Medicaid Contractor Gainwell Faces Reinstated Fraud Lawsuit

Gainwell Technologies LLC, the largest Medicaid claims processor for states, will face renewed False Claims Act allegations it enabled a Rhode Island hospital’s decade-long fraud that cost taxpayers hundreds of millions of dollars.

Judge Leo T. Sorokin granted Friday a request to amend the previously dismissed lawsuit by a former hospital administrator and two of its doctors. While Gainwell didn’t create the fraud perpetrated by the state and Eleanor Slater Hospital, the plaintiffs “plausibly allege that Gainwell acted with at least reckless disregard with respect to ESH’s fraudulent Medicaid practices,” Sorokin said.

The hospital and state have acknowledged that the hospital incorrectly classified the facility as a nursing home when it was a mental health center, which isn’t eligible for Medicaid payments.

The ruling is the latest salvo in a three-year lawsuit that was dismissed in April after Sorokin found the plaintiffs “had not sufficiently pled claims of fraud.” He allowed plaintiffs to seek leave to amend their complaint. In Friday’s order Sorokin rejected several of plaintiffs’ arguments but said they had met the burden to revive the lawsuit.

In a motion to reconsider and at a Nov. 19 hearing in Boston, the plaintiff’s attorney, Reuben Guttman of Guttman, Buschner & Brooks, argued that a proposed second amendment would cure the judge’s earlier findings that allegations of fraud and conspiracy against Gainwell weren’t sufficiently pleaded.

Sorikin noted in the latest order that while federal Medicaid rules “required Gainwell to review every Medicaid claim” for compliance, the plaintiffs’ evidence suggested that it approved every false claim from 2018 to 2021.

“Taken together, these facts suggest that Gainwell acted beyond mere mistake or negligence. Gainwell, which has served as a ‘longtime’ Medicaid fiscal agent for Rhode Island and other states, presumably was well-versed in Medicaid requirements for patient admissions and billing practices,” the judge wrote.

“But when it came to ESH, Gainwell did not overlook just one or two unauthorized claims [....] Relators’ factual allegations suffice to plausibly allege that Gainwell acted with at least reckless disregard toward ESH’s fraudulent billing practices.”

The judge rejected the plaintiffs’ claim that Gainwell was an architect of the fraud. “Here, the facts point to the state of Rhode Island, not Gainwell, as the source of ESH’s fraud,” Sorokin said.

Gainwell, based in Irving, Texas, is the country’s largest Medicaid claims-processing contractor, with contracts touching about 70 million of the approximately 80 million Americans enrolled in Medicaid. It works with about three dozen states.

“We are pleased the court rejected the vast majority of the proposed claims for a second time. We intend to challenge the one remaining count and remain confident that we will prevail,” Gainwell said in a statement.

Many of its contracts require Gainwell to audit and review claims to weed out fraud and make sure they comply with federal Centers for Medicare and Medicaid Services rules.

But the Rhode Island lawsuit filed by former hospital administrator Jennifer White, Dr. Brian Daly and Dr. Andrew Stone allege that Gainwell intentionally ignored the hospital’s long-running fraud so that its client —the state of Rhode Island —could bring in hundreds of millions of dollars for which it wasn’t entitled.

The case is United States of Am. v. Gainwell Techs., LLC, D. Mass., No. 1:22-cv-10953, 12/5/25.