Oliver Street / U.S. Dermatology Partners: Referral Payments in Acquisition Prices

In the Oliver Street Dermatology kickback settlement, Oliver Street Dermatology Management LLC agreed to pay $8,892,079 to resolve allegations that former senior managers offered or agreed to increase practice purchase prices in exchange for future referrals. The company operates as U.S. Dermatology Partners, and the alleged bargain reached beyond the sale: providers would send services to its affiliated entities after acquisition. If you worked on those transactions or saw where the referrals went afterward, the connection between the deal and the later Medicare bills is the heart of this case.

Oliver Street is a Texas company managing and operating dermatology practices, surgical centers and pathology laboratories across the United States. The U.S. Attorney’s Office for the Northern District of Texas, in its September 2023 announcement, describes a company that brought the suspected conduct to the government itself. The office coordinated the resolution with the Department of Health and Human Services’ Office of Inspector General.

The Acquisition Price Was Allegedly Tied to Future Referrals

The alleged referral payments sat inside the price of 11 acquired dermatology practices. Oliver Street acquired practices nationwide from January 2013 through July 2018, and its later disclosure identified evidence suggesting that former senior managers had offered or agreed to increase those prices in return for providers’ referral commitments.

The alleged inducement was a better price for selling the practice, while the promised business would arrive after the acquisition. We see the troubling bargain in that exchange: a decision about where a patient’s services go becomes something the buyer and seller negotiate as part of the practice’s price. Under the alleged arrangement, the buyer gets the referrals, the seller gets the higher price, and taxpayers get the Medicare bill.

That makes the negotiations as important as the referral records. A valuation file can explain what the buyer expected to earn, while correspondence about the proposed price can explain what the provider was expected to do. In this case, the government’s allegation joined those subjects directly: a higher purchase price in exchange for an agreement to send services to affiliated entities.

Why the Medicare Claims Matter

The government alleged that some services referred under these arrangements were later billed to Medicare. It contended that the purchase-price exchanges violated the Anti-Kickback Statute and the Stark Law and resulted in false claims for payment. The acquisition agreement was the beginning of the alleged payment chain, with the government’s money at the other end.

Oliver Street’s alleged physician kickbacks took the form of an offer or agreement to raise an acquisition price. The government connected those physician financial relationships and referrals to the affiliated entities receiving the services and the resulting Medicare claims.

A 2020 paper in the Journal of Forensic and Investigative Accounting, A Forensic Accountant’s Guide to the Most Potent Federal Laws Used Against Healthcare Fraud, explains why the request for payment is central to a False Claims Act case. Connecting what the transaction side and the billing side each know is work we do with a whistleblower. One may understand the price increase and the referral commitment, while the other can identify the services submitted to Medicare.

Dermatology Acquisitions Have More Than One Layer of Control

The clinical practice, the management organization and the entity receiving a referral can occupy different positions in a practice acquisition. A professional entity supplies clinical services, while a management services organization supplies contracted administrative functions. Ownership, operational control and accounting control can sit in different hands, which is why who controlled the decisions matters alongside who owned the practice.

The announcement singled out decisions about where medical specimens are analyzed, a concrete concern for a company operating pathology laboratories alongside practices and surgical centers. The allegation concerned a promise to direct services to affiliated entities. For an insider, knowing who negotiated a referral commitment, who carried it out and which entity billed for the resulting service can connect decisions that otherwise appear in separate files.

The Robert Wood Johnson Foundation’s 2008 report, Physician Self-Referral and Physician-Owned Specialty Facilities, describes financial incentives both to recommend additional services and to steer patients toward facilities with which the physician has a financial relationship. Those are different decisions in a health care business: how much care to order and where to send it. Oliver Street’s alleged acquisition bargain concerned that destination, promised in the deal before the later services were billed.

Oliver Street Received Credit for Reporting Itself

Oliver Street voluntarily disclosed the suspected conduct to the Justice Department in September 2021. The government said it had not previously known about the conduct and credited the company’s disclosure and collaboration with investigators in the settlement.

Of the total settlement, $5,928,053 was designated as restitution. The disclosure identified the potentially problematic transactions, the personnel involved and the potential financial impact on the government. Those are connections an insider may recognize: the terms of the bargain, the people behind it and the bills it generated.

The Evidence Trail an Insider Would Recognize

The useful evidence connects the transaction to the claims: negotiations and valuations, the referral commitment, the services ordered afterward and the Medicare bills. In the Oliver Street allegations, the question was what the increased price was buying from the provider. Someone who saw the price change may understand a promise that would never be apparent from the bill alone.

A transaction employee may know why an offer changed. A practice employee may know how the referral commitment affected where services went, and a billing employee may know which resulting services reached Medicare. We work with that knowledge to connect the financial bargain to the claims and identify the people who directed it.

A whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers. If the terms of a practice acquisition dictated future referrals, our whistleblower experts can assess that connection with you.

You Know What the Buyer Was Paying For

If you saw an acquisition price change because a physician promised future business, speak with our whistleblower experts about that exchange. We build your strongest case with you around the deal terms and the Medicare claims, bring in healthcare whistleblower counsel who understand practice acquisitions and stay beside you as the case moves forward.