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Cochlear Americas Pays $950,000 to Settle Federal Kickback Allegations

Cheryl Clark, for HealthLeaders Media, June 10, 2010

To resolve charges that it illegally paid health providers to influence purchases of cochlear implants bought with federal money, Cochlear Americas has agreed to pay $880,000, plus $70,000 in legal fees, under a federal False Claims Act settlement with the U.S. Department of Justice.

According to federal documents, the U.S. Office of Inspector General alleged that between Jan. 1, 2001 and March 1, 2004, Cochlear Americas "paid remuneration" to audiologists, surgeons, and audiology clinics that purchased the implants with money from a Medicare and Medicaid. The remuneration, the OIG says, came in the form of "credits that could be used to purchase other of Respondent's products, as well as through various gifts, donations, and sponsorships."

The alleged illegal payments were discovered when a whistleblower filed a legal complaint under the federal qui tam law and False Claims Act in January, 2004.

In a statement, the Australia-based company said that it has agreed to pay $950,000, but "specifically disputes and denies the factual and legal allegations in relation to sales [programs] and other conduct alleged to have occurred from 1998 to 2003 in the USA. However to avoid ongoing legal fees and the uncertainty and expense of litigation, the parties have … agreed to resolve the matter."

The whistleblower who brought the original case, Brenda March, a former vice president and a director at Cochlear Americas in Colorado, receives $176,000 according to a statement from the Department of Justice. The federal government receives $704,000, and legal fees paid by Cochlear Americas amount to $70,000.

"Today's actions demonstrate that the United States will not tolerate the payment of kickbacks of any entity involved in providing medical goods or services to beneficiaries of federal healthcare programs," said Assistant Attorney Tony West, head of the Justice Department's Civil Division.

Added David Gaouette, U.S. Attorney for the District of Colorado: "This office is determined to protect the integrity of the Medicare and Medicaid programs for the citizens of Colorado and of the United States."

The United States intervened in the lawsuit in January, 2007. In one of the complaint documents released by the Department of Justice, it was alleged that Medicare reimbursements to hospitals were "artificially high due to the improper financial incentives paid by Cochlear Americas to Physicians. Cochlear Americas, therefore, has willingly and knowingly caused such false claims to be submitted to Medicare."


Cheryl Clark is senior quality editor and California correspondent for HealthLeaders Media. She is a member of the Association of Health Care Journalists.
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