Orthofix Inc., a Texas-based manufacturer of medical devices, will pay $42 million to settle civil and criminal charges relating to its marketing and sale of a bone growth stimulator device to the federal government. The settlement was the result of a whistleblower lawsuit filed on behalf of Jeffrey Bierman, a Midwest health care consultant, who brought the allegations to the government’s attention in 2003. The whistleblower will receive $9,243,251 – a 27 percent share of the civil recovery of $34.23 million False Claims Act settlement.
Orthofix Inc., a subsidiary of Orthofix International NV, will also plead guilty to a federal crime and pay the United States a $7.77 million criminal fine. Non-invasive bone growth stimulators are supposed to help bones heal by applying a weak electrical current or ultrasonic wave to a fracture or surgical site. They are worn by patients over a cast, brace or clothing for between two and six months in most cases. Medicare pays approximately $4,000 to purchase each device, which incidentally costs about $100 to manufacture.
It was alleged in the lawsuit that Orthofix falsified Certificates of Medical Necessity and other documents supporting claims to Medicare and gave kickbacks to doctors, their staffs, patients, and independent sales agents to get orders for the devices. It alleges further that Orthofix failed to comply with a Medicare requirement that suppliers advise patients of a monthly rental option rather than have the government pay the $4,000 purchase price for a new device every single time. Utilizing the rental approach would have saved Medicare millions of dollars on devices that were used for only a few months. It made absolutely no sense to pay $4,000 to purchase a device for short-term use when a short-term rental would work.
The lawsuit alleges that Orthofix routinely waived the patient’s 20 percent co-payment of approximately $800 in order to get patients who might otherwise refuse the devices because of the high cost to accept them. But the company then overcharged for the devices when making claims to Medicare. Similar allegations are made in ongoing cases against the four other manufacturers – Biomet, Inc., DJO Incorporated, Orthologic Corp. (a predecessor company of DJO), and Smith & Nephew, Inc.
The company pleaded guilty to a felony of obstruction of a federal audit. The criminal guilty plea involved its failure to disclose information concerning its practices regarding certificates of medical necessity to a Medicare contractor during a June 2008 audit. Five individual Orthofix employees had previously pled guilty to criminal charges in connection with this matter. As part of the settlement, Orthofix also agreed to enter into a corporate integrity agreement with the Office of Inspector General of the Department of Health and Human Services, which provides for procedures and reviews to be put in place to avoid and promptly detect conduct similar to that which gave rise to this matter. Susan J. Waddell, Special Agent in Charge of the Office of Inspector General of the U.S. Department of Health and Human Services New England region, had this to say:
Criminals intent on placing profits from federal health programs over and above compliance should expect to tangle with authorities. Orthofix blatantly ordered sales staff to disregard Medicare rules, and conveniently looked away when medical records were altered and even forged.
Neil Getnick, a lawyer with the Manhattan-based law firm Getnick & Getnick LLP, represented the whistleblower. He had this to say about the fraudulent conduct:
The business models of the makers of bone growth stimulators are strikingly similar. Not only has Medicare been grossly overcharged, but the industry is plagued by kickbacks, falsified medical records and other illegal conduct designed to get orders and get claims paid. Medicare has lost hundreds of millions of dollars to fraud, and we intend to recoup that as we move forward with the remaining defendants.
I have to wonder how much longer the American people will tolerate Corporate America cheating the taxpayers when corporations contract with the government on programs designed to help folks – not hurt them. Hardly a week passes when a corporation settles with the Justice Department, pays a fine, and then keeps on doing business with the government.
Source: Corporate Crime Reporter
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