Merit Medical Systems Inc. agreed to an $18 million settlement with the Department of Justice to resolve allegations that it was involved in a Medicare kickback scheme, with almost $2.7 million being awarded to the whistleblower in the Medicare fraud lawsuit.

The whistleblower lawsuit was filed in 2016 by the former chief compliance officer of the Utah-based medical device company, Dr. Charles W., M.D., under the qui tam provision of the False Claims Act, which allows a private citizen to bring an action on behalf of the government and receive a share of the recovery. The government intervened in the action in July 2020.

According to Charles’ allegations in the lawsuit, MMSI submitted false claims to Medicare, Medicaid, and TRICARE by providing physicians, medical practices, and hospitals with kickbacks to induce the referrals of its products used in procedures performed on beneficiaries of the programs.

Acting Assistant Attorney General Jeffrey Bossert Clark of the DOJ’s Civil Division stated, “When medical devices are used in surgical procedures, patients deserve to know that their device was selected based on quality of care considerations and not because of improper payments from manufacturers.”

According to the DOJ’s announcement, $15.2 million will be returned to the federal government with the settlement, with the whistleblower’s share of $2.65 million being allotted from the government’s portion. The remaining $2.79 million of the settlement will go back to individual states.

MMSI is also required by the terms of the settlement to enter into a corporate integrity agreement for five years, with the U.S. Department of Health and Human Services Office of Inspector General. Pursuant to the settlement, the medical device company must have its systems and transactions analyzed by a compliance expert and an independent review organization.

Per the allegations in the suit, MMSI took part in the kickback scheme for over six years, using an internal program called the “Local Advertising Program” as a façade to provide millions of dollars in remuneration for assistance with advertising, practice development, and other purported support for healthcare providers to induce them into purchasing the company’s devices.

According to the DOJ’s press release, the products involved in MMSI’s alleged kickback scheme included its EmboSphere devices which were used for uterine fibroid embolization procedures and its QuadroSphere devices other embolization procedures.

Rachel A. Honig, attorney for the United States said in the press release announcing the settlement, “Unlawful kickbacks like these distort the market for medical devices upon which our healthcare system depends. For years, Merit Medical ignored internal warnings and refused to abide by the rules that apply to every other medical device company. With today’s settlement, they are paying the price for that refusal.”

In his position as compliance officer from 2011-2015, Charles said in the suit that he addressed the violations that occurred at the company to management, but his concerns were disregarded and he was “always given only token respect.” The former medical doctor worked solely in compliance since 1999 and left MMSI in 2015 upon the company’s culture of refusing to address the violations and implement change.

What Are Medicare Kickbacks?

The False Claims Act, the Anti-Kickback Statute, and the Physician Self-Referral Law all prohibit Medicare and Medicaid fraud and abuse. While there are some distinctions in these laws, they all prohibit illegal referrals and kickbacks and are enforced by the DOJ, the Department of Health and Human Services Office of Inspector General, and the Centers for Medicare and Medicaid Services.

Under the Anti-Kickback Statute, physicians and healthcare providers are prohibited from submitting false claims to Medicaid or Medicare, accepting kickbacks, and paying anything of value for referrals to generate business that results in a service payable by a federal health program.

Medical providers who knowingly engage in any of these acts can incur civil and criminal penalties.

Physicians are also not permitted to accept remuneration from medical device companies for inducing Medicare patients into purchasing products which will be paid for by Medicare or Medicaid — Medicare pays 80% of the cost for durable medical equipment and devices for Medicare beneficiaries.

The Anti-Kickback Statute also makes it a violation to pay and solicit remuneration in exchange for referrals of patients who receive medical treatment paid for by Medicare, and medical device companies must also be in compliance with the law. Companies producing and marketing medical devices may violate the Anti-Kickback Statute by providing kickbacks or anything of value to induce healthcare providers into purchasing products that would ultimately be paid for by Medicare. Remuneration includes not only monetary payments but also vacations, reduced office rent, excessive consultant compensation, and meals.

The Medicare Kickback Scheme Whistleblower Lawsuit is Case No. 2:16-CV-01855-CCC- MF, in the United States District Court for the District of New Jersey.

This article is not legal advice. It is presented
for informational purposes only.