1 October 2024. The healthcare industry recently witnessed a significant legal development as Oak Street Health, a primary care center network for Medicare beneficiaries, agreed to pay $60 million to settle allegations of violating the False Claims Act. The primary care center company allegedly paid unlawful kickbacks to insurance brokers for referrals of Medicare beneficiaries. A whistleblower reported the kickback scheme under the qui tam provision of the False Claims Act and has been rewarded $9.9 million or approximately 16.5% of the settlement.

Allegations and Violations

Chicago-based Oak Street Health, as of 2023 a wholly-owned subsidiary of CVS Health, faced allegations of violating the Anti-Kickback Statute from September 2020 – December 2022. According to court documents, Oak Street Health cooked up a Medicare business referral scheme known as the “Client Awareness Program,” wherein it paid insurance agents $200 for every Medicare beneficiary they referred to Oak Street Health’s clinics. Every claim that Oak Street Health submitted to Medicare for one of these referred patients was thereby tainted by the referral scheme, violating the False Claims Act.

Medicare Advantage or Part C

Medicare Part C, or Medicare Advantage, allows patients who qualify for traditional Medicare to receive benefits through a private insurer, often through plans such as HMOs or PPOs. It offers many Americans the opportunity to maintain or expand their benefits compared to traditional Medicare. In Medicare Part C (Medicare Advantage), healthcare providers are paid by private insurance companies that administer the plans, rather than directly by the federal government. These insurers receive a fixed amount per enrollee from Medicare. Providers may receive payments through fee-for-service, capitation, or other models, depending on their agreements with the Medicare Advantage Organization.

The False Claims Act

The False Claims Act is pivotal in combating fraud against the federal government. The law allows private individuals to file actions on behalf of the government (known as qui tam actions) and share in any recovered damages. This case underscores the Act’s effectiveness in identifying and addressing fraudulent activities in the healthcare sector.

The Anti-Kickback Statute

The Anti-Kickback Statute aims to protect patients and federal healthcare programs from fraud and abuse by prohibiting financial incentives for patient referrals. Violations of this statute can lead to severe penalties, including fines and exclusion from federal healthcare programs. The Special Agent in Charge of the Department of Health and Human Services Office of the Inspector General for the case summed up the negative impact of kickbacks: “Kickbacks impose hidden costs on the federal health care system and compromise medical choice and decision-making.”

Impacts on the Healthcare Industry

This settlement serves as a stark reminder to healthcare providers about the legal and ethical standards governing patient referrals and financial incentives. This case also emphasizes the significance of understanding and adhering to regulations such as the False Claims Act and the Anti-Kickback Statute in order to prioritize patient wellbeing over financial gain, as well as provide an avenue to report others’ unethical conduct.