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Medtronic Settles Two Different False Claims Act Cases in the Same Week

WhistleThe U.S. Department of Justice announced today that medical device manufacturer Medtronic Inc. has agreed to pay the federal government $2.8 million to settle a relator’s allegations of fraud brought under the False Claims Act against the Minnesota-based company. Medtronic allegedly caused a number of physicians, located throughout twenty states, to submit false claims to federal health care programs for a medical procedure known as “SubQ stimulation” between 2007 and 2011. As an investigational procedure, it was not eligible for reimbursement. United States ex rel. Nickel v. Medtronic, Inc. was filed in federal court in New York by Jason Nickell, a former Medtronic sales representative. The government subsequently elected to intervene in the case, leading to this settlement. For his role in helping to uncover the fraud, Nickell will receive $602,000. 

During SubQ stimulation procedures, Medtronic’s spinal cord stimulation devices are placed just beneath the skin near an area of pain, most often in the lower back, where the devices could provide electrical impulses to create a “tingling” sensation intended to alleviate chronic pain. The procedure was not eligible for reimbursement because the safety and efficacy of SubQ SubQ stimulation had not been established as required by the Food and Drug Administration. Nevertheless, the company promoted this procedure by, among other strategies, arranging to have physician-customers attend Medtronic-sponsored “on-site training programs” regarding the use of Medtronic spinal cord stimulation devices.

Friday’s False Claims Act settlement is the second this week connected to Medtronic. On Thursday, the U.S. Department of Justice announced that medical device manufacturer ev3 Inc., formerly known as Fox Hollow Technologies Inc., has agreed to pay the federal government $1.25 million to resolve allegations under the False Claims Act that it caused certain hospitals to submit false claims to Medicare for unnecessary inpatient admissions in connection with minimally-invasive atherectomy procedures. Medtronic bought ev3 last month as part of its $49.9 billion acquisition of surgical supplier Covidien. In 2010, Ireland-based Covidien paid $2.6 billion to buy ev3, and ev3 itself acquired the Silver Hawk Plaque Excision System machine used in atherectomy procedures as part of a $780 million acquisition of Fox Hollow Technologies in 2007. United States ex rel. Cashi v. Fox Hollow Technologies, Inc., et al. was filed under the whistleblower provision of the Act in 2009 by former Fox Hollow sales representative Amanda Cashi. The government then elected to intervene in the case in 2013. Cashi is to receive $250,000 of the settlement amount.

Atherectomy is a minimally-invasive surgical procedure that uses a small cutting device to remove atherosclerosis, or hardening of the arteries, from large blood vessels within the body, and it is intended to open up narrowed coronary arteries to increase blood flow and circulation. One such device used in the atherectomy procedures is the Silver Hawk Plaque Excision System sold by Fox Hollow. According to the complaint, Fox Hollow struggled to sell their expensive devices to hospitals because of the low Medicare reimbursement rates for the procedure in which it is used, since the minimally invasive procedure can easily be performed in an outpatient setting. Throughout 2006 and 2007, Fox Hollow therefore allegedly advised hospitals that they should bill Silver Hawk atherectomy procedures as more expensive inpatient claims, as opposed to less costly outpatient claims in order to increase hospital purchases of the device. Accordingly, certain hospitals allegedly sought greater reimbursement than they were entitled to for treating Medicare beneficiaries that underwent Silver Hawk atherectomy procedures. Admitting the patients under inpatient status allegedly yielded a reimbursement that was $7,000 higher than that received for patients classified as outpatients. The complaint also alleged that the medical device manufacturer violated the Anti-Kickback Statute for inducing purchases of devices by marketing the spread of reimbursement costs.

The two settlements illustrate achievements for the Health Care Fraud Prevention and Enforcement Action Team initiative, announced in May 2009 by the Attorney General and the Secretary of Health and Human Services. The partnership between the two departments has focused efforts to reduce and prevent Medicare and Medicaid financial fraud through enhanced cooperation. One of the most powerful tools in this effort is the False Claims Act.  Since January 2009, the Justice Department has recovered a total of more than $23.5 billion through False Claims Act cases, with more than $15 billion of that amount recovered in cases involving fraud against federal health care programs.