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More Trouble for Orthofix

Posted  December 20, 2012

By Marlene Koury

Medical device maker Orthofix, Inc. this week obtained court approval for its June 2012 settlement proposal to resolve civil and criminal allegations that it defrauded Medicare through kickback schemes and overbilling for its bone-growth stimulators.  Click here for the original government press release.  The company will pay approximately $43 million for its misdeeds.  This payment follows on the heels of the company’s agreement last month to pay $30 million to resolve allegations that its subsidiary, Blackstone Medical, engaged in an elaborate kickback scheme to induce physicians to use its products.  That scheme involved luxury travel, fancy dinners, strip clubs, prostitutes and even the participation in illicit acts by one of the company’s female sales managers.  See Blackstone Medical Caught “Entertaining” Physicians In Exchange for Business.

While this newest payout may lack the sordid backdrop of the Blackstone ignominy, it is based on misconduct that it is no less disturbing.  According to the government’s charges, for much of the past decade, Orthofix submitted fraudulent Medicare billings for its bone-growth stimulator products by routinely falsifying certificates of medical necessity and then relying on those certificates to support its claims for reimbursement.  Orthofix representatives either completed these certificates themselves without any input from the overseeing physician, “coached” or otherwise persuaded physicians on how to complete the certificates, or forged the physician signatures on the certificates altogether.  The charges also included allegations that the company provided kickbacks to physicians to induce doctors to use Orthofix products.

The owner of a medical billing company was the whistleblower who first brought these transgressions to the government’s attention.  He filed a False Claims Act case after discovering that Orthofix was submitting fraudulent claims for payment to the tune of millions of dollars per year.  He is expected to receive a $9.2 million take of the government’s settlement for his efforts at exposing the scheme.  In addition to the monetary payout and a sure sign that the government takes this kind of misconduct very seriously, five Orthofix employees — including a company Vice President — have plead guilty to violating the federal kickback statute.

Orthofix President and Chief Executive Officer Robert Vaters has promised that Orthofix has shaped up and completed a major overhaul of its company.  In response to these recent settlements, he stressed that Orthofix will “emerge from these resolutions as a Company deeply committed to the highest levels of integrity and ethics which, along with our unique value proposition for bone repair and regeneration, we believe will position us for continued long term growth.”  Given the company’s recent track record, it would appear that in this regard, the company has nowhere to go but up.

Tagged in: Anti-Kickback and Stark, FCA Federal, Medicare,