Health Law Daily Wrap Up, FALSE CLAIMS ACT—SETTLEMENT AGREEMENTS: Oglethorpe Inc. and executives agree to pay $32 million to resolve False Claims Act liability over Medicare overpayment retention, (Jun 1, 2026)

By Wendy Biddle, J.D.

The settlement resolves allegations that the company and its officers knowingly withheld identified Medicare overpayments for years.

Oglethorpe, Inc., a Florida-based operator of inpatient psychiatric and substance abuse treatment facilities, along with its founder and principal owner Robert Cohen, CEO John Picciano, and Chief Operating Officer James O'Shea, have agreed to pay $32 million to the United States to resolve civil allegations arising under the False Claims Act and the Medicare Overpayment Statute. The settlement agreement resolves a qui tam lawsuit that was brought by former Oglethorpe employees who alleged that Oglethorpe did not return Medicare overpayments its own consultants identified during internal claims reviews (Settlement Agreement, U.S. ex rel. Treloar v. Oglethorpe, Inc., No. 5:22-cv-00238-JA-PRL (M.D. Fla. May 21, 2026)).

Background. The case originated with a qui tam complaint filed in 2022, by former employees of Oglethorpe. In February 2026, the United States filed a notice of partial intervention, intervening specifically in the allegations that defendants violated Medicare laws and the False Claims Act by failing to return to the Medicare program millions of dollars. The core of the government's case involves defendants' failure to return Medicare overpayments that their own consultants had identified in claims reviews completed in 2021 and 2022. Those overpayments pertained to inpatient psychiatric facility services billed to Medicare for beneficiaries admitted to three of Oglethorpe's Ohio facilities: Ridgeview Behavioral Hospital, Georgetown Behavioral Hospital, and The Woods at Parkside, a substance abuse treatment clinic. According to the government, the beneficiaries did not qualify for inpatient psychiatric care, yet Medicare was billed accordingly, and after the overpayments were internally identified, defendants refrained from returning the funds from 2021 through the present.

Settlement terms and payment structure. The $32 million settlement amount, of which $10,224,875 is designated as restitution, is to be paid in two installments. Defendants are required to remit $5 million within five days of the agreement's effective date, with the remaining $27 million due on or before September 30, 2026. Interest accrues on the full settlement amount at 4.25 percent per year from February 24, 2026, through the dates of payment.

The agreement contains a default provision specifying that if defendants fail to cure a payment default within seven calendar days of written notice, the entire unpaid balance becomes immediately due, with interest thereafter accruing at 12 percent per year, compounded daily. In the event of an uncured default, the United States retains broad remedies, including the right to rescind the agreement and reinstate the underlying civil action, offset unpaid balances against amounts owed to defendants by any federal agency, or pursue collection through new proceedings.

Defendants were also required to pay $350,000 to relators' counsel in satisfaction of statutory attorneys' fees and costs, payable within five days of the effective date.

Corporate Integrity Agreement and exclusion. The settlement also carries an important regulatory dimension. Oglethorpe, Inc., had previously entered into a Corporate Integrity Agreement (CIA) with the HHS Office of Inspector General on January 28, 2021, following an earlier False Claims Act matter. As a consequence of violating that CIA, the defendants entered a voluntary exclusion agreement on July 31, 2025, agreeing to be excluded from Medicare, Medicaid, and all federal health care programs for a period of ten years beginning in July 2026.

"By enforcing the Corporate Integrity Agreement and securing a voluntary exclusion agreement the Department of Health and Human Services Office of Inspector General has demonstrated its unwavering commitment to protecting the integrity of federal health care programs," said Chief Counsel Susan Edwards of HHS-OIG. "When entities fail to meet their obligations—after entering agreements designed to ensure compliance—we will take decisive action."

Scope of release and reserved claims. The United States' release of civil and administrative monetary claims is expressly limited to the covered conduct and is conditioned on receipt of the full settlement amount plus accrued interest. Several categories of claims are specifically reserved, including criminal liability, tax liability under the Internal Revenue Code, administrative exclusion rights, and claims against individuals who are not parties to the agreement.

The release extended by the relators runs to defendants' conduct alleged in or related to the Civil Action. Notably, the agreement explicitly preserves all parties' rights with respect to the relators' share of the settlement proceeds.

Oglethorpe, Inc., also agreed not to seek payment from any Medicare contractor or state payer for any previously denied claims related to the Covered Conduct, and agreed to withdraw any pending appeals of such denials. The company further agreed to waive any claims for payment from health care beneficiaries for services covered by the settlement.

Cooperation and unallowable costs. The agreement imposes ongoing obligations on defendants beyond financial payment. Defendants are required to cooperate fully with any government investigation of individuals and entities not released under the agreement, including making current and former directors, officers, and employees available for interviews and providing unredacted, non-privileged documents upon request.

Oglethorpe is also required to separately account for all costs connected with the matters covered by the agreement including investigation, defense, negotiation costs, and attorneys' fees; and is prohibited from passing those costs to Medicare, Medicaid, TRICARE, or FEHBP through cost reports or payment requests. Within 90 days of the effective date, the company is required to identify any such costs previously submitted to federal or state health care programs and request adjustments to previously submitted cost reports.

Disposition. Upon receipt of the initial $5 million payment, the United States and relators agreed to promptly file a Joint Stipulation of Dismissal of the Civil Action. The dismissal is to occur with prejudice, and the United States' release is with prejudice as to claims arising from or based upon the Covered Conduct.

"Healthcare fraud has negative impacts for taxpayers and patients alike," said Assistant Attorney General Brett A. Shumate of the Justice Department's Civil Division. "This settlement reflects the Department's commitment to protecting taxpayer money and ensuring that Medicare payments are consistent with the coverage and payment rules for those services."

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