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Press Release

Clayton Deardorff and Stepping Stones Healthcare LLC Agree to Pay $589,000 to Resolve False Claims Act Allegations

For Immediate Release
U.S. Attorney's Office, Southern District of Mississippi

Darren J. LaMarca, United States Attorney for the Southern District of Mississippi, announced today that Clayton Deardorff (“Deardorff”) and his company, Stepping Stones Healthcare, LLC (“SSH”), have agreed to pay $589,000 to resolve allegations that they engaged in an illegal kickback arrangement with a Mississippi Critical Access Hospital (“CAH”) in violation of the False Claims Act (“FCA”).

Medicare designated CAHs are small rural hospitals limited to 25 beds that operate in medically underserved areas.  Medicare reimburses most acute care hospitals under a fixed prospective payment system based on a patient’s diagnosis or treatment.  However, to encourage hospital coverage in rural, underserved areas, Medicare exempts CAHs from this fixed prospective payment system and instead reimburses 101% of actual allowable costs of providing Medicare beneficiaries with outpatient, inpatient, laboratory, ambulance, and post-acute care services.

This settlement resolves allegations that were brought in a lawsuit filed under the qui tam whistleblower provisions of the FCA, 31 U.S.C. § 3730(b), by Mitchell Monsour and Stephen Vaughan.  The FCA permits private parties to sue on behalf of the government for false claims and to receive a share of any recovery.  The FCA permits relators, like Monsour and Vaughan, to continue with the FCA litigation on behalf of the government as they did here after the United States filed a notice of non-intervention.  In this case, the United States continued its investigation and settlement negotiations with Deardorff and SSH and is a signatory on the settlement agreement.  Monsour and Vaughan will receive $159,000 of the settlement proceeds.

As alleged in Relators’ complaint, Deardorff and SSH submitted, or cause to be submitted, false claims for payment to the Medicare Program as the result of a kickback arrangement with Franklin County Memorial Hospital, a CAH located in Meadville, Mississippi, for the recruitment and referral of intensive outpatient therapy (“IOP”) patients.  In addition to a monthly fixed fee payment arrangement, Relators contend that beginning in 2010 Deardorff and SSH illegally charged Franklin County Hospital 10% of gross charges billed for IOP services (“deferred fees”).  These “deferred fees” are alleged to constitute illegal remuneration in exchange for the recruitment and referral of IOP patients.

The FCA claims settled are allegations only, and there has been no determination of liability.  

Updated January 27, 2022

False Claims Act