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East Texas Dermatology Management Company to Pay $8.9 Million to Resolve Self-Reported False Claims Act Liability

A Texas entity that manages and operates dermatology practices, surgical centers, and pathology laboratories across the United States has agreed to pay the United States $8.9 million to resolve allegations, which were self-reported, of potential violations of the Physician Self-Referral Law (the Stark Law) and the Anti-Kickback Statute (AKS), announced U.S. Attorney for the Northern District of Texas Leigha Simonton.  The United States contends that these potential violations resulted in liability under the False Claims Act.

Per the terms of a civil settlement executed on September 12, 2023, Oliver Street Dermatology Management LLC will pay the government $8,892,079.72 – including $5,928,053.15 in restitution—within 10 days of the settlement. The settlement credits Oliver Street for its self-disclosure and collaboration with government investigators. The self-reported conduct was unknown to the United States at the time of the self-disclosure, and was specific as to the nature of the potentially problematic transactions, the personnel involved, and the potential financial impact on the Government.

According to the settlement agreement, from January 2013 to July 2018, Oliver Street – doing business as U.S. Dermatology Partners (USDP) -- acquired numerous dermatology practices across the United States.

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 acquisition.  Claims for certain of those referred services were later submitted to Medicare for payment.

The United States contends that this conduct violated the AKS and the Stark Law, and resulted in the submission of false claims for payment to Medicare.  The AKS prohibits offering or paying remuneration to induce the referral of items or services covered by Medicare and other federally funded healthcare programs.  The Stark Law prohibits healthcare entities from billing for certain services referred by physicians with whom the entity has a financial relationship, unless that relationship satisfies one of the law’s statutory or regulatory exceptions.  Both the AKS and the Stark Law are intended to ensure that medical judgments are not compromised by improper financial inducements.

“Decisions about where medical specimens are analyzed should be made with the best interests of patients, not providers, in mind,” said U.S. Attorney Leigha Simonton. “We applaud this company for self-reporting its potential violations and cooperating with government investigators, allowing us to reach a swift settlement.”

This resolution is the result of a coordinated effort between the U.S. Attorney’s Office for the Northern District of Texas and the U.S. Department of Health & Human Services’ Office of Inspector General.  This matter was handled by Civil Chief Kenneth Coffin.

The claims resolved by the settlement are allegations only; there has been no determination of liability.

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