Dermatology Company Settles Violations of Stark Law and Anti-Kickback Statute

A Texas-based dermatology management company recently agreed to pay the U.S. government approximately $8.9 million, including $5.9 million in restitution, to settle self-reported allegations of potential violations of the Stark Law and the Anti-Kickback Statute resulting in liability under the False Claims Act.

The Settlement Agreement

According to the settlement agreement, from January 2013 to July 2018, Oliver Street Dermatology Management LLC, doing business as U.S. Dermatology Partners (USDP), bought numerous dermatology practices across the country.

In September 2021, the company voluntarily self-disclosed to the Department of Justice that it had discovered credible evidence suggesting that former senior managers had offered (or agreed) to increase the purchase price of 11 acquired dermatology practices in exchange for an agreement by the provider at the practice to refer services to USDP-affiliated entities following the purchase. Claims for some of those referred services were later submitted to Medicare for payment.

Stark and Anti-Kickback Statute Have Stiff Penalties

Stark Law and the Anti-Kickback statue both state that medical decisions should not be made based on financial incentives. Specifically, the Anti-Kickback statue prohibits the knowing and willful payment of “remuneration” to induce or reward patient referrals or the generation of business involving any item or service payable by federal health are programs.

Stark Law, also known as the Physician Self-Referral Law, prohibits physicians from referring patients to receive “designated health services” payable by Medicare or Medicaid from entities with which the physician or an immediate family member has a financial relationship, unless an exception applies.

Penalties for violations of these laws can result in significant fines and civil penalties for each service in violation of the law, jail time, exclusion from federally funded healthcare programs i.e., Medicare and Medicaid, that the money improperly received be refunded and the payment of three times the amount of improper payment received by the violating entity from Medicare program.

Why Self-Disclose?

A healthcare entities ability to self-disclose helps to lessen the penalty that might occur should the crime be discovered by the government. In addition, the provider often isn’t required to admit any wrongdoing or liability.

Such self-disclosure gives healthcare entities or individuals the opportunity to avoid the costs and disruptions associated with a healthcare fraud investigation as well as litigation.

DOJ recently published an approved policy and is looking for ways to incentivize further self-disclosures. In addition, DOJ may provide credit for self-disclosure in reducing the settlement amount, as benefited Oliver Street. In other cases, DOJ has said that “proactive, timely, and voluntary self-disclosures to the department about misconduct will receive credit during the resolution of a False Claims Act case.†These are important reasons healthcare entities should self-disclose.

Agencies Incentivize Self-Disclosure

Two other agencies also have provided incentives for self-disclosure: The Office of the Inspector General for the Department of Health & Human Services provides voluntary self-disclosure protocols for institutions to report healthcare fraud. They give healthcare institutions the chance to avoid disruptions and costs associated with healthcare fraud investigations and civil or administrative litigation. OIG also credits timely self-disclosures in settlement amounts. Usually, it seeks 1.5 times the amount at issue, a settlement amount close to what Oliver Street agreed to pay.

If the matter strictly implicates the Stark Law, a healthcare provider may use the voluntary self-disclosure protocol to advise the Centers for Medicare & Medicaid Services it was in violation of the law. CMS often settles such violations for a fraction of the full penalties authorized under the statute and less than the issues here would have resulted in. CMS recently updated its protocol to streamline them.

How We Can Assist

All healthcare practitioners and entities should remain vigilant for potential violations to the Anti-Kickback Statute and Stark laws. If you believe you may have inadvertently violated one of these laws, it is recommended that you contact an attorney who can assist you in mitigating any potential liability.

The Health Law Offices of Anthony C. Vitale represents healthcare professionals in state and federal court who are charged with fraudulent billing, kickbacks, Medicare and Medicaid fraud and false claims, among others. For more information, contact us at 305-358-4500 or email info@vitalehealthlaw.com