WASHINGTON–Medical device manufacturer EndoGastric Solutions Inc., located in Redmond, Washington, has agreed to pay the government up to $5.25 million to resolve allegations that it violated the False Claims Act by misleading health care providers about how to bill federal health care programs for a procedure using a device manufactured by the company and by paying kickbacks, the Justice Department said on Wednesday.
“Health care providers that cause the government to pay more than it should for medical devices not only cost us money as taxpayers, they raise the cost of health care for everyone,” said Assistant Attorney General for the Justice Department’s Civil Division Stuart F. Delery. “Medical device manufacturers must deal fairly and honestly with federal health care programs if they want to participate in them.”
EndoGastric Solutions manufactures and sells a device called EsophyX that is intended to treat gastroesophageal reflux disease. The device was developed as an alternative to a more invasive procedure that requires incisions in the abdomen. The government alleged that EndoGastric Solutions knowingly caused health care providers to bill for the less invasive EsophyX procedure using codes applicable to the more invasive procedure, which provided for a higher level of reimbursement. As a result, federal health care programs allegedly paid more than they should have for the procedures using EsophyX.
The government also alleged that EndoGastric Solutions knowingly paid illegal remuneration to certain physicians for participating in patient seminars and co-marketing agreements to induce them to use EsophyX, in violation of the Federal Anti-Kickback Statute. The Anti-Kickback Statute prohibits offering or paying remuneration to induce referrals of items or services covered by federally funded health care programs. The statute is intended to ensure that physicians’ medical judgments are not compromised by improper financial incentives and are based solely on the best interests of patients.
“A medical device manufacturer violates the law when it advises physicians and hospitals to report the wrong codes to federal health insurance programs in order to increase reimbursement rates,” said U.S. Attorney for the District of Montana Michael W. Cotter. “Health care providers are required to bill federal health care programs truthfully for the work they perform.”
As part of the settlement, EndoGastric Solutions has agreed to enter into a Corporate Integrity Agreement with the Department of Health and Human Services Office of Inspector General. The agreement provides for procedures and reviews to be put in place to avoid and promptly detect conduct similar to that which gave rise to the settlement.
“Those seeking to maximize profits by encouraging others to bill government health care programs improperly should expect to pay a heavy price,” said Inspector General of the U.S. Department of Health and Human Services Daniel R. Levinson. “Law enforcement agencies will continue using all available tools to bring violators to justice.”
The civil settlement resolves a lawsuit filed in the U.S. District Court of Montana by Glenn Schmasow, a former employee of EndoGastric Solutions, under the whistleblower provision of the False Claims Act, which permits private parties to file suit on behalf of the government for false claims and to obtain a portion of the government’s recovery. Schmasow will receive up to $945,000.
