A recently unsealed Settlement Agreement strikes a cautionary note for healthcare providers engaged in capitated payment models. For providers that participate in capitated payment arrangements, increased patient panel size means increased per member per month (“PMPM”) fees. However, paying insurance agents or brokerages directly or indirectly for patient volume is a now-confirmed regulatory pitfall. This is what allegedly occurred per a recent settlement agreement[1] between the federal government and a large, rapidly growing capitated provider, Oak Street Health. Federal laws were implicated as Oak’s patients are comprised principally of managed Medicare and Medicaid enrollees.[2] The case underscores the importance of having competent healthcare counsel review capitated providers’ marketing arrangements to ensure compliance with anti-kickback laws.
The Oak Street Health Case
The “Covered Conduct” released by the Settlement Agreement includes an allegedly audacious kickback scheme, camouflaged by Oak Street’s innocuously-entitled “Client Awareness Program”. Oak Street developed that Program to increase patient membership.[3] Oak Street Health allegedly paid “remuneration to third-party insurance agents or brokers and broker organizations (together, ‘agents’) . . . with a purpose to induce the agents to refer Medicare beneficiaries to Oak Street Health . . .”[4] More specifically, it was alleged that, at Oak Street Health’s direction, these insurance agents and brokerages “delivered marketing messages designed to garner beneficiaries’ interest in Oak Street [and] . . . then sought to refer a beneficiary to an Oak Street Health employee via [a] three-way phone call, otherwise known as a ‘warm transfer,’ and/or an electronic form submission.” In exchange for a “warm transfer”, Oak Street would allegedly pay the agents “$200 per eligible referral.” “Between September 2020 through January 2022, Oak Street Health made more than 20,000 [of such] payments to agents under the Client Awareness Program, totaling more than $4 million in remuneration[,]” each of which payments violated the Federal Anti-Kickback Statute (“AKS”) and, in turn, the False Claims Act (“FCA”).[5]
Key Take-Aways – Shifting to Value-Based Care Does Not Lessen Anti-Kickback Liability
It’s important for capitated providers to understand that they are still vulnerable to AKS and FCA liability, even absent the more standard fee-for-service claims submission process. The difference – at least in the Oak Street Health case – is that volume-based incentives for capitated providers is about total patient membership volume, as opposed to total claims volume under more traditional models.
The Oak Street Health settlement agreement seemed to recognize this distinction. Specifically, the agreement noted how increasing a capitated provider’s Medicare Advantage patient panel through alleged illegal kickbacks causes each capitated payment made under such circumstances to be deemed the result of a false claim.[6] It is not hard to see, then, how even small, roughly $200 kickbacks, can snowball into an eight-figure settlement. This is because each alleged kickback would not have resulted in a single tainted payment from the government; instead, each kickback would have engendered months or even years’ worth of capitated PMPM fees for each patient unlawfully acquired.
How Frier Levitt Can Help
Frier Levitt has extensive experience in both the value-based and FCA defense spheres. We can assist capitated providers in evaluating the compliance of their current marketing arrangements using this experience through rigorous auditing of your contracts and data. Additionally, if it is determined that a marketing model is problematic from a compliance standpoint, we can assist capitated providers in doing something Oak Street theoretically could have done before the Complaint was ever filed against it – submit an Office of the Inspector General (“OIG”) self-disclosure. Filing a self-disclosure – assuming a qui tam has not already been filed and the government will otherwise accept it – can be a highly effective means of limiting your practice’s liability under the FCA, as it can cap liability at roughly single[7], rather than triple damages, in addition to avoiding or mitigating other collateral consequences that come with a FCA case.
Contact Frier Levitt to further discuss.
[1] https://www.justice.gov/opa/media/1369171/dl
[2] See https://www.justice.gov/opa/pr/oak-street-health-agrees-pay-60m-resolve-alleged-false-claims-act-liability-paying-kickbacks; see also https://finance.yahoo.com/news/oak-street-health-pays-60m-084834729.html;
[3] See FN1 at ¶D(1).
[4] See FN1 at ¶D(2).
[5] See FN1 at ¶D(3) (emphasis supplied).
[6] See FN1 at ¶D(5).
[7] The minimum multiplier for damages following an OIG self-disclosure protocol is generally around 1.5 times the actual damages suffered by the government.
