The investigation stemmed from a 2008 qui tam (whistleblower) lawsuit filed in federal district court in Buffalo by two former employees of Kyphon Inc., which sold the equipment and materials used to perform kyphoplasty. The two contended that hospital and Kyphon violated the federal False Claims Act.
The whistleblowers alleged that the company persuaded the hospitals to perform the procedure on an inpatient basis to capture larger Medicare payments, Matthew Smith, an attorney with Phillips & Cohen LLP, the Washington, D.C. law firm that represented the whistleblowers, explained in a telephone interview.
Kyphon sold to hospitals kyphoplasty kits valued at about $3,400. Although Medicare outpatient reimbursement grew overtime, Smith says inpatient reimbursement averaged between $6,000 and $12,000, depending on co-morbidities listed and whether the hospital performed a bone biopsy.
He added that "inpatient care generally isn't medically necessary for routine, scheduled kyphoplasty procedures."
Medtronic Inc., which acquired Kyphon in 2007, settled the 2008 qui tam suit for $75 million. Tuesday's settlement brings the total amount recovered from kyphoplasty-related cases to more than $149 million.