Attorney General Headshot

Attorney General Jason R. Ravnsborg

Attorney General Seal

SOUTH DAKOTA AND SANFORD HEALTH SETTLE MEDICAID CASE

FOR IMMEDIATE RELEASE: Wednesday, November 25, 2020

PIERRE, S.D.Attorney General Jason Ravnsborg announced today that South Dakota has reached a settlement agreement with Sanford Health resolving a case involving Medicaid payments.

As part of the settlement agreement Sanford Health will pay $329,412.21 to South Dakota, fully reimbursing the state’s share of alleged Medicaid damages arising from Medicaid claims filed between January 1, 2010, through June 30, 2019. The settlement is neither an admission of liability by Sanford Health, nor a concession by South Dakota that it’s claims are not well founded.

The state’s agreement is related to a federal settlement agreement reached in October 2019, which resolved federal allegations against Sanford Health relating to the federal Anti-Kickback Statute.  Where the federal settlement agreement resolved federal Medicaid and other healthcare program damages, the state agreement resolves the state’s share of damages arising from the same conduct.

“Sanford Health cooperated fully with the State throughout this matter,” said Ravnsborg. “In reaching this resolution, we are able to ensure that the South Dakota Medicaid program is made whole.”

The October 2019 federal settlement resolved allegations that Sanford Health knew that one of its top neurosurgeons was improperly receiving kickbacks from his use of implantable devices distributed by his physician-owned distributorship (POD).  Sanford Health allegedly received warnings from the neurosurgeon’s physician colleagues and others about the alleged kickback scheme and was aware of the heightened compliance risks associated with PODs.  In addition, the neurosurgeon’s colleagues and others repeatedly warned Sanford Health that the neurosurgeon was performing medically unnecessary procedures involving the devices in which he had a substantial financial interest.  The United States alleged that, despite these repeated warnings, Sanford Health continued to employ the neurosurgeon, continued to allow him to profit from the devices he used in surgeries performed at Sanford Health, and continued to submit claims to federal healthcare programs for these surgeries, including procedures that were medically unnecessary. 

“Back in 2013, my agency warned that physician distributorships, such as in this case, are inherently suspect under the Anti-Kickback Statute,” said Curt L. Muller, Special Agent in Charge for the Office of Inspector General of the U.S. Department of Health and Human Services.  “We will continue working with Medicaid Fraud Control Units in South Dakota and other States whenever Medicaid funds are threatened.” 

As part of the October 2019 federal settlement, Sanford Health, Sanford Medical Center, and Sanford Clinic (collectively, Sanford Health), of Sioux Falls, South Dakota, agreed to pay $20.25 million to resolve federal False Claims Act allegations that they knowingly submitted false claims to federal healthcare programs resulting from violations of the Anti-Kickback Statute and medically unnecessary spinal surgeries.  The Anti-Kickback Statute prohibits offering, paying, soliciting, or receiving remuneration to induce referrals of items or services covered by Medicare, Medicaid, and other federally-funded programs.

The October 2019 federal settlement agreement resolved allegations originally brought in a lawsuit filed by Drs. Carl Dustin Bechtold and Bryan Wellman, surgeons at Sanford Health, under the whistleblower, or qui tam, provision of the False Claims Act, which allows private parties to bring suit on behalf of the government and to share in any recovery.  The whistleblowers received $3.4 million of the October 2019 settlement proceeds.

The October 2019 federal settlement was the result of an investigation by the Department of Justice’s Civil Division, the U.S. Attorney’s Office for the District of South Dakota, and HHS-OIG.  As part of the federal settlement, Sanford Health agreed to cooperate with the Department of Justice in litigation related to alleged co-defendants, and the hospital system has taken various remedial steps, including terminating the employment of the neurosurgeon in question and prohibiting all Sanford Health physicians from profiting from their use of medical devices at Sanford Health. 

The federal lawsuit is captioned United States ex rel. Bechtold, et al. v. Asfora, et al., No. 4:16-cv-04115-LLP (D.S.D.).  The claims resolved by the state and federal settlements are allegations only, and there has been no determination of liability.

The case was handled by the South Dakota Attorney General’s Medicaid Fraud Control Unit, with assistance from the South Dakota Department of Social Services, the U.S. Attorney’s Office for the District of South Dakota, the US Department of Health and Human Services - Office of Inspector General, the US Department of Justice Civil Division, and Relators.  Medicaid is a public insurance program that provides health coverage to low-income families and individuals, including children, parents, pregnant women, seniors, and people with disabilities; it is funded jointly by the federal government and the states.

-30- 

The Office of the Attorney General is the chief legal officer for the State of South Dakota and provides legal advice to agencies, boards, and commissions of the State as well as representing the State in state and federal court.  The Office of Attorney General also handles prosecutions, felony criminal appeals, civil matters, consumer protection issues, and issues formal opinions interpreting statutes for agencies of the state.  Visit www.atg.sd.gov to learn more.

Connect with us on Facebook or on Twitter at @SDAttorneyGen

CONTACT: Tim Bormann, Chief of Staff, (605) 773-3215