AMARILLO, TX – In an Oct 2020 press release, the Department of Justice (DOJ) announced a federal False Claims Act (FCA) settlement with Utah-based Merit Medical Systems, Inc. The press release says, in part:

Medical device maker Merit Medical Systems Inc. (MMSI), of South Jordan, Utah, has agreed to pay $18 million to resolve allegations that the company caused the submission of false claims to the Medicare, Medicaid, and TRICARE programs by paying kickbacks to physicians and hospitals to induce the use of MMSI products, the Department of Justice announced today. 

“Paying kickbacks to doctors in exchange for referrals undermines the integrity of federal healthcare programs,” said Acting Assistant Attorney General Jeffrey Bossert Clark of the Department of Justice’s Civil Division.  “When medical devices are used in surgical procedures, patients deserve to know that their device was selected based on quality of care considerations and not because of improper payments from manufacturers.”

The Anti‑Kickback Statute prohibits offering or paying anything of value to induce the referral of items or services covered by Medicare, Medicaid, TRICARE, and other federal healthcare programs.  The statute is intended to ensure that medical providers’ judgments are not compromised by improper financial incentives.

The settlement announced today resolves allegations that, for over six years, MMSI engaged in a kickback scheme to pay physicians, medical practices, and hospitals to induce their use of MMSI products in medical procedures performed on Medicare, Medicaid, and TRICARE beneficiaries. Under the guise of an internal program known as the Local Advertising Program, MMSI allegedly provided remuneration to healthcare providers in the form of millions of dollars in free advertising assistance, practice development, practice support, and purported unrestricted “educational” grants to induce the healthcare providers to purchase and use a wide variety of MMSI products.  These products included MMSI’s EmboSphere devices, which generally were used for uterine fibroid embolization procedures, and its QuadraSphere devices, which generally were used for other types of embolization procedures.  Despite publicly claiming that its financial assistance was designed to “increase the awareness” of medical treatments, MMSI allegedly provided it only to select healthcare providers to reward past sales, induce future sales, and steer business to MMSI and away from MMSI’s competitors.  The government alleged that MMSI disregarded numerous warnings that its conduct may violate the Anti-Kickback Statute, including warnings from MMSI’s own Chief Compliance Officer, during the course of the alleged kickback scheme.  Of the $18 million to be paid by MMSI, $15.21 million will be returned to the federal government, and a total of $2.79 million will be returned to individual states, which jointly funded claims involving MMSI devices that were submitted to state Medicaid programs.

“Merit Medical provided millions of dollars of advertising and other marketing support to healthcare providers to induce sales of its products,” Attorney for the United States Rachael A. Honig. “Unlawful kickbacks like these distort the market for medical devices upon which our healthcare system depends.  For years, Merit Medical ignored internal warnings and refused to abide by the rules that apply to every other medical device company.  With today’s settlement, they are paying the price for that refusal.”

Along with the civil settlement, MMSI entered into a five-year Corporate Integrity Agreement (CIA) with the Department of Health and Human Services Office of Inspector General (HHS-OIG).  The CIA requires MMSI to hire a compliance expert and an independent review organization to analyze its systems and transactions.  “No health care company’s compliance program can be effective without commitment and support from the company’s leaders,” said HHS-OIG Chief Counsel Gregory Demske.  “As happened here, ignoring your compliance officer’s concerns about payments to referral sources is a great way to become a defendant in a kickback case.”

The allegations were originally made in a lawsuit filed under the whistleblower provisions of the False Claims Act by Charles J. Wolf, M.D., the former Chief Compliance Officer of MMSI.  The act permits private parties to sue for false claims on behalf of the United States and to share in any recovery.  Dr. Wolf will receive $2.65 million from the federal share of the settlement.

The Merit Medical Systems, Inc. (“MMSI”) settlement spawned a lawsuit by the State of Georgia (“State”) against John C. Lipman, M.D. and Atlanta Interventional Institute, P.C. (collectively referred to as “Lipman”). The lawsuit was filed on October 5, 2021, approximately one year after the MMSI settlement. The lawsuit is based on the Georgia False Medicaid Claims Act.

The Complaint states, in part:

From July 2010 through at least December 2016, Defendants knowingly and willfully solicited and received prohibited remuneration from Merit Medical Systems, Inc. (Merit) in the form of unrestricted “educational” grants and “consulting” fees, in return for using Merit products in uterine fibroid embolization procedures. This scheme violated the federal Anti-Kickback Statute (AKS), 42 U.S.C. 1320a-7b(b), and Georgia Medicaid’s Policies and Procedures, and thereby caused the submission of false claims to Georgia Medicaid in violation of the [Georgia False Medicaid Claims Act (GFMCA)].

Over the course of nearly five years, Merit paid Defendants over $284,000 in unrestricted educational grants and consulting fees, which [were] primarily used by Defendants to market their uterine fibroid embolization practice. During the entire time period relevant to the complaint, Defendants knew of the AKS and understood the AKS’ prohibition on soliciting or receiving something of value in return for using a company’s product. Nevertheless, Defendants continued to submit and cause the submission of claims to Georgia Medicaid for items and services resulting from kickbacks they received from Merit. In paying for these ineligible, kickback-tainted claims, the Georgia Medicaid program sustained hundreds of thousands of dollars in damages. 

[Lipman] used the purported education grant funds to market his UFE practice. Lipman’s marketing strategy was multi-faceted, and involved traditional advertising (e.g., radio and internet ads); setting up booths at health fairs; “lunch and learns” for referring physicians; and, most notably, giving public talks on fibroids and UFE. For his speaking event, Lipman specifically targeted venues in which he would be able to speak to large numbers of women more likely to suffer from fibroids based on demographic factors (e.g., race and age) …The purpose of Lipman’s various marketing initiatives – and thus the dollars that funded them – was to funnel women with fibroids to his medical practice for UFE procedures. 

There are important lessons to be learned from the MMSI settlement and the subsequent lawsuit against Lipman:

• An Investigation Can Have “Legs” – When the DOJ focuses on activities of a health care provider, such focus can lead to (i) other activities of that same provider and (ii) activities of other providers. Simply speaking, the DOJ will follow the facts…and follow the money. Here, a year after the MMSI settlement with the DOJ, another governmental agency (the Georgia Attorney General’s Office) has brought a lawsuit against the person who benefitted from the payments by MMSI.
• If an Employee Points Out a Problem, Don’t Ignore the Employee – MMSI’s Compliance Office brought the kickback scheme to the attention of MMSI management. Instead of diligently investigating the matter…and addressing it…MMSI essentially ignored the Compliance Officer’s concerns and continued with its kickback arrangement with Lipman. This resulted in the Compliance Office becoming a whistleblower. And the dominoes began to fall.
• States Also Have Teeth – When discussing potentially fraudulent arrangements, the focus is almost always on federal laws (the anti-kickback statute, Stark, the False Claims Act, etc.). However, each state has its own set of anti-fraud statutes. Not only can a provider be targeted by the DOJ under federal laws, but a provider can be targeted by a state Attorney General’s Office under state laws.
• You Can Put Lipstick on a Pig…. – If a provider has to mentally turn itself into a pretzel in order to justify an arrangement, the arrangement is likely fraudulent. Our brain can deceive us, but our stomach never lies. Most people know when a potential arrangement is a problem. Instead of trying to justify the arrangement, they need to walk away.

AAHOMECARE’S EDUCATIONAL WEBINAR

Offering “Value-Added” Services to Patients While Avoiding Prohibited Inducements

Presented by: Jeffrey S. Baird, Esq., Brown & Fortunato & Rossanna J. Howard, Esq., Brown & Fortunato

Tuesday, October 26, 2021

1:30-2:30 p.m. CENTRAL TIME
An important way for a DME supplier to set itself apart from its competitors is to offer services to existing and prospective patients—services that other suppliers do not offer. And with the recent relaxation of the federal anti-kickback statute, the federal physician self-referral statute, and the federal beneficiary inducement statute, CMS and the OIG are encouraging the provision of “value-added” services to patients. At the same time, it is important that the supplier not go so far that it inadvertently violates these statutes. This program will discuss (i) the federal laws governing value-added services to patients; (ii) those value-added services that are legally acceptable; and (iii) those value-added services that may trigger a government enforcement action.

Register for be available soon for Offering “Value-Added” Services to Patients While Avoiding Prohibited Inducements on Tuesday, October 26, 2021, 1:30-2:30 p.m. CT, with Jeffrey S. Baird, Esq. and Rossanna J. Howard, Esq. of  Brown & Fortunato.

Members:  $99
Non-Members:  $129

Jeffrey S. Baird, JD, is chairman of the Health Care Group at Brown & Fortunato, a law firm with a national health care practice based in Texas. He represents pharmacies, infusion companies, HME companies, manufacturers, and other health care providers throughout the United States.  Baird is Board Certified in Health Law by the Texas Board of Legal Specialization and can be reached at (806) 345-6320 or [email protected].