Texas firm to pay millions in Medicare fraud case

Thursday, June 7, 2012 | 4:57 p.m. CDT; updated 9:54 p.m. CDT, Thursday, June 7, 2012

HOUSTON — A Dallas-area medical manufacturer has agreed to pay $42 million in penalties to settle civil and criminal cases related to fraudulent claims it made to Medicare and other federal health care programs when selling bone growth stimulator devices, the Justice Department announced Thursday.

The settlement is part of the federal government's ongoing nationwide crackdown on Medicare fraud that is thought to cost taxpayers between $60 billion and $90 billion each year.

Orthofix Inc. will pay more than $34.2 million to settle a whistle-blower civil lawsuit under the False Claims Act that alleged the company improperly waived patient co-payments, resulting in overpayments by federal programs. The suit also said the company paid kickbacks to physicians and their staffs.

Authorities said Orthofix, based in the Dallas suburb of Lewisville, also pleaded guilty in a related criminal case to a felony charge of obstruction of a federal audit and has been ordered to pay a nearly $7.8 million criminal fine.

The case "demonstrates the government's unflagging commitment to prosecuting corporate and individual medical device fraud, and particularly to protecting Medicare from those who prey on it by fraudulent means," said Carmen M. Ortiz, U.S. Attorney for the District of Massachusetts. Both suits were filed in Massachusetts federal court.

"Orthofix is very pleased that it has reached formal agreements to resolve all issues associated with the government's investigation of sales of its bone growth stimulator devices. The company has been in a lengthy period of full cooperation with the federal government and now can move forward in pursuit of its mission to serve patients," Brien T. O'Connor, a Boston attorney for Orthofix said Thursday in a statement.

In a form filed with the U.S. Securities and Exchange Commission on Thursday, Orthofix said the "settlement is neither an admission of liability by the company or its subsidiaries ..." and that the settlement will not affect the company's participation in federal health care programs.

As part of the settlement, Orthofix agreed to enter into a corporate integrity agreement with the Office of Inspector General of the Department of Health and Human Services.

The whistle-blower lawsuit had been filed by Jeffrey J. Bierman, the co-owner of a Missouri company that provides billing services and compliance programs to doctors, hospitals and nursing homes. Bierman will receive more than $9.2 million as his share of the civil settlement.

The company's 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 Orthofix employees had previously pleaded guilty to criminal charges.

Since 2009, the Justice Department has recovered more than $7.5 billion in cases involving fraud against federal health care programs. Health and Human Services Secretary Kathleen Sebelius and Attorney General Eric Holder partnered in 2009 to increase enforcement by allocating more money and staff and creating strike forces in fraud hot spots.

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