Medicrea: The Hospitality Had a Reporting Bill of Its Own

In the Medicrea Open Payments settlement, Medicrea International and Medicrea USA Inc. agreed to pay $2 million over alleged physician kickbacks and incomplete reporting of conference entertainment. The government alleged that the manufacturer paid for benefits intended to influence physicians’ spinal-device purchases, then failed to fully report those benefits. For someone inside device sales, finance or physician-payment reporting, the case connects what the company spent, whose product choices it wanted to influence, and what it told the public.

The Justice Department’s May 19, 2021 announcement separated the payments. Medicrea agreed to pay $1 million to the United States and participating states to resolve allegations under the Anti-Kickback Statute, the False Claims Act and similar state laws. It agreed to pay another $1 million to the United States over the Open Payments allegations. The Open Payments allegations settled for the same $1 million.

The Physician Benefits Around the Lyon Conference

The government alleged that Medicrea provided meals, alcoholic beverages, entertainment and travel expenses to U.S.-based physicians at events surrounding the Scoliosis Research Society’s September 2013 Congress in Lyon, France. Medicrea International was the French medical device manufacturer, and Medicrea USA Inc. was its American affiliate.

According to the government, the purpose of those benefits was to induce the physicians to purchase or order Medicrea’s spinal devices. The resulting claims to federal health care programs were the basis of the False Claims Act allegations. The alleged commercial return on entertaining a physician was the device business that physician could direct afterward.

The alleged bargain put the manufacturer’s sales ahead of patients’ medical needs, with taxpayers paying the resulting claims.

The benefits described in Lyon were expenses paid for physicians. A 2020 review in the Journal of Forensic and Investigative Accounting, A Forensic Accountant’s Guide to the Most Potent Federal Laws Used Against Healthcare Fraud, explains that kickback arrangements can involve indirect compensation and benefits in kind, as well as cash.

Why the Open Payments Resolution Was Separate

The Open Payments allegation concerned Medicrea’s failure to fully report the physician-entertainment expenses to the Centers for Medicare & Medicaid Services. It addressed the public account of the benefits, while the kickback allegations addressed their alleged purpose and the resulting healthcare claims.

Congress created Open Payments, formerly known as the Sunshine Act, to make certain manufacturer payments and transfers of value to physicians public. The Justice Department explained that transparency was intended to help prevent benefits from influencing physicians and hospitals to prescribe or buy products. Its Medicrea announcement specifically included indirect payments in the manufacturer’s reporting responsibility.

The public report characterizes the transfer. Calendars, contracts and sales records can explain what that characterization leaves out.

The announcement also connected the case to the Senate Finance Committee’s March 2019 request that federal health agencies investigate Open Payments noncompliance and pursue enforcement. The department described Medicrea as among the first settlements combining False Claims Act and Open Payments allegations. For device insiders, that combination makes the expense record and the reporting record relevant to different parts of the same case.

Medtronic’s Restaurant Payments Show the Same Split

In a separate October 2020 resolution, the government alleged that Medtronic USA, Medicrea’s later acquirer, routed benefits through a restaurant owned by a physician to induce product use. It also alleged that Medtronic knew the physician owned the restaurant but underreported the payments to the Centers for Medicare & Medicaid Services. The company agreed to an $8.1 million False Claims Act settlement and a separate $1.11 million Open Payments resolution.

The venue mattered because paying the restaurant could benefit the physician who owned it. Comparing the vendor record with ownership and the public report can reveal a relationship that the restaurant’s name alone would not explain. Medicrea’s alleged benefits took a different form, but both matters separated the manufacturer’s spending from its account of that spending.

The Whistleblower’s Case Reached Inside the Business

A whistleblower brought the Medicrea qui tam case in the Eastern District of Pennsylvania. The Justice Department said the civil settlement resolved claims brought under the False Claims Act’s whistleblower provisions, which allow a private party to bring a case on the government’s behalf and receive a share of a recovery.

The whistleblower’s complaint described relationships beyond the conference hospitality addressed in the announcement. It alleged unperformed consulting duties, travel presented as surgical observation and free devices.

Consulting Meetings That Allegedly Never Happened

The complaint alleged that physicians under consulting agreements were the only consistent users of Medicrea products. It also alleged that they failed to perform required duties, including leading two annual think tanks and participating in twelve annual teleconferences.

The whistleblower connected the missing meetings to the consultants’ use of the company’s products. The promised work and the device orders tell different sides of that relationship.

Observation Trips With Sightseeing and Wine

The complaint also alleged that trips presented as opportunities to observe surgery became occasions for entertaining surgeons and their guests:

For someone who arranged the travel or handled the expenses, that difference is concrete: the invitation and the itinerary tell parts of the same story.

The complaint also alleged that free UNiD rods and PASS LP systems increased the surgeon’s profit.

How Does Reimbursement Work for Medical Devices?

For most implanted devices, Medicare includes the implant in its payment to the institution for the procedure. The hospital or surgery center buys the device, while the surgeon may make or strongly influence the brand and type selected.

The Department of Health and Human Services’ Office of Inspector General describes that influence in its Special Fraud Alert on Physician-Owned Entities, calling implants physician preference items. It explains why a manufacturer interested in hospital sales would cultivate a physician: the institutional buyer and the person choosing the implant can be different parties.

Consignment adds another connection. A manufacturer may retain ownership of devices kept at the hospital until use or implantation. In that arrangement, the operation can trigger the sale. The implant-use record helps connect the physician’s choice to the manufacturer’s revenue and the institution’s procedure claim.

The sales representative can sit close to that choice. A Senate Finance Committee staff report describes manufacturer representatives as employees or independent agents who order, deliver, stock and restock instrumentation, and assist surgeons in the operating room. That work can put product use alongside the commercial relationship in the representative’s ordinary view of the business. For a case alleging that hospitality won device orders, the person who knows the account may also know what actually reached the operating room.

That is the industry setting for Medicrea’s alleged chain from physician benefit to spinal-device order to government payment. The expense sits in the manufacturer’s accounts, the choice belongs to the physician, and the claim can sit with the provider. Understanding the case means following those connections across the businesses involved.

What Evidence Is Needed to Prove Fraud?

For conference-benefit allegations like Medicrea’s, the evidence connects the benefit, the physician’s device choice, the manufacturer’s public report and the resulting government claim. We examine how those records fit together and what the insider knows about the decisions behind them.

Tying a benefit to an order, a public report and a government claim takes records from several businesses. We work through those connections with you, drawing on your knowledge of the account and the people making the decisions.

A sales employee may understand why a particular physician mattered to the company. Someone handling expenses may recognize the difference between the event’s description and what it paid for. A reporting employee may understand how the payment became a public entry. We work with that knowledge to connect the company’s decisions to the government money at issue.

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.

You Know What the Conference Expenses Bought

If you know how physician entertainment fed device orders or disappeared from the public reporting, speak to one of our Whistleblower Experts about what the conference money bought. We build your strongest medical device whistleblower case with you and bring in medical device whistleblower lawyers who understand physician benefits, Open Payments and provider claims. We stay beside you through the case.