Byram Healthcare: The Distributor’s Side of the Hollister Kickback Case

In the Byram Healthcare kickback settlement, Byram Healthcare Centers agreed to pay $9,372,883 to the federal government over allegations that it accepted catalog funding from Hollister and payments from manufacturers in return for promotional campaigns and patient referrals. Hollister’s separate settlement resolved allegations that it funded bonuses Byram paid its sales staff for new patient orders. For someone inside purchasing, sales or billing, the case connects what the supplier received, what its staff recommended and what it charged the government.

The Department of Justice announced the resolution on April 29, 2016. Hollister, the disposable healthcare products manufacturer, separately agreed to pay $11.44 million. Byram’s settlement also included a payment to California over inflated Medi-Cal bills and a corporate integrity agreement with the U.S. Department of Health and Human Services Office of Inspector General.

The Supplier’s Product Recommendation Was the Prize

The government alleged that Byram accepted kickbacks from Hollister, Coloplast, Montreal Ostomy and Safe N’ Simple in 2012 and 2013 in return for promotional campaigns and patient referrals to their ostomy and continence care products. The supplier had something the manufacturers wanted: access to the patient’s next product order.

These products include ostomy collection bags and pouches, and urinary catheters. The whistleblowers’ complaint described Byram as a supplier enrolled in Medicare that sold products to Medicare and Medi-Cal recipients. Its position connected the manufacturer’s sales effort to the person using the supplies and the program paying for them. The complaint described patients who would need these products for an extended period or for the rest of their lives. A patient conversion could therefore mean repeat orders.

In Byram’s case, the alleged influence ran through the supplier’s recommendations and sales campaigns. That is why the distributor’s side deserves attention: its staff could turn a manufacturer’s incentive into a particular product order.

Sales Bonuses Tied to New Patient Orders

Hollister allegedly agreed to fund bonuses that Byram paid its own sales personnel for each new patient order for a Hollister product. The government described seven such occasions from 2007 through 2012 in the allegations resolved by Hollister’s settlement. These bonus commissions were called spiffs.

A new patient’s order for the manufacturer’s product earned the supplier’s salesperson a bonus, with the manufacturer allegedly covering the cost. That arrangement put the manufacturer’s commercial preference into the distributor’s compensation system. An insider who handled the commission records would see a different part of the transaction from someone who approved the manufacturer’s payment.

The government’s account of catalog funding described another incentive. Each year from 2009 through 2014, Hollister allegedly agreed to pay Byram $200,000 under that label to induce recommendations of Hollister products to patients. Byram’s settlement resolved the same catalog-funding allegations. A payment described as support for a catalog was allegedly buying the recommendation made to the customer. Patients depended on those recommendations, while taxpayers funded the government programs paying for their supplies.

Patient Leads Became Orders and Claims

The whistleblowers’ complaint described how Hollister patient leads reached Byram and became supply orders. It alleged that Hollister sent weekly lead reports assigning patients to Byram and other suppliers. The reports contained patient contact information, and the complaint identified a sample report emailed to Byram.

According to the complaint, Hollister also used telephone transfers to connect patients with suppliers. After patients received free samples, Hollister telemarketers encouraged them to keep using Hollister products and transferred those ready to buy to a supplier. Byram and other suppliers could then fill the orders and submit claims to Medicare and Medicare Advantage, among other payers.

The complaint gives a concrete example of how valuable those referrals allegedly were. A Coloplast employee asked a Byram senior vice president whether Byram would buy more Coloplast ostomy pouches. The whistleblowers alleged that the executive said this was unlikely because Byram feared jeopardizing its patient referrals from Hollister.

In that account, buying more of a competing product could threaten incoming patient business. The commercial pressure reached both directions: the manufacturer wanted product orders, and the supplier wanted the manufacturer’s patient leads.

The Separate Medi-Cal Billing Allegation

Byram also agreed to pay California $127,118 to resolve allegations of falsely inflated Medi-Cal claims. The United States and California alleged that Byram sold Coloplast urology products to Medi-Cal beneficiaries and knowingly failed to account for substantial discounts when billing the program.

California’s upper billing limit restricted what a provider could bill for certain products. According to the government, Byram knew when it submitted the claims that the discounts materially reduced the prices it paid. The allegation concerned the gap between the supplier’s actual purchase cost and the cost reflected in its government billing.

That makes the purchasing side of the business important to the claims story. The government alleged that Byram billed without accounting for those discounts. Someone handling supplier pricing could understand the discount while someone in billing saw the amount charged to Medi-Cal. Connecting those views is how we examine this kind of allegation.

The billing allegation followed the discount into the claim. The kickback allegation followed the benefit into the product recommendation.

Product Switching in the Same Case

Coloplast and Liberator Medical Supply had already resolved kickback allegations in December 2015. Those allegations concerned payments to suppliers for promotions that switched individual users to Coloplast products. The Justice Department said the later Byram and Hollister settlements brought the total recovery in that case to $24.6 million.

In Byram’s own resolution, the government described benefits accepted in return for promotional campaigns and referrals to the manufacturers’ products.

What Evidence Is Needed to Prove Fraud?

For the supplier conduct described here, evidence connects the manufacturer’s benefit to the product recommendation, the patient’s order and the government claim. For the Medi-Cal allegation, it connects the negotiated discount to what the supplier knew its products cost when it billed. We work with insiders to establish those connections from the transactions they know.

How Much Is a Whistleblower Claim Worth?

A whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers. The Byram and Hollister settlements grew out of a qui tam case brought by two former Coloplast employees and one current employee.

A 2020 analysis in the Journal of Forensic and Investigative Accounting, A Forensic Accountant’s Guide to the Most Potent Federal Laws Used Against Healthcare Fraud, explains why inside knowledge matters: complex financial wrongdoing often cannot be detected without help from people who know about it. Here, the employees’ view came from inside a manufacturer, but their allegations reached the suppliers receiving its benefits and the claims that followed.

You Know What the Supplier Was Paid to Do

If you handled supplier incentives, patient conversion campaigns or discount-adjusted billing, talk with our whistleblower experts about the transactions you saw. We develop your case with health care kickback whistleblower lawyers who understand supplier sales and reimbursement, and stand beside you throughout the case.