An Upstate chain of pain management clinics filed for bankruptcy last week a few months after an unsealed lawsuit revealed allegations that the company cheated government health programs out of millions.
Despite their complexity, the U.S. Attorney's Office in South Carolina has sought more health care fraud lawsuits in recent years and has emerged as an unlikely leader in this type of litigation.
Oaktree Medical Center operated mostly in South Carolina, with a smaller presence in North Carolina. It is accused of billing Medicare, Medicaid and Tricare roughly $31 million in eight years for urine tests but is now saying it's out of money.
Lawyers for the government are asking for a settlement triple the amount the companies purportedly stole.
But in its filing for bankruptcy liquidation, Oaktree Medical Center disclosed $37.9 million in debts and $8 million in assets. The company leased its office space, which included nine clinics primarily in the Midlands and Upstate and one in North Carolina. It owes $29.4 million to its major investor, Fidus Investment Corp.
News of a bankruptcy filing comes as little surprise, given the company laid off 257 employees in August. Pain Management Associates, another name the company used, notified its patients via Facebook it would be closing by the end of last month.
"Despite considerable efforts to continue its business operations, PMA will be shutting down its nine clinics in South Carolina and one in North Carolina due to mounting financial challenges," the company wrote.
A network of South Carolina-based pain treatment clinics is closing after five of its former employees "blew the whistle" and alleged an elaborate scheme to cheat federal health insurance programs.
The federal lawsuit was unsealed in March. Whistleblowers usually file their own civil lawsuits first, which become public once the U.S. Attorney’s Office decides to sign on. Whistleblowers are entitled to part of the settlement that results, if there is one, and stand to make millions. In this case, the whistleblowers are former employees. Their complaints date back to 2015.
The suit is ongoing. Lance Crick, spokesman for the U.S. Attorney's Office, declined to comment on the case while it is ongoing. The effects of the bankruptcy filing on the complaint are unclear. Oaktree's creditors are scheduled to meet in a Charlotte courtroom in mid-October.
In other major cases of its kind, companies have been forced to seek a new parent or go out of business. Tuomey Healthcare System was absorbed into Palmetto Health after attorneys for the government won a $237 million judgment in 2015. The hospital was found to have improper relationships with physicians, resulting in fraud to Medicare.
In Charleston, Dr. Barron Nason filed for bankruptcy two years after he had to close his network of urgent care clinics amid allegations of health care fraud. Nason was ordered to pay back about $1 million in 2015.
Fidus Investment CEO Edward Ross said in a call with investors in early August that news of an FBI raid, a civil lawsuit from the Department of Justice and Oaktree's loss of business is "an unfortunate turn of events." Ross said his firm, which is publicly traded, cut the value of its investment in hte business to zero. The pain management company represented less than 1 percent of the firm's portfolio.
Dozens of former employees are asking for thousands back in paid time off benefits, according to the filing, and a number of patients appear to be requesting refunds.