Walgreens-Backed CityMD Settles With Justice Department Over Alleged COVID Fraud

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Dive Brief:

• Urgent care provider CityMD has agreed to pay more than $12 million to resolve allegations it submitted false claims to a limited fund of federal money meant to fund 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 care, according to the Department 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 provider VillageMD for $8.9 billion in early 2023.

Dive Insight:

The Health Resources and Services Administration, an agency in the HHS, stood up a program during the early months of the coronavirus pandemic that reimburses healthcare providers generally at Medicare rates for testing, treating and vaccinating uninsured Americans for COVID. The program requires providers to attest that their patients are actually uninsured.

Yet from early 2020 through the spring of 2022, CityMD — one of the largest medical chains in New York and New Jersey with almost 180 urgent care clinics — knowingly submitted claims to the program for people who had health insurance, according to the DOJ.

CityMD also caused third-party labs to submit false claims for COVID testing by issuing forms indicating that those patients were uninsured, regulators said.

The DOJ learned of CityMD’s conduct from a whistleblower, Steven Kitzinger, who got a COVID test at a CityMD clinic in New Jersey in the summer of 2020. Despite informing the clinic he was fully insured, Kitzinger was told by an employee that CityMD would delete his insurance information from their records software, according to Kitzinger’s lawsuit against the company. CityMD instead wrote that Kitzinger was uninsured in their patient portal.

Kitzinger will receive more than $2 million of the settlement under a provision of the False Claims Act that grants whistleblowers a portion of recovered funds.

The federal government poured money into COVID relief programs during the pandemic. That infusion was meant to improve the nation’s public health response, but also created a wealth of opportunities for fraudsters and other criminals. In response, the DOJ stood up a task force in 2021 to specifically investigate COVID-related fraud.

Since being formed, the task force has recovered more than $1.4 billion in stolen funds, regulators said in April.

On Friday, the DOJ gave CityMD credit for cooperating with the investigation, including voluntarily contracting with an auditor and repaying HRSA $7 million in early 2022 after identifying many of the improper payments.

CityMD, which now owes the government roughly $5 million of the settlement, did not have to admit culpability as part of the deal.

“CityMD denies the allegations. However, we settled this matter to avoid the cost and burden of prolonged litigation,” a spokesperson for the company said.

Walgreens purchased CityMD’s parent company Summit as part of a series of provider acquisitions underpinning the retail pharmacy chain’s foray into healthcare services. The strategic shift has yet to become profitable for Walgreens, which was forced to write down VillageMD’s value and accelerate clinic closure plans in the second quarter this year.

Walgreens has also overhauled its C-suite, laid off a sizable chunk of its corporate workforce and offloaded assets, including stakes in home infusion provider Option Care Health and drug distributor Cencora. The company has also shelved plans for a possible initial public offering of its Boots drugstore chain in the U.K. as it angles for a sale of the business instead, according to Bloomberg reporting.