Oak Street Health, a Chicago-based primary care provider and subsidiary of CVS Health since 2023, has agreed to pay $60 million to settle allegations that it violated the False Claims Act. The company was accused of paying illegal kickbacks to third-party insurance agents as part of a scheme to recruit seniors for Medicare Advantage plans.
This case highlights concerns over compliance with federal healthcare laws, including the Anti-Kickback Statute, which prohibits any form of payment to induce patient referrals for services covered by Medicare, Medicaid, or other federally funded programs. The allegations suggest that Oak Street Health engaged in unethical practices by incentivizing insurance agents to refer patients based on financial motivations rather than their healthcare needs.
Oak Street Health’s Alleged Kickback Scheme in Medicare Advantage
Medicare Advantage, also known as Part C, allows Medicare beneficiaries to receive healthcare services through private insurance plans. Providers like Oak Street Health often contract with these plans to offer primary care services to enrolled seniors. However, federal regulations require that patient referrals be made based on medical necessity and patient choice, not financial incentives.
Between September 2020 and December 2022, Oak Street Health allegedly violated these principles through its Client Awareness Program. Under this program, third-party insurance agents reached out to seniors who were either eligible for or already enrolled in Medicare Advantage, promoting the services offered by Oak Street Health to them. Interested seniors were then transferred to Oak Street Health employees via a “warm transfer”—a direct three-way call or an electronic submission.
In exchange, Oak Street Health is alleged to have paid these agents $200 for each referral. This payment structure raised concerns that the referrals were driven by financial gain rather than patient welfare, resulting in the submission of false claims to Medicare, which is a violation of the False Claims Act.
The Anti-Kickback Statute and False Claims Act
The Anti-Kickback Statute forbids offering or receiving any form of payment or compensation to encourage referrals of patients for services covered by federally funded healthcare programs. In this case, the payments made by Oak Street Health to insurance agents were considered kickbacks, as they were intended to drive patient referrals to the company’s clinics, which in turn billed Medicare for services.
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The False Claims Act is one of the government’s most effective tools for combating healthcare fraud. It allows the government to impose penalties on individuals or companies that submit false claims for government payments. By allegedly paying kickbacks for referrals, Oak Street Health caused Medicare claims to be submitted under false pretenses, thus violating the False Claims Act.
Whistleblower Lawsuit and Settlement
The whistleblower behind these allegations, Joseph Stinson, filed a lawsuit under the qui tam provisions of the False Claims Act. These provisions enable private individuals to file lawsuits on behalf of the government and receive a portion of any financial recovery obtained. Stinson will receive $9.9 million as part of the Oak Street Health settlement.
Although Oak Street Health has agreed to a $60 million settlement to resolve the case, the company has not admitted to any wrongdoing. This settlement brings to an end the legal proceedings related to the kickback allegations, but it also serves as a reminder of the consequences of violating federal healthcare laws.
A Broader Effort to Combat Healthcare Fraud
The settlement with Oak Street Health is part of a broader effort by the U.S. government to combat fraud within Medicare and other federal healthcare programs. The U.S. Department of Justice (DOJ), the Department of Health and Human Services Office of Inspector General (HHS-OIG), and the FBI collaborated in the investigation and resolution of the case. According to Brian M. Boynton, Principal Deputy Assistant Attorney General of the DOJ’s Civil Division, “Healthcare providers that attempt to profit from kickbacks will be held accountable.”
Morris Pasqual, Acting U.S. Attorney for the Northern District of Illinois, emphasized the importance of preventing kickbacks, stating that they “subvert patient choice and defraud federal healthcare programs.”
Special Agent in Charge Mario Pinto of HHS-OIG reiterated that kickbacks not only impose hidden costs on the healthcare system but also compromise the integrity of medical decision-making. He noted that protecting the integrity of federal healthcare programs is a top priority for law enforcement agencies.
The Oak Street Health case illustrates the serious consequences that healthcare providers face when they engage in practices that violate the Anti-Kickback Statute and False Claims Act. The $60 million settlement serves as a warning to other healthcare organizations that illegal kickbacks and fraudulent Medicare claims will not be tolerated.
As federal agencies continue to crack down on healthcare fraud, this case highlights the critical role of whistleblowers in exposing unethical behavior. The resolution of this case not only brings closure for Oak Street Health but also reinforces the importance of compliance with federal healthcare laws aimed at protecting patients and the integrity of Medicare.
