medicaid Funding for Families First, Inc.

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By James Steward

DES MOINES, Iowa (AP) — State Medicaid payments to a counseling and mental health services company have been suspended because of concerns some of the money may have been used to cover the owner's personal expenses and allegations of questionable billing by some of its counselors.

Families First Inc., which collected $1.5 million through Medicaid last year, is a privately owned, for-profit company with 75 employees in Des Moines, Perry and Sioux City.

States and federal records and internal company documents show Families First spent large amounts of money on personal expenses for its owner, Kim Krum, of Ankeny, even as the company's executive director called for wage freezes and restrictions on vacation pay, the Des Moines Register reported Thursday.

Krum's attorney, Doug Fulton, said allegations of wrongdoing are "pretty overblown" and that the company is appealing the funding suspension.

"This company, from what I know, has done a great job of providing services and following all Medicaid regulations," he said.

Owners of privately held companies typically can spend company money however they want but because Families First's main source of income is Medicaid, the amount it receives is based partly on its business costs. Medicaid contractors must report distributions of cash to their owners so the payments won't be treated as business expenses that could inflate future Medicaid income.

In 2009, the company told Medicaid that it paid Krum $71,835 in salary and routed an additional $90,815 to her for non-business expenses. In 2010, the company told Medicaid that Krum received only $51,796 in salary, with no additional payments for non-business expenses.

Jennifer Vermeer, Iowa's Medicaid director, said the Iowa Department of Human Services has yet to accept the company's cost reports for 2009 and 2010 because of concerns that some information provided by the company is either incomplete or inaccurate.

Vermeer said DHS has referred complaints related to billing and personal expenditures to the Medicaid Fraud Control Unit at the Iowa Department of Inspections and Appeals.

Most of the allegations about billing focus on a half-dozen counselors. State officials are investigating allegations that a few billed Medicaid for nonexistent services, with parents claiming their children were not seen by counselors or that some in some cases a child was placed alone in front of computer to write on Facebook.

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