RAPID CITY, S.D. (AP) — The federal Indian Health Service agency is defending a contract it awarded to a company whose CEO formerly led a firm that paid $10 million to settle allegations of submitting false claims to government health programs.

The agency awarded contracts in September to Arizona-based Tribal Emergency Medicine and Virginia-based Central Care Inc. to potentially run the emergency departments at IHS hospitals in South Dakota, North Dakota and Nebraska, the Rapid City Journal reported .

The contracts allow each hospital to select one of the companies to provide emergency department staffing, or to provide staffing along with emergency department management. The agency said the contracts are worth a combined maximum of $26.8 million per year.

Tribal Emergency Medicine CEO John Shufeldt previously led NextCare Inc., a multistate chain of urgent-care clinics. In 2009, a former NextCare employee filed a lawsuit against the company on behalf of the U.S. government alleging the company conducted hundreds of unnecessary allergy and respiratory tests on patients and then submitted bills for the tests to government programs, including Medicare and Medicaid. The lawsuit also alleged the company inflated billings as part of a practice known as upcoding.

The company paid $10 million in 2012 to settle the allegations, according to an announcement by the U.S. Justice Department. Shufeldt said he disagreed with the company's decision to pay the settlement and said he had parted ways with NextCare by then. He has denied any wrongdoing and said the company's testing program was medically justified.

The contract-awarding process for the Indian Health Service requires a review to learn whether any bidder has been debarred or suspended from doing business with the federal government. The agency in its review of Shufeldt found that neither he nor Tribal Emergency Medicine are listed as ineligible for conducting business with government agencies, said Jennifer Buschick, a spokeswoman for the agency.

"IHS is committed to monitoring the Great Plains Area ED (emergency department) contracts to ensure they are complying with the terms and conditions of the contract and providing quality services in a timely and lawsful manner, as it does with all of its contracts," Buschick said.

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Information from: Rapid City Journal, http://www.rapidcityjournal.com