South Dakota, Sanford Health agree on Medicaid settlement

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

Part of the settlement agreement involves Sanford Health paying $329,412.21 to South Dakota to fully reimburse the state’s share of alleged Medicaid damages that occurred between Jan. 1, 2010 and June 30, 2019.

“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 agreement is related to a federal settlement agreement that was reached in October 2019, which had resolved federal allegations against Sanford Health. The allegations involved the federal Anti-Kickback Statute, which prohibits medical providers from paying or receiving kickbacks, remuneration, or anything of value in exchange for referrals of patients who will then receive treatment paid for by government healthcare programs, such as Medicare and Medicaid.

The federal settlement resolved allegations that Sanford knew one of its top neurosurgeons was receiving kickbacks from his use of implantable devices distributed by his physician-owned distributorship. Sanford was allegedly warned by the neurosurgeons colleagues about the scheme, as well as that the doctor was performing medically-unnecessary procedures involving those devices. These allegations were originally brought in a lawsuit filed by Drs. Carl Dustin Bechtold and Bryan Wellman, surgeons at Sanford, under a whistleblower provision that allows private parties to bring suit on behalf of the government and share in any recovery. Bechtold and Wellman received $3.4 million of the federal settlement proceeds.

“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 a result of the settlement, Sanford paid $20.25 million to resolve the 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. They also agreed to cooperate with the Department of Justice in litigation related to alleged co-defendants.

Various remedial steps have been taken since the federal suit, including termination of the neurosurgeon in question and prohibiting any Sanford Health physician from profiting from use of their medical devices while employed at Sanford.

This 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 claims resolved by the state and federal settlements are allegations only and there has been no determination of liability.

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