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Diving brief:
- Urgent care provider CityMD has agreed to pay more than $12 million to resolve allegations that it submitted false claims to a limited federal fund intended to finance COVID-19 testing for the uninsured.
- During the first two years of the coronavirus pandemic, CityMD falsely documented insured patients as uninsured before fraudulently billing the government for their COVID-related care, according to the Ministry of Justice, which announced the settlement on Friday. The DOJ began investigating CityMD's conduct after being tipped off by a whistleblower in 2020.
- CityMD is owned by Summit Health, which was acquired by Walgreens-backed supplier VillageMD for $8.9 billion in early 2023.
Dive overview:
The Health Resources and Services Administration, an agency of HHS, established a program during the early months of the coronavirus pandemic that reimbursed health care providers generally at Medicare rates to test, treat and vaccinate uninsured Americans against COVID. The program requires providers to certify that their patients are truly uninsured.
Yet from early 2020 through spring 2022, CityMD – one of the largest medical chains in New York and New Jersey with nearly 180 urgent care clinics – knowingly submitted claims to the program for people receiving health insurance, according to the DOJ.
CityMD also caused third-party labs to submit false claims for COVID testing by issuing forms indicating those patients were uninsured, regulators said.
The DOJ learned of CityMD's conduct from a whistleblower, Steven Kitzinger, who took a COVID test at a CityMD clinic in New Jersey in the summer of 2020. Although he informed the clinic that he was fully insured, Kitzinger was informed by an employee that CityMD would delete his insurance information from their registration software, according to Kitzinger's lawsuit against the company. CityMD instead wrote that Kitzinger was uninsured on its patient portal.
Kitzinger will receive more than $2 million from the settlement under a provision of the False Claims Act that gives whistleblowers a portion of the recovered funds.
The federal government has poured money into relief programs during the pandemic. This injection was intended to improve the country's public health response, but also created a multitude of opportunities for fraudsters and other criminals. In response, the DOJ formed a working group in 2021 to specifically investigate COVID-related fraud.
Since its creation, the working group has recovered more than $1.4 billion in stolen funds, regulators said in April.
Friday, the DOJ gave VilleMD credit for cooperating with the investigation, including voluntarily contracting with an auditor and repaying HRSA $7 million in early 2022 after identifying numerous improper payments.
CityMD, which now owes the government approximately $5 million from the settlement, did not have to admit guilt as part of the deal.
“CityMD denies the allegations. However, we settled this matter to avoid the cost and burden of protracted litigation,” a company spokesperson said.
Walgreens purchased Summit, the parent company of CityMD, as part of a series of supplier acquisitions supporting the retail pharmacy chain's foray into health services. This change in strategy has not yet become profitable for Walgreens, which was forced to depreciate the value of VillageMD and accelerate plans to close clinics in the second quarter of this year.
Walgreens also reshuffled its senior management and laid off a large portion of its employees. company workforce and assets discharged, including stakes in home infusion provider Option Care Health And Cencora medicine dispenser. The company also has abandoned plans for possible IPO of its Boots pharmacy chain in the United Kingdom, as it instead considers selling the business, according to a Bloomberg report.