Diopsys Settles Federal False Claims Act Case

Diopsys Inc. has agreed to pay up to $14.25 million to resolve allegations it violated the federal False Claims Act and various Pennsylvania state laws by knowingly submitting or causing others to submit false Medicare and Medicaid claims for certain vision testing services.

The settlement resolves allegations relating to Diopsys’ NOVA device, an electrophysiological product cleared by the U.S. Food and Drug Administration (FDA) for visual evoked potential (VEP) testing. From Jan. 1, 2015 through Dec. 31, 2021, Diopsys allegedly caused healthcare providers to submit false claims to Medicare and Medicaid for services in which the NOVA device was used for medically unnecessary purposes, specifically electroretinography (ERG) vision testing, a substantially different vision test for which the NOVA device lacked FDA clearance, federal prosecutors claimed. The U.S. government further contended that Diopsys made substantial changes to the NOVA device that it never submitted to FDA for clearance or approval despite knowing such a submission was required.

“This resolution reaffirms our commitment to protect the integrity of the Medicare and Medicaid programs,” said U.S. Attorney John Giordano for the District of New Jersey. “Healthcare companies must not encourage doctors to submit claims for payment for medically unnecessary tests.”

Under the terms of the settlement, Diopsys will make guaranteed payments of $1,225,000 and contingent payments of up to $13,025,000. The settlement is based on Diopsys’ financial condition.

The civil settlement includes the resolution of claims brought under the qui tam or whistleblower provisions of the False Claims Act by Dr. Atul Jain, a California ophthalmologist. Under those provisions, a private party can file an action on the U.S. government’s behalf and receive a portion of any pecuniary recovery.  Approximately $1.12 million of the guaranteed payment and up to approximately $11.9 million of the contingent payments constitute the recovery’s federal portion. Dr. Jain will receive at least roughly $207,000 as his share of the federal recovery in this case.

The resolution obtained in this matter was the result of a coordinated effort between the Justice Department’s Civil Division, Commercial Litigation Branch, Fraud Section, and the United States Attorney’s Office for the District of New Jersey, with assistance from the U.S. Department of Health and Human Services Office of Inspector General.

“We take regulatory requirements seriously and this agreement reinforces that commitment,” Diopsys Inc. Chief Financial Officer Michael Egleston stated. “With the settlement now complete, Diopsys can proceed with submitting a new 510(k) application to the FDA for its redesigned ERG device and working to restore its ERG presence in the U.S. marketplace.”

The investigation and resolution of this case illustrates the government’s emphasis on combating healthcare fraud. One of the most powerful tools in this effort is the False Claims Act. 

This case was handled by Assistant U.S. Attorney David Simunovich of the Health Care Fraud Unit in the U.S. Attorney’s Office for the District of New Jersey, and Trial Attorney Daniel Meyler of the Civil Division’s Commercial Litigation Branch, Fraud Section.

The case is captioned United States ex rel. Jain v. Diopsys Inc., et al. The claims resolved by the settlement are allegations only. There has been no determination of liability.

Middletown, Pa.-based Diopsys Inc. is a medical device company commercializing the NOVA Vision Testing System, a comprehensive electrophysiology platform that provides objective assessment of the entire pathway for visual and neuro-visual disorders. VEP is available in the United States and select countries outside of the United States. ERG is only available outside the United States.