Medtronic subsidiary ev3 pays $1.25 million to settle Medicare billing fraud case

BUFFALO, NY, February 5, 2015 - ev3, a wholly owned subsidiary of medical device company Covidien PLC (now Medtronic Inc.), has agreed to pay $1.25 million to the federal government to settle a whistleblower lawsuit brought by Phillips & Cohen LLP.

The "qui tam" (whistleblower) lawsuit, which the government joined, alleged that Fox Hollow Technologies Inc. (acquired by ev3) caused hospitals to submit false claims to Medicare by advising them that a medical procedure to remove harmful buildup in blood vessels using a device sold by Fox Hollow could be billed as an inpatient procedure in cases where they should have been billed as a less-expensive outpatient procedure.

By advising hospitals they could bill Medicare for a higher-paying inpatient procedure, the whistleblower complaint said, Fox Hollow figured that hospitals would be more likely to buy its product and perform the procedure.

"In the jargon of Fox Hollow's sales representatives, many hospitals 'drank the Kool-Aid' and admitted all or nearly all of those patients to inpatient status regardless of medical necessity," said Larry P. Zoglin, Of Counsel to Phillips & Cohen LLP, which represented the whistleblower.

Fox Hollow, headquartered in Redwood City, California, manufactured and sold the device known as the SilverHawk Plaque Excision System for use in atherectomy, a minimally invasive surgical procedure to remove atherosclerotic plaque from blood vessels.

The whistleblower, Amanda Cashi, was a former district sales manager in Louisiana for Fox Hollow. Phillips & Cohen filed a qui tam lawsuit in 2009 on her behalf in federal district court in Buffalo, New York, alleging violations of the False Claims Act.

The settlement agreement, announced by the government today, covered Fox Hollow's actions from 2006 to 2007, after which ev3 acquired Fox Hollow. In 2010, Covidien acquired ev3, and last month, Medtronic acquired Covidien. The hospitals that followed Fox Hollow's advice to perform the procedure on an inpatient basis are listed in an attachment to the settlement agreement but aren't being held liable.

The qui tam lawsuit had been under seal, meaning it wasn't known to the public. Whistleblowers in False Claims Act lawsuits are entitled to 15 percent to 25 percent of the amount recovered if the government intervenes in the case. Cashi has been awarded 20 percent of the recovery ($250,000).

"Amanda Cashi exposed a practice that was hurting the Medicare program," Zoglin said. "She put her career at risk to do so."

Cashi and her attorneys thanked the government attorneys and investigators for their work on the case, in particular Colin M. Huntley, senior trial counsel in the Justice Department's Civil Division; Assistant U.S. Attorney Gretchen Wylegala, Investigator Margaret McFarland and Auditor Theresa Tetlow of the US Attorney's Office in Buffalo; and Special Agent Peggy Glynn of the Department of Health and Human Services Office of the Inspector General.

The case is captioned: United States ex rel. Cashi v. Fox Hollow Technologies, Inc., et al., Civ. No. 09-CV-01066-S.