CVS Subsidiary to Pay $60 Million for Medicare Kickback Scheme

Oak Street Health, a Chicago-based healthcare provider and a subsidiary of CVS, has agreed to pay $60 million to settle allegations that it engaged in a Medicare Advantage kickback scheme. The settlement, announced on September 18, follows accusations that Oak Street Health paid illegal kickbacks to third-party insurance agents in exchange for referrals of Medicare beneficiaries to its clinics, according to a press release from the U.S. Department of Justice (DOJ).

The allegations stem from Oak Street Health’s “Client Awareness Program,” which operated between September 2020 and January 2022. Under this program, the company paid agents $200 for each Medicare-eligible beneficiary they referred. The agents reportedly used a three-way call system to connect Medicare beneficiaries with Oak Street Health employees, securing new patients for the company. Oak Street Health paid over $4 million to these agents as part of the scheme.

The settlement highlights that Oak Street Health specifically targeted Medicare beneficiaries, and agents were only paid if the referrals qualified for Medicare. This violates both the Anti-Kickback Statute, which prohibits payments for medical referrals, and the False Claims Act, which can result in severe penalties, including fines up to three times the amount claimed from the government and additional penalties of $11,000 per claim.

The DOJ emphasized that this case is part of a broader effort to crack down on healthcare fraud. In June 2023, the DOJ announced a nationwide initiative to address healthcare fraud, with 192 defendants already charged, accounting for billions of dollars in losses.

Other Healthcare Fraud Settlements

The Oak Street Health settlement is just one of several recent cases involving violations of the False Claims Act. On September 16, Dunes Surgical Hospital in South Dakota agreed to pay $12.7 million to settle allegations that it paid for physician referrals. The hospital was accused of making substantial contributions to a nonprofit affiliated with a group of doctors who referred their patients to the hospital. The scheme, which ran from 2014 to 2019, targeted Medicare, Medicaid, and TriCare programs. According to the settlement, Dunes Surgical Hospital paid between $300,000 and $375,000 annually to the nonprofit in exchange for the referrals and provided clinic space and staff to these doctors at little to no cost.

Additionally, DaVita Inc., a Denver-based dialysis company, settled a False Claims Act violation in July by agreeing to pay over $34 million. DaVita was accused of paying kickbacks to vascular physicians and nephrologists to increase referrals to its former subsidiary, DaVita Rx. The company also agreed to purchase dialysis clinics from a competitor in exchange for patient referrals for Medicare-covered services.

Healthcare Fraud Reporting

The DOJ continues to emphasize the importance of cracking down on healthcare fraud. “These settlements reflect our commitment to holding healthcare providers accountable for illegal kickbacks and fraud that harm government healthcare programs,” the DOJ said in a statement.

If you suspect Medicare fraud, you can report it by calling 1-800-MEDICARE or using the online hotline managed by the Department of Health and Human Services. For fraud related to Medicare Advantage or a Medicare drug plan, you can contact the Medicare Drug Safety Coordinator at 1-877-7SAFERX.

The Oak Street Health case serves as a reminder of the government’s ongoing efforts to address fraud and illegal practices in the healthcare system. The $60 million settlement underscores the serious consequences companies face when they violate federal laws designed to protect the integrity of Medicare and other public healthcare programs.