DOJ settles CityMD Covid fraud allegations for $12 million

People wait in in a queue to enter CityMD, a health clinic that offers coronavirus disease (COVID-19) testing, on the Upper West Side as the Omicron coronavirus variant continues to spread in Manhattan, New York City, U.S., December 19, 2021.

Andrew Kelly | Reuters

Walgreens-backed CityMD will pay $12.04 million to settle Covid fraud allegations brought by the Department of Justice, the department announced on Friday.

From February 2020 to April 2022, CityMD, which operates over 100 walk-in urgent care practices in New York and New Jersey, allegedly obtained fraudulent government reimbursements for Covid tests by submitting false claims to a Covid program specifically designated for uninsured patients, even when their patients had health insurance.

The U.S. Attorney’s Office for the District of New Jersey brought the allegations under the False Claims Act, a law that incentivizes whistleblowers to file lawsuits related to potential fraud by providing them a portion of the government’s winnings in successful cases.

“Uninsured Americans who were at risk from COVID-19 were covered by emergency funding programs that made available to them the testing, vaccines and treatments that they needed,” U.S. Attorney Philip R. Sellinger said in a Friday statement. “The alleged misuse of these funds is something we cannot and will not tolerate.”

Stephen Kitzinger, a CityMD patient, initially alleged the fraud in 2020. As a reward for bringing the case to the government’s attention, Kitzinger will receive over $2 million of the settlement.

Kitzinger’s attorney did not immediately respond to a request for comment sent outside of regular business hours.

CityMD cooperated with the government’s investigation and hired a third-party firm to help the government determine how much was lost in connection as a result of the alleged fraud, according to the DOJ.

CityMD said it denies the allegations but has decided to settle in order to to avoid the costs of dragged-out litigation.

“The recent settlement is neither a finding of liability nor an admission of wrongdoing, and CityMD denies the allegations. However, we settled this matter to avoid the cost and burden of prolonged litigation,” a CityMD spokesperson said in a statement to CNBC on Saturday. “CityMD is proud of the health care services we provided to patients throughout the pandemic.”