EndoGastric Solutions: Coding a Less-Invasive Procedure as Abdominal Surgery

In the EndoGastric Solutions EsophyX settlement, the manufacturer agreed to pay up to $5.25 million to resolve allegations of false billing advice and physician kickbacks. The government said providers performed the less-invasive EsophyX procedure but billed under codes for a more invasive procedure requiring abdominal incisions. For someone inside device sales or reimbursement support, the connection is worth following: what the company told the customer, and what the customer then told the government it had done.

The Justice Department announced the civil settlement on February 19, 2014. EndoGastric Solutions, based in Redmond, Washington, made and sold EsophyX to treat gastroesophageal reflux disease. A former employee brought the whistleblower case against the manufacturer.

What EsophyX Was and Why the Code Mattered

EndoGastric developed EsophyX as a less-invasive alternative to a procedure requiring incisions in the abdomen. The government’s allegation put that clinical distinction at the center of the bill: the codes for the more invasive procedure carried higher reimbursement, and EndoGastric allegedly caused providers to use them for EsophyX.

The procedure’s selling point and its billing description were pulling in opposite directions. The government alleged that providers performed the less-invasive treatment but billed federal health care programs as though they had performed the more invasive one. Taxpayers picked up the extra cost of surgery the bill described but the patient never received, according to that account.

EndoGastric sold the device, but the provider billed for a procedure. According to the government, describing that procedure with the wrong code brought in the higher payment.

A bill can misrepresent the treatment even when a patient received care. A Forensic Accountant’s Guide to the Most Potent Federal Laws Used Against Healthcare Fraud, published in the Journal of Forensic and Investigative Accounting in 2020, describes false claims based on an incorrect description of services or goods. In the EsophyX allegations, the difference was concrete: the bill described the more invasive surgery instead of the procedure performed.

How the Manufacturer Reached the Provider’s Bill

The government alleged that EndoGastric knowingly caused providers to submit the higher-paying claims. That puts the manufacturer’s reimbursement advice inside the billing story, even though the physician or hospital submitted the claim.

In the EsophyX case, the government alleged that the manufacturer’s reimbursement advice sent providers toward codes for a different operation.

The Justice Department’s explanation of the coding allegation specifically addressed manufacturers advising physicians and hospitals to report the wrong codes to increase reimbursement. An insider who knew the advice could see a part of the transaction that the payer’s claim alone would not explain.

EndoGastric also agreed to enter into a Corporate Integrity Agreement with the Department of Health and Human Services Office of Inspector General, calling for procedures and reviews to prevent and promptly detect similar conduct.

Patient Seminars and Co-Marketing Payments

The government separately alleged that EndoGastric paid physicians for participating in patient seminars and co-marketing agreements to induce them to use EsophyX. Those payments concerned which device the physician chose, while the coding advice concerned how the resulting procedure was billed.

The Justice Department described the Anti-Kickback Statute’s purpose in patient terms: medical judgments should serve patients’ best interests, free of improper financial incentives. The financial incentive allegedly reached the person making a medical judgment for the patient.

Can a Whistleblower Take Legal Action Against a Medical Device Company?

Yes. A former EndoGastric employee brought this False Claims Act case in federal court in Montana over the manufacturer’s alleged conduct. The civil settlement resolved that employee’s lawsuit, and the Justice Department announced that the whistleblower would receive up to a set share of the settlement.

A whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers.

Manufacturer Billing Advice in Other Device Cases

Other medical device cases show the same connection between a manufacturer’s commercial instructions and a customer’s reimbursement. In the Kyphon manufacturer case, resolved in 2008, the government alleged that the company encouraged unnecessary inpatient admissions for kyphoplasty to increase hospital reimbursement.

Kyphoplasty treats spinal fractures and can often be performed safely on an outpatient basis. The government alleged that hospitals admitted patients to increase Medicare reimbursement. The disputed decision there was where the patient received treatment. The EsophyX allegation concerned which procedure the provider reported.

In the THD America case, resolved in 2024, the government alleged that the manufacturer encouraged additional or substitute procedure codes to avoid denials associated with a temporary code. Temporary procedure codes identify emerging technology. That comparison puts the reimbursement instruction itself in view: a device company allegedly helped its customer obtain payment by changing the claim’s description.

What Evidence Is Needed to Prove Fraud?

For the EsophyX coding allegation, the evidence connects the company’s advice, the procedure performed, the code billed and the resulting federal payment. For the physician-payment allegation, it connects the seminar or co-marketing arrangement to the company’s alleged purpose of inducing EsophyX use. Our whistleblower experts work with insiders to establish those connections.

Someone who worked on reimbursement advice may know how the company described billing to its customers. Someone involved in physician payments may know what the company expected in return. On the provider’s side, the procedure and billing records concern what happened after that advice reached the customer.

You Know What Customers Were Told

If you saw device billing advice or physician payments designed to increase product use, talk with our whistleblower experts about what happened inside the business. We work with you from the company’s instructions through the provider claims to build your strongest medical device whistleblower case. We bring in medical device whistleblower lawyers who understand coding advice and physician payments, and stay with you throughout the case.