Estech: Free Generators for Preferred Status

Estech, also called Endoscopic Technologies, agreed to pay $1.4 million in its 2009 settlement over alleged atrial-fibrillation promotion, Medicare upcoding and kickbacks. The government said the device maker promoted expensive heart surgery when less-invasive alternatives were appropriate and advised hospitals to inflate their Medicare reimbursement. The whistleblower’s complaint put the sales pitch beside the hospital bill: a minimally invasive procedure sold with the financial appeal of open-heart surgery.

The Department of Justice announced the civil settlement on July 14, 2009. Estech, based in San Ramon, California, manufactured surgical ablation devices, which use focused energy to create controlled lesions or scar tissue on the heart or other organs. The treatment at issue was for atrial fibrillation, an abnormal heart rhythm.

Atrial-Fibrillation Promotion That Sold the Hospital’s Profit

The government alleged that Estech marketed its devices to treat atrial fibrillation even though the Food and Drug Administration had not approved that use.

The whistleblower’s complaint described a coordinated sales effort aimed at hospitals and cardiothoracic surgeons. According to the complaint, Estech emphasized the gap between Medicare reimbursement and the hospital’s cost of performing the procedure. The company allegedly offered surgeons a way to win business and hospitals a way to earn more from it. The complaint contrasted inpatient surgical ablation with outpatient catheter ablation performed by specialized cardiologists, alleging that the less-invasive procedure was appropriate for most patients.

That pitch extended to finding patients. The complaint alleged that Estech supplied free advertising and referral services to surgeons who agreed to use its products. It described company-sponsored community meetings to identify potential surgical-ablation patients, followed by referrals to surgeons using the company’s equipment. In that account, the manufacturer was helping create demand for the procedures as well as selling the tools used to perform them.

Medicare Upcoding for a Closed-Chest Procedure

The upcoding allegation was specific: Estech allegedly instructed hospitals to bill a closed-chest, stand-alone ablation procedure using an open-heart surgery code. The complaint said managers trained sales representatives to make the higher Medicare reimbursement part of their pitch.

Medicare’s inpatient payment system groups hospital stays by diagnoses and procedures and pays a set amount for the group. Device costs sit inside that payment. A manufacturer selling equipment into that system has a commercial reason to talk about the hospital’s reimbursement, because the hospital compares what it will receive with what the procedure will cost.

The complaint identified ICD-9 procedure code 37.33 as the open-chest code Estech allegedly told hospitals to use. It then described the mismatch:

The whistleblower alleged that the coding advice produced nearly $20,000 in reimbursement above the hospital’s cost each time the system was used as a stand-alone procedure. The same filing alleged that Estech’s promotional materials used a reimbursement case study to show hospitals how much more they could collect with the open-heart code.

The alleged sales advantage depended on the difference between the procedure performed and the procedure billed. The hospital submitted the Medicare claim, while the manufacturer’s instruction allegedly helped determine what went on it. That is how the government’s case connected a device company’s marketing to a taxpayer-funded payment.

What Are Some Examples of Kickbacks in Healthcare?

The Estech complaint alleged kickbacks in the form of free equipment, purchasing discounts tied to product preference, and advertising and referral services for surgeons. Each allegedly offered something of value in exchange for using the company’s devices.

The equipment allegation made the bargain concrete:

With hospital reimbursement fixed by the payment group, free equipment reduces a hospital’s costs and increases what it keeps. The complaint alleged that this made the offer an inducement to perform more ablation procedures. The sale reached beyond the generator to the continuing use of Estech’s disposable products.

According to the complaint, some discount arrangements required Estech’s products to be used in 80% or more of the hospital’s surgical ablation procedures. Hospitals also allegedly had to surrender competitors’ equipment. The filing went further: in some cases, it alleged, sales representatives disabled competing generators by taking their power cords and adapters.

Taking a competitor’s power cord is a remarkably direct way to influence a surgeon’s equipment choice. The allegation shows what a market-share commitment could mean inside the hospital: the competing product could no longer be used. In the alleged scheme, patients faced unnecessary surgery, Medicare paid inflated claims and competitors lost access to hospitals.

What Evidence Is Needed to Prove Fraud?

In a device-promotion case like Estech’s, the evidence connects the manufacturer’s sales instructions, the procedure selected and the hospital’s health care claim. The complaint described internal sales training, promotional materials, equipment agreements and the billing codes hospitals used.

We work with insiders to connect those sales instructions and purchasing commitments to the claims they produced.

The court’s account of the related ablation cases said the whistleblower alleged learning of the practices while working for a device company. In the Estech complaint, the whistleblower specifically alleged being among the sales representatives trained to pitch the profit from overbilling Medicare. That is a view of the sales instruction from inside the room where it was given.

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 Estech case began as a qui tam lawsuit, and the Department of Justice announced that the whistleblower would receive a reward from the settlement proceeds.

You Heard the Reimbursement Pitch

If you saw a device sold on inflated reimbursement or equipment tied to purchasing commitments, talk with our whistleblower experts about the sales practices you know. We build the case with you and bring in medical device fraud whistleblower lawyers who understand how a manufacturer’s instructions reach a hospital claim. We stay beside you as we turn that inside knowledge into your strongest medical device whistleblower case.