In September 2024, Oak Street Health (OSH), a primary care provider group with hundreds of locations in several states, agreed to pay $60 million to settle a whistleblower case brought under the False Claims Act (FCA). The FCA allows private individuals to sue in the name of the United States to allege fraud against the government and, if successful, share in 15-30% of the recovery. OSH is Chicago-based and is specifically designed to serve American seniors who are insured by Medicare. Since 2023, it’s been a subsidiary of CVS health.
In general, the Anti-Kickback Stature prohibits medical providers from paying or receiving kickbacks, remuneration, or anything of value in exchange for referrals of patients whose treatment will be paid for by government healthcare programs such as Medicare, including Medicare Advantage. Medicare Advantage is a managed care system where the government contracts with private insurers to cover Medicare beneficiaries, paying the private insurers premiums based on the demographic and health profile of their covered populations. Some of those plans contract with providers such as OSH to provide primary care services.
OSH agreed to settle allegations that it paid kickbacks to insurance agents to boost its patient membership. The government alleged a scheme which involved insurance agents contacting MA-eligible seniors and delivering messages meant to generate interest in OSH, followed by having a call with the MA beneficiary and an OSH employee. A so called “warm transfer” with the goal of that beneficiary becoming an OSH patient. In exchange, OSH paid the agents $200 per referral. The whistleblower alleged that this practice potentially tainted the independent judgment of the insurance agents, prioritizing financial gain over the best interests of MA beneficiaries.
The action was initiated by a whistleblower, Joseph Stinson, who filed the case in 2020. Mr. Stinson was the president of a company that offers insurance products and services to insurance agencies. According to the complaint, Mr. Stinson learned of the fraud when his company was contacted by OSH to use his company’s network of agents to further it. In addition to the settled fraud scheme, Mr. Stinson also alleged that OSH was providing illegal kickbacks to certain Medicare beneficiaries in the form of free transportation. Mr. Stinson will receive a whistleblower award of roughly $9.9 million.
This case is notable for two reasons.
First, for a case in the Medicare Advantage space, it resolved at an astounding pace. Several MA fraud cases, including several brought by our clients, have been going on for a decade or more. This one resolved in under four years. Kudos.
Second, while Medicare Advantage fraud has been a hot issue, most cases have focused on MA plans exaggerating the sickliness of their beneficiaries to boost premium payments they receive from the government. The overlap of AKS violations and MA fraud has been a rare subject of FCA settlements, despite the fact that in healthcare fraud, AKS cases make up a lion’s share of recoveries. This seems to be the third true AKS/MA case that has resolved in a settlement. The other two include a kickback scheme regarding Roche diabetic test strips and Humana’s beneficiaries, and a similar scheme to recruit MA beneficiaries to a plan in Puerto Rico while using gift cards as incentives. This one is, by far, the largest.
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