ev3 and Fox Hollow: Selling the Device Through the Hospital’s Bill

In the ev3 and Fox Hollow atherectomy settlement, ev3 agreed to pay $1.25 million to resolve allegations that Fox Hollow encouraged unnecessary inpatient admissions to sell its SilverHawk device. The alleged sales pitch reached beyond what the device could do to what a hospital could collect from Medicare. For someone who sold the product or advised hospitals on reimbursement, the complaint describes recognizable decisions about admission orders, sales training and the bills that followed.

The Justice Department announced the settlement on February 5, 2015. Fox Hollow sold the Silver Hawk Plaque Excision System, used in minimally invasive atherectomy to remove plaque from blood vessels. ev3 acquired Fox Hollow in late 2007.

What Fox Hollow Allegedly Told Hospitals to Bill

Fox Hollow allegedly advised hospitals to bill SilverHawk procedures as inpatient care instead of outpatient care to increase hospital purchases. The government said the advice, given during 2006 and 2007, caused 12 hospitals in nine states to submit Medicare claims for medically unnecessary inpatient stays.

The whistleblower’s complaint describes how that advice allegedly worked inside the sales operation. Sales and marketing personnel allegedly treated hospitals with a large percentage of outpatient claims as a problem to be fixed by converting claims to inpatient status. Physicians were allegedly told that an inpatient admission was easier to justify if they wrote the order after the procedure.

In the complaint’s account, that was a sales instruction about a medical decision. The complaint’s account places company personnel inside the discussion of when a physician should write an admission order, with the higher-paying inpatient classification as the goal. The alleged advice went beyond explaining the device.

The complaint also alleged that a sales training manual promoted separate admissions for procedures on each leg:

Discharge and readmission become part of the sales lesson, with each admission presented as another opportunity for full reimbursement.

The complaint alleged that hospitals embracing the pitch admitted all or nearly all their SilverHawk patients as inpatients regardless of medical necessity. The government said many of the patients should have received outpatient care. In that account, patients faced unnecessary hospital stays, and taxpayers funded the higher bills: hospital profit had become a reason to use more health care than the patients needed.

How Does Reimbursement Work for Medical Devices?

In hospitals, Medicare generally includes device costs in the payment for the procedure or stay. Hospital outpatient payment packages implantable and insertable devices into the service payment. Inpatient payment includes device costs in the diagnosis-related group, the payment category for the hospital stay.

That structure gives a manufacturer a commercial interest in the hospital’s reimbursement. The alleged Fox Hollow pitch offered hospitals a more lucrative way to bill care involving the device, making the device more attractive to buy.

The whistleblower alleged that Medicare paid approximately $7,000 more per unnecessary inpatient case, on average, than it would have paid for outpatient treatment. The alleged gain came from changing the patient’s admission status, with Medicare paying the higher bill.

Hospital Profit Became a Sales Argument

According to the complaint, a regional sales manager’s email credited the inpatient reimbursement advice for a hospital’s SilverHawk profit.

The complaint also described an internal analysis comparing physicians who attended a company conference with those who did not. According to the quoted email, attendees had 25% greater sales volume after the meeting. The company was allegedly measuring what physician education produced in product sales.

As the complaint describes them, the training manual and emails put the commercial motive into ordinary business records. They describe what representatives were taught to say and what managers counted as success.

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

Yes. The ev3 medical device fraud settlement resolved a False Claims Act case brought by a former Fox Hollow sales representative in the Western District of New York. The manufacturer faced allegations that its advice caused hospital claims, and the Justice Department announced a reward for the former employee.

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

The Same Admission Incentive in Another Device Case

Kyphon faced a similar allegation involving kyphoplasty. In the manufacturer settlement announced in May 2008, Medtronic Spine agreed to pay $75 million over allegations that Kyphon encouraged unnecessary inpatient admissions that increased hospital reimbursement. The larger settlement concerned a different procedure, but the alleged commercial connection was the same: selling a device by getting a hospital a higher payment.

Other atherectomy cases concern a different sales incentive. The Cardiovascular Systems settlement, announced in June 2016, addressed alleged physician kickbacks to induce device use. Fox Hollow’s admission case follows the reimbursement advice into the hospital’s Medicare claim.

What Evidence Is Needed to Prove Fraud?

For this admission-billing allegation, the evidence connects the manufacturer’s advice, the patient’s need for inpatient care and the claim the hospital submitted. The complaint identifies sales training, internal communications and instructions about admission orders as parts of that connection.

A device sales representative may know what the manufacturer taught, while a hospital reimbursement specialist may know how that advice affected admission orders and billing. Those are different views of the same alleged scheme. We work with healthcare insiders to connect what happened inside the sales operation with the hospital’s claims, and bring in whistleblower lawyers who understand medical device reimbursement.

You Heard the Reimbursement Pitch

If you know how inpatient billing became part of a device sales pitch, speak to one of our Whistleblower Experts about how the reimbursement pitch reached the bill. We build the case with you, bring in medical device fraud whistleblower lawyers who understand manufacturer reimbursement advice, and stay beside you through the pursuit of a recovery.