Understanding the NextCare Legal Settlement and the Role of Dr. John Shufeldt

The intersection of healthcare entrepreneurship and federal regulation often leads to complex legal challenges. One of the most notable examples involves NextCare, a pioneer in the urgent care industry. Founded by Dr. John Shufeldt, the company grew into a national network but eventually faced significant legal scrutiny under the False Claims Act.

The Rise of NextCare Urgent Care

Dr. John Shufeldt founded NextCare in 1993 with the specific goal of addressing overcrowding in hospital emergency departments. Under his leadership as founder, CEO, and Chairman of the Board, NextCare expanded from a single clinic to a network of 60 facilities across six states, including Arizona, Colorado, Texas, North Carolina, Ohio, and Virginia. At its peak, the organization achieved an annualized revenue of nearly $100 million before being sold to a private equity group.

The False Claims Act Allegations

In 2009, NextCare became the subject of an investigation triggered by a whistleblower claim. The legal action, United States of America, et al. V. NextCare, Inc., et al., centered on allegations that the company submitted false medical claims to government payors.

Key Allegations

• Unnecessary Testing: The lawsuit alleged that NextCare billed for unnecessary respiratory panel tests, H1N1 virus (flu) tests, and allergy tests.
• Upcoding: The civil suit included claims that the company engaged in “upcoding,” which is the practice of using a medical billing code for a more expensive service than what was actually performed.

The Department of Justice (DOJ) eventually joined the civil lawsuit. In 2011, a second former employee filed a separate Qui Tam suit based on the same facts, though this second case was dismissed with prejudice in 2014.

The $10 Million Settlement

To resolve the allegations and avoid criminal prosecution by the Department of Justice, NextCare agreed to a settlement. The company paid $10 million to the United States government. As part of this agreement, $1.614 million was awarded to the first whistleblower who filed the claim.

According to an official response from Dr. Shufeldt, the company’s Board of Directors initially favored defending the case. However, they ultimately voted to settle, citing the difficulty of winning cases against the Department of Justice.

Key Takeaways

• Founder: Dr. John Shufeldt pioneered NextCare in 1993 to reduce ER overcrowding.
• Legal Issue: Allegations of upcoding and unnecessary testing for H1N1 and respiratory panels.
• Outcome: A $10 million settlement with the U.S. Government to avoid criminal prosecution.
• Scale: NextCare grew to over 60 clinics across six states.

Frequently Asked Questions

What is “upcoding” in medical billing?

Upcoding occurs when a healthcare provider submits a claim for a more complex or expensive service than the one actually provided to the patient, resulting in higher reimbursement from insurance or government payors.

Who is Dr. John Shufeldt?

Dr. John Shufeldt is a physician, attorney, and entrepreneur who has founded over 15 companies. Beyond NextCare, he has been involved with ventures such as MeMD, StatRead, and EmPower Emergency Physicians.

What is a Qui Tam suit?

A Qui Tam suit is a legal action brought by a private individual (a whistleblower) on behalf of the government, typically alleging fraud against the government.