Free Practice Development: The Device Sale Hidden in Patient Marketing

Medical device hospital practice development kickbacks can take the form of free advertising, patient screenings and referral-building that a manufacturer supplies to win device business. The practice gets help attracting patients. The manufacturer expects its products to be used when those patients receive treatment, and the provider bills the government for the care. If you work in field sales, practice marketing or compliance, the arrangement may look familiar: a budget described as education, an account selected for its sales potential, and a campaign whose success is measured in device orders.

The benefit is the business itself. Covidien, Merit Medical Systems and Cardiovascular Systems each settled allegations that they funded practice growth to induce use of their devices. The alleged benefits reached beyond a payment to a physician: help building a referral network, advertising the practice or bringing prospective patients through the door.

From Free Marketing to a Paid Procedure

Free practice development connects a manufacturer-funded benefit to device selection and then to a provider’s claim for payment. The company pays for support aimed at a particular practice. The practice gains referrals or patients, uses the sponsor’s products in their procedures, and bills Medicare or another government health program. That is the commercial chain alleged in these cases.

The person choosing the device and the organization buying it can be different. A surgeon may strongly influence the brand and type while a hospital or surgery center purchases the product and bills for the procedure. With consigned inventory, the manufacturer can retain ownership until use. The device sale can occur when the product is used, well after it arrives at the facility.

That split explains why support directed at a physician matters to a hospital claim. A practice-development budget sits on the manufacturer’s side. A purchase record sits with the buyer. The procedure and claim sit with the provider. We connect those parts of the transaction to understand what the sponsor bought with its marketing money.

How Does Reimbursement Work for Medical Devices?

Medicare usually includes an implanted device’s cost in payment for the procedure or hospital stay. In a physician’s office, payment includes the cost of supplies and equipment. The connection to public money runs through the care billed, while the manufacturer’s invoice records the device sale.

What Are Some Examples of Kickbacks in Healthcare?

Free advertising, referral letters, patient-screening support and business-expansion services are examples of benefits alleged to be medical device kickbacks. The support can do work a practice would otherwise have to arrange or pay for: design its marketing, introduce referring physicians, promote an event or advertise a procedure.

Practice-specific support is particularly revealing. A campaign advertises a selected physician. A dinner brings potential referring physicians to that practice. A screening event cultivates patients for procedures that use the sponsor’s device. Each gives the practice something commercially useful, and each gives the manufacturer a way to grow sales through the person selecting the product.

The advertising matters here as a benefit to the practice. Its design, distribution and cost connect the sponsor to the recipient. The next question is what the manufacturer expected from that recipient: more procedures with its product, continued purchasing, or a switch from a competitor.

Educational Grants With Sales Expectations Attached

A grant described as unrestricted can still carry a sales expectation in the company’s internal decisions. In the Merit allegations, the Department of Justice said financial assistance went to selected providers to reward past sales and induce future business. The stated purpose was awareness of treatments. The alleged selection criterion was the recipient’s value as a customer.

The whistleblower’s complaint against Merit describes advertising funds tracked against increased sales and procedures, with that return used to justify renewing support. It also alleges that sales and marketing controlled which physicians appeared in a company-sponsored referral service. Physicians who failed to demonstrate loyalty to Merit could lose their listing.

Those allegations make the selection decision as important as the amount spent. We work through the approval and renewal decisions with insiders to understand what business the company expected in return.

An advertisement can run exactly as commissioned and still be the benefit at the center of the allegation. In other arrangements, the claimed work itself was allegedly fictitious.

Covidien: Alleged Funding for the Search for Vein Patients

Covidien agreed to pay the United States $17,477,947 in March 2019 to resolve allegations that free or discounted practice and market development support induced purchases of its vein-ablation products. The Justice Department’s announcement identified ClosureFAST radiofrequency ablation catheters, used to treat venous reflux disease, often marked by varicose veins.

The government alleged that support to providers in California and Florida included customized marketing plans, referral-building lunches and dinners, and help planning, promoting and conducting vein screenings. The alleged purpose was to cultivate patients for practices buying the catheters. The announcement connected those purchases to Medicare and the states’ Medicaid programs.

The sales managers’ complaint shows what that could look like inside an account. It alleges that a physician requested advertising support for vein screenings and threatened to switch to a competing device if Covidien would not pay. A regional manager allegedly proposed payments for training sessions that would never take place. The complaint says the physician received $9,000 for training that never happened, concealing funding for advertising that ultimately ran.

The same complaint alleges that temporary marketing staff supported physicians who were the highest users of Covidien devices. Sometimes, it says, Covidien billed physicians for marketing services but never collected. An invoice could make the assistance appear to carry a price while the alleged benefit remained free.

Merit: Alleged Advertising With a Hidden Sponsor

Merit Medical Systems agreed to an $18 million settlement in October 2020 over allegations that kickbacks to physicians and hospitals caused false claims to Medicare, Medicaid and TRICARE. Its Local Advertising Program allegedly supplied free advertising assistance, practice development, practice support and purported unrestricted educational grants to induce purchases and use of Merit products.

The products included Embosphere devices, generally used in uterine fibroid embolization, and QuadraSphere devices, generally used in other embolization procedures. The government alleged that Merit directed assistance to selected providers to reward past sales, encourage future sales and divert business from competitors. The company allegedly kept funding the program despite repeated warnings from its own chief compliance officer.

The settlement covered a program whose alleged inducements included individual referral mailers. The whistleblower’s complaint describes what one cost and whom it was meant to persuade:

According to the complaint, referring physicians received a letter promoting another physician’s practice without disclosing that the device maker had drafted and paid for it. The appeal was for patient referrals. The alleged purpose was device sales.

Cardiovascular Systems: Alleged Referral-Building for Device Users

Cardiovascular Systems agreed to pay $8 million in June 2016 to resolve allegations that it provided marketing and practice-development services to induce physicians to use its devices. The government’s account concerned devices used for atherectomy, a procedure that clears blockages restricting blood circulation in arteries.

The government alleged that the company developed and distributed materials promoting device users to referring physicians, coordinated meetings between them, and developed and implemented business-expansion plans. The alleged aim was to get physicians to begin using, or continue using, its products.

This was practice growth as a sales service. The manufacturer allegedly helped its customers reach the physicians who could send them patients. A business plan, a referral meeting and a marketing campaign supplied different parts of that effort.

Across these separate settlements, the recurring benefit was help building a customer’s business. Covidien’s alleged screening support cultivated new patients. Merit’s advertising and referral activity allegedly promoted selected providers. Cardiovascular Systems allegedly built referral relationships and expansion plans. The manufacturer had something to gain when the practice grew: procedures using its devices.

Why Is a Kickback Illegal?

As the Justice Department explains in its Merit announcement, the Anti-Kickback Statute prohibits offering or paying anything of value to induce referrals for items or services covered by federal health care programs. Improper financial incentives can compromise medical judgment. Patients deserve a device chosen for their care, and taxpayers should not fund a manufacturer’s purchase of that choice. In these practice-development cases, the alleged inducement reached device selection through the business needs of the practice.

A whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers. The Covidien settlement grew out of cases brought by former sales managers and a former employee of a customer. Merit’s former chief compliance officer brought its case, and the Justice Department announced a $2.65 million reward from the federal share of the settlement. A former Cardiovascular Systems employee brought that company’s case. The people who saw how the support was chosen and delivered helped expose the alleged connection to device sales.

When the Marketing Budget Bought Device Business

If you know which practices received free support and what device business the sponsor expected in return, speak to one of our Whistleblower Experts about the arrangement. We work beside you to connect the marketing decisions, product use and provider claims into your strongest medical device whistleblower case. We bring in medical device kickback whistleblower lawyers who understand these sales arrangements and stay with you through the case.