Texas Supreme Court Returns Dentists’ Medicaid Ortho Suit Against Conduent to Trial Court

Edited by Dentaltown staff

The Supreme Court of Texas has vacated an appeals court decision in a lawsuit that two dentists and their orthodontic practice brought against Conduent State Healthcare, the contractor that reviewed prior-authorization requests for Texas Medicaid orthodontic services, and sent the case back to the trial court.

In an Oct. 9 decision written by Justice Sullivan, the court held that the 3rd Court of Appeals in Austin lacked jurisdiction to hear Conduent’s interlocutory appeal. In a divided 2024 decision, the appeals court had affirmed a trial court ruling that denied Conduent’s plea to the jurisdiction.

Dr. Diana Malone, Dr. Scott Malone, and M&M Orthodontics, PA, allege that Conduent injured them by approving their prior-authorization requests without rigorously reviewing them for the medical necessity that Medicaid policy requires. They seek damages on tort claims including fraud and negligence. Conduent’s plea invoked derivative sovereign immunity and the election-of-remedies provision of the Texas Tort Claims Act.

The court rejected both statutory routes Conduent used to appeal before trial. Conduent is not a “governmental unit,” the court held, because its status and authority come from its contract with the Texas Health and Human Services Commission rather than from a statute. “Conduent is a government contractor, not a ‘governmental unit,’” Sullivan wrote. The court also held that a provision allowing appeals based on immunity asserted by an “individual” government officer or employee applies only to natural persons, not companies.

The ruling did not decide whether Conduent is immune from the suit. The court said that when the case returns, the district court may wish to allow a permissive interlocutory appeal on Conduent’s sovereign-immunity and election-of-remedies arguments.

The dispute stems from the commission’s contract with Conduent, formerly known as ACS State Healthcare, which granted or denied prior-authorization requests for children’s Medicaid orthodontic services for almost a decade. The state later sought civil penalties from Conduent, alleging it rubber-stamped requests in violation of Medicaid policy. According to briefs before the court, Conduent settled that case for $236 million. In a separate case, the state pursued Medicaid fraud claims against dentists, and the Malones and their practice paid $2 million to settle.

The court described the Malones’ suit as one of many similar cases brought by dentists who were first defendants in the state’s Medicaid fraud actions.

Sources:
Supreme Court of Texas, Conduent State Healthcare, LLC v. M&M Orthodontics, PA; Diana Malone, DDS; and Scott Malone, DDS, No. 24-0802, decision, Oct. 9, 2026: txcourts.gov/media/1463464/240802.pdf
Supreme Court of Texas, Orders Pronounced Oct. 9, 2026: txcourts.gov/supreme/orders-opinions/october-9-2026