After the company disclosed that it was facing an investigation by the Department of Justice, Oak Street Health’s stock price fell 20% today. In the documents submitted on Monday, The company shared that the US Department of Justice is investigating whether the company may have violated the “False Declaration Act,” especially its relationship with third-party marketing agents and the free transportation services it provides to patients.
On Monday afternoon’s earnings conference call, CEO Mike Pykosz stated that the company plans to cooperate with the DOJ’s investigation, but there is no other content to share, and pointed out that the company had just received a civil investigation request a week ago.
“We have not had any meaningful dialogue with the Ministry of Justice. We are also learning,” he said.
The investigation does not necessarily mean that Oak Street will face lawsuits, but as the Department of Justice investigates, the process may take months.
The agency recently initiated several False Declaration Act investigations related to Medicare Advantage plans. In many of these cases, the U.S. Department of Justice accused insurance companies of falsely inflating Medicare Advantage plan payments, and private insurance companies received a certain amount from Medicare based on the patient’s risk score.
Earlier this year, Sutter Health paid $90 million To resolve allegations that it submitted inflated diagnostic codes for certain Medicare Advantage beneficiaries.The agency recently File a lawsuit against Kaiser Permanente, Claiming that it has changed the patient’s records to add diagnoses not related to their visits.
Oak Street Health does not provide insurance, but it has a risk-based contract with Medicare Advantage plans, including plans managed by Humana, Wellcare, and Cigna. It operates primary care centers for Medicare patients and provides scheduled transportation services.
When an analyst asked about the investigation, including whether the company got any leads from third-party insurance agents, and whether this had any relationship with the DOJ’s investigation of its transportation services, Pykosz objected.
“I’m not sure what the link is,” he said. “I am still trying to understand the basis of the investigation and the information they are looking for.”
Covid’s continuing impact
Oak Street Health in the third quarter Reported revenue of 388.7 million U.S. dollars, This is an increase of 78% over the same period last year. But its net loss has also expanded, from US$59.3 million in the third quarter of 2020 to US$109.9 million in the third quarter of 2021. It has a total of 131,500 patients, most of which are through its risk-based contracts.
Like other companies, the Covid-19 pandemic continues to affect Oak Street Health’s business. Since too many patients did not see a doctor or clinics closed last year, Oak Street stated that its risk score for new patients in 2021 was below average, which means that its per capita income has decreased.
As more and more patients postpone care, medical claims also declined last year, but from the end of 2020 to the second half of 2021, medical expenses were above average.
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