Philips Subsidiary to Pay More Than $24M for Alleged Kickback Scheme

Philips RS North America LLC, formerly known as Respironics Inc., has agreed to pay more than $24 million to resolve False Claims Act allegations that it misled federal healthcare programs by paying kickbacks to suppliers. The affected programs included Medicare, Medicaid and TRICARE, the latter of which is the healthcare program for active military and their families.
 
The settlement resolves allegations that Respironics convinced durable medical equipment (DME) suppliers to submit false claims for ventilators, oxygen concentrators, CPAP and BiPAP machines, and other respiratory-related medical equipment by providing illegal inducements to the suppliers. Respironics allegedly gave suppliers physician prescribing data (for free) to help their marketing efforts to doctors. 
   
“Paying illegal remuneration to induce patient referrals undermines the integrity of our nation’s healthcare system,” said Principal Deputy Assistant Attorney General Brian M. Boynton, head of the Justice Department’s Civil Division. “To ensure the goods and services received by federal healthcare program patients are determined by their healthcare needs, rather than the financial interests of third parties, we will pursue any individual or entity that violates the prohibition on paying kickbacks, including DME manufacturers.”
 
“The people of South Carolina need to know that medical facts—not finances—drive their healthcare decisions,” said U.S. Attorney Adair F. Boroughs for the District of South Carolina. “Those who improperly use money and other things of value to induce business in violation of the Anti-Kickback Statute will be held accountable.”

The settlement provides that Respironics will pay $22.62 million to the United States, and $2.13 million to the various states as a result of the impact of Respironics’ conduct on their Medicaid programs, pursuant to the terms of separate settlement agreements that Respironics has, or will enter into, with those states. In addition to the civil settlement, Respironics entered into a five-year Corporate Integrity Agreement (CIA) with HHS-OIG. The CIA requires Respironics to implement and maintain a robust compliance program that includes, among other things, review of arrangements with referral sources and monitoring of Respironics’ sales force. The CIA also requires Respironics to retain an independent monitor, selected by the OIG, to assess the effectiveness of Respironics’ compliance systems.
 
“Paying kickbacks to medical equipment providers is misaligned with patient care and corrupts our nation’s health care programs including TRICARE,” said Special Agent in Charge Christopher Dillard for the Department of Defense Office of Inspector General, Defense Criminal Investigative Service (DCIS), Mid-Atlantic Field Office. “Working closely with our law enforcement partners, DCIS will continue to investigate those who risk harming the welfare of our active-duty service members and seek to profit at the expense of the American taxpayer.”
 
The settlement resolves a lawsuit originally brought by Jeremy Orling, a Respironics’ employee, under the qui tam or whistleblower provisions of the False Claims Act. Under those provisions, a private party can file an action on behalf of the United States and receive a portion of any recovery. As part of this resolution, Orling will receive approximately $4.3 million of the federal settlement amount.

“By paying kickbacks to obtain patient referrals, DME manufacturers are prioritizing financial incentives over patient needs, which undermines the integrity of federal health care programs,” said Special Agent in Charge Tamala E. Miles for the Department of Health and Human Services, Office of the Inspector General (HHS-OIG). “HHS-OIG will continue to work tirelessly with our law enforcement partners to prevent such waste of valuable taxpayer dollars.”
 
The Anti-Kickback Statute prohibits the knowing and willful payment of any remuneration to induce the referral of services or items that are paid for by a federal healthcare program, such as Medicare, Medicaid or TRICARE. Claims submitted to these programs in violation of the Anti-Kickback Statute give rise to liability under the False Claims Act. 
 
This settlement resulted from a coordinated effort by the Justice Department’s Civil Division, Commercial Litigation Branch, Fraud Section and the U.S. Attorney’s Office for the District of South Carolina with assistance from the HHS-OIG and HHS Office of Investigations; DCIS; the Defense Health Agency Office of General Counsel; and the National Association of Medicaid Fraud Control Units. The matter was handled by Senior Trial Counsel Daniel A. Spiro of the Fraud Section of the Civil Division and Assistant U.S. Attorneys Beth Warren and Johanna Valenzuela District of South Carolina.
 
The lawsuit resolved by this settlement is captioned United States, et al., ex rel. Respiratory Care. LLC v. Respironics Inc., et al., Case No. 2:19-cv-02913-BHH (D.S.C). The claims resolved by the settlement are allegations only, and there has been no determination of liability.