Medtronic Inherits DOJ False Claims Fine

Fox Hollow Technologies Inc., which was purchased by Ev3 Inc. nearly eight years ago for $780 million, has agreed to pay the United States $1.25 million to resolve allegations under the False Claims Act that Fox Hollow caused certain hospitals to submit false claims to Medicare for unnecessary inpatient admissions related to minimally invasive atherectomy procedures, according to the U.S. Department of Justice (DOJ).

Minneapolis, Minn.-based Ev3 was purchased by Covidien plc in 2010 for $2.6 billion. Medtronic plc, through its recent purchase of Covidien, now owns Ev3 and inherits the Fox Hollow bill. Though the settlement was announcement this month, the deal to settle the suit was finalized in December, just before the Covidien-Medtronic deal closed.

“Medtronic is committed to the highest standards of ethical conduct, and we take responsibility for delivering outstanding results to our partners, patients and colleagues,” according to a company statement. “The case relates to historical conduct that took place under Fox Hollow. We are pleased to have the matter resolved.”

The claims resolved by this settlement are allegations only and there has been no determination of liability, according to DOJ officials.

“It should come as no surprise to anyone that proper healthcare of a patient includes more than just competence of a provider, it requires accuracy and honesty in billing Medicare for the patient’s treatment,” said U.S. Attorney William J. Hochul Jr. of the Western District of New York.  “In this case, a medical device manufacturer allegedly induced hospitals to admit patients as inpatients for minimally invasive procedures involving its device, even though many of those patients should have been treated as outpatients at significantly less cost. This was done in order to collect higher Medicare reimbursements, which ultimately drive up costs for all taxpayers and beneficiaries of government health programs.”

DOJ alleged that Fox Hollow knowingly caused 12 hospitals located throughout nine states to submit claims to Medicare for medically unnecessary inpatient stays for certain Medicare beneficiaries undergoing elective atherectomy procedures.

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 atherectomy procedures is the Silver Hawk Plaque Excision System originally developed and sold by Fox Hollow. The Silver Hawk system now is sold by Medtronic.

The DOJ alleged that throughout 2006 and 2007, to increase hospital purchases of the Silver Hawk device, Fox Hollow advised hospitals that they should bill Silver Hawk atherectomy procedures as more expensive inpatient claims, as opposed to less-costly outpatient claims.  As a result, certain hospitals allegedly claimed greater reimbursement than they were entitled to for treating Medicare beneficiaries who underwent Silver Hawk atherectomy procedures.

The civil settlement resolves a lawsuit filed under the whistleblower provision of the False Claims Act, which permits private parties to file suit on behalf of the United States for false claims and obtain a portion of the government’s recovery. The lawsuit was filed by Amanda Cashi, who worked as a Fox Hollow sales representative. She will receive $250,000.
Medtronic is based in Dublin, Ireland.