EV3, a unit of Covidien PLC, will pay $1.25 million to the federal government to settle a whistleblower lawsuit.
The 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.
The company was represented by Brien O’Connor of Ropes & Gray in Boston.
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 FoxHollow’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.
“Fox Hollow used the financial incentive of inpatient reimbursement to encourage hospitals to buy its product,” said Tim McCormack, a whistleblower attorney with Phillips & Cohen in Washington, DC. “It was a coordinated, nationwide marketing strategy.”
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 covered Fox Hollow’s actions from 2006 to 2007, after which ev3 acquired Fox Hollow. In 2010, Covidien acquired ev3, which it operates as a wholly owned subsidiary.
The hospitals that followed FoxHollow’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.
Cashi has been awarded 20 percent of the recovery — $250,000.