EndoGastric Solutions Settles False Claims Act Case for Over $5 Million

The False Claims Act not only covers exaggerated bills for examinations, but also works to help eliminate fraud pertaining to the use of medical devices during surgical procedures. In a recent case against gastrointestinal device-maker EndoGastric Solutions, the government has alleged a serious pattern of fraud involving executives wrongfully directing physicians’ offices on the proper way to bill for the use of their products, resulting in a gross overpayment by the federal government. In addition, EndoGastric is alleged to have offered kickbacks to certain doctors for referring their products, which is prohibited under the False Claims Act and other federal statutes.

Details of Case Against EndoGastric

Washington-based EndoGastric Solutions is in the business of manufacturing products to treat conditions including gastroesophageal reflux disease and accompanying side effects to that condition. Many patients who endure reflux problems must eventually submit to surgical repair and reconstruction of the esophagus as stomach acid often wears away the lining in this area. One of its leading devices, EsophyX, was designed to offer patients a less-intrusive way to repair and reconstruct the esophagus and gives the patient the option to forgo the abdominal incision required by traditional esophageal repair procedures. In fact, patients are treated through the mouth and no incision is generally required. As a result, the procedure is much less intensive than the traditional method and carries its own unique billing code for purposes of seeking reimbursement from Medicare and Medicaid.

Notwithstanding the less-invasive nature of the EsophyX, EndoGastric Solutions is alleged to have informed physicians that they should still bill for the traditional esophageal replacement surgery – a code with a much higher rate than the incision-less EsophyX method. This intentional, wrongful advice resulted in massive overpayments by the federal government and amounts to exposure to liability under the FCA.

It is important to note that, under the FCA, liability is only imposed if the party submitting invoices did so with the intent to knowingly defraud the government. As a result, it does not appear likely that the government is interested in pursuing the actual doctors who submitted false invoices, provided these individuals did not knowingly submit upcoded bills for esophageal replacement surgery.

EndoGastric Solutions also settled claims it unlawfully offered kickbacks to doctors who promised to offer the EsophyX product to reflux patients.

The whistleblower in this case is set to receive $945,000 for his role in uncovering the defendant’s fraudulent practices.

Government Reiterates Its Dedication to Combating Fraud

The Department of Health and Human Services stated, “Those seeking to maximize profits by encouraging others to bill government healthcare programs improperly should expect to pay a heavy price….Law enforcement agencies will continue using all available tools to bring violators to justice.” The U.S. Attorney for the District of Montana (where the case was filed) stated, “A medical device manufacturer violates the law when it advises physicians and hospitals to report the wrong codes to federal health insurance programs in order to increase reimbursement rates….Healthcare providers are required to bill federal healthcare programs truthfully for the work they perform.”

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