Medical Device Fraud under the False Claims Act

Medical Device Fraud under the False Claims Act Medical device fraud is a serious threat, as healthcare providers and medical record retrieval firms know. There are many ways in which such fraud occurs.

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The False Claim Act (FCA) was signed into law by President Abraham Lincoln on March 2, 1862 and has become the most successful anti-fraud act in the U.S. Major changes made to this Act in 1986 increased damages considerably for these cases. Cases filed under the FCA quickly transform into multi-million-dollar cases and whistleblowers typically receive huge financial rewards.

A significant feature of the FCA is that any person or non-

governmental organization can file an FCA lawsuit on behalf of the U.S. government. The federal government is required to investigate all such claims – they can intervene and proceed with the case or decline to do so. In the latter case, the whistleblower may proceed with the action. As a medical review company serving the legal and medical industries, we understand that of the $3.7 billion recovered by the Department of Justice (DOJ) in FY 2017, $2.4 billion came from the healthcare industry and this is the 8th consecutive year healthcare fraud recoveries surpassed $2 billion. The defendants included hospitals, physicians, pharmaceutical companies, physician practice groups, hospice and hospice care systems, outpatient clinics and pharmacies.

Here is a figure that shows the statistics clearly:

The largest recoveries were made from pharmaceutical and medical device manufacturers –more than $900 million of the $2.4 billion in health care fraud recoveries.

Medical device fraud is a grave risk indeed to the U.S. government’s regulation of healthcare. What are the possible violations you can expect from medical device manufacturers?

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Referrals and Kickbacks: The Stark Law and the Anti-Kickback Statute prohibit improper payments for referrals of Medicaid and Medicare patients. Violations of these laws occur if the manufacturer pays improper fees to physicians and their staff, improper discounts to encourage future business, or when the prescribing physician is the owner of the medical device company.

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Defective Medical Devices: False claims submission for payment by hospitals and physicians may result if a medical device manufacturer intentionally provides defective devices to Medicare and Medicaid patients. A company that does not

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clearly reveal the problem to the FDA or continues to sell defective devices even after discovering the problem may be violating the law. •

Off-label Marketing: The manufacturer of a medical device must limit its marketing to its FDA-approved uses. Federal regulations are intended to ensure that medical device companies promote their products only for safe and effective uses. If the company violates the regulations for marketing the device by allowing its use for off-label purposes, the medical device will be regarded as misbranded or adulterated. This could be a violation of the FCA.

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Unnecessary Billing: Medical device companies may violate the law by encouraging healthcare providers to use an inappropriate treatment protocol or billing code for procedures that involve the company’s device. Take the case of a medical device maker that advises the hospital that a particular procedure using the device could be billed under a more complicated diagnosis related group than is allowed by Medicare guidelines. If the hospital takes this advice and charges Medicare for an inpatient stay when the procedure required only an outpatient admission, it could amount to healthcare fraud.

Healthcare professionals who recommend wearable medical devices to their patients (to monitor their condition) must be cautious about possible exposure to the FCA. To comply with fraud and abuse laws, providers must avoid accepting anything of value in exchange for recommending the use of a wearable medical device. Typically, false claims act suits are brought against providers under the allegation that they violated the Anti-Kickback Statute by accepting remuneration in exchange for recommending the use of a medical device covered by government healthcare programs. For instance, from January 1, 2018, Medicare provides coverage for a monthly recurring reimbursement for remote patient monitoring devices. Providers must make sure that their billing for remote patient monitoring is compliant with the requirements of insurers and Medicare/Medicaid in order to avoid False Claims Act exposure.

Medical device companies and their sales representatives, especially in segments that are highly competitive and profitable (implantable pacemakers and cardioverter defibrillators, stents, prosthetic heart valves and other cardiac implant devices, orthopedic implants such as artificial knees and artificial hips, cochlear implants, spinal disks and robotic surgery machines) are under tremendous pressure to win market share. They may be pressurized to offer kickbacks to providers to stay competitive.

A medical record retrieval company associating with lawyers and doctors regularly knows how crucial medical devices are to healthcare treatment and advancements. Though the

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schemes that medical device manufacturers and sales personnel engage in to win market share are mostly forthright, they can at other times be more complicated, and shrewd. In such instances it could be more difficult for the public or government regulators to properly detect fraudulent schemes. There is no doubt that wearable medical devices can considerably shape the practice of medicine and the regulatory landscape covering it.

Providers are increasingly incorporating such devices into their treatment plans and must be very cautious about the applicable legal and regulatory requirements. Device companies can expect to see continued strong enforcement activity under the False Claims Act. There is a greater likelihood of strong and ongoing scrutiny of medical device companies’ dealings and arrangements with healthcare providers and other customers as well as their compliance with FDA.

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918-221-7791