Medtronic USA: The Surgeon Owned the Restaurant

Medtronic USA agreed to pay over $9.2 million in a restaurant kickback and payment-reporting settlement over allegations that it paid a neurosurgeon’s restaurant to induce him to use its SynchroMed II pumps. The government alleged that the surgeon chose the dinner guests, Medtronic paid for their evening, and the surgeon benefited as the restaurant’s owner. For a device sales or compliance employee, the revealing detail is how the company described those evenings on paper.

The Department of Justice announced the settlement on October 29, 2020. It included $8.1 million for alleged kickbacks under the False Claims Act and a separate $1.11 million to resolve allegations that it failed to report the full value of the restaurant spending through Open Payments. SynchroMed II intrathecal infusion pumps are implantable devices that deliver medication. The sales target was a neurosurgeon in Sioux Falls, South Dakota, whose other business was Carnaval Brazilian Grill.

Carnaval Brazilian Grill and the Alleged Pump Kickbacks

Medtronic allegedly bought business for a restaurant to win business for its pumps. In the signed settlement agreement, the government alleged that the surgeon told Medtronic the restaurant’s business was slow and asked the company to pay for events there. The government said Medtronic knew that he and his wife owned it.

The government’s allegations covered September 2010 through September 2019. Seeking to increase pump sales, Medtronic allegedly held more than 130 events at Carnaval and paid the restaurant more than $87,000. The company had written compliance policies against the conduct, but the government said its sales personnel agreed to the surgeon’s request anyway.

The invitations explain whom these events served. The surgeon allegedly selected social acquaintances, business partners, favored colleagues, and existing or potential referral sources. The government said spouses and significant others attended most of the events, and Medtronic paid for some of their meals and drinks too.

The government described multicourse tasting menus with wine paired to each course, and attendees sitting at a family-style table near the bar while the public dined nearby. Yet the expense reports told a different story:

Education on the expense report, a social evening in the government’s account. That difference matters to someone who attended the dinner, approved the expense or saw the account plan behind it.

How Does Reimbursement Work for Medical Devices?

For most implanted devices, the hospital or surgery center buys the product and receives payment for the procedure or stay. Medicare usually includes the device in that payment. The physician can have considerable influence over which device the institution buys.

The Department of Health and Human Services’ Office of Inspector General explains in its Special Fraud Alert on physician-owned entities that implantable devices are often physician preference items. The physician may choose or strongly influence both the brand and the type of device, even though the procedure takes place at a hospital or surgery center. That split gives a manufacturer a reason to cultivate the person choosing the implant.

The Medtronic agreement connects the restaurant spending to that commercial position. The government alleged that employees responsible for South Dakota sales targeted the surgeon to increase SynchroMed II use, paid his restaurant to influence that choice, and caused false claims to Medicare, Medicaid and TRICARE.

A restaurant invoice and a hospital claim sit in different parts of the business. The reason for paying the restaurant connects them in this case. Patients depend on a device choice made for their care, while taxpayers fund the covered health care. The allegation was that the manufacturer’s spending brought the surgeon’s restaurant business into that choice.

The Open Payments Allegation: The Meal, Not the Whole Event

The Open Payments allegation concerned the value Medtronic attributed to the surgeon. The government said the company reported what individual physicians ate and drank while leaving out the full event payment to the business he owned.

The announcement puts the separate reporting payment at $1.11 million.

Open Payments makes manufacturers’ payment disclosures public. As a medical device manufacturer covered by the program, Medtronic had to disclose certain payments and transfers of value to physicians to the Centers for Medicare & Medicaid Services. The government said that obligation included indirect payments through the surgeon’s restaurant and payments to the restaurant at his request. The recipient relationship mattered even when the money went to a business account.

For 74 events between August 2013 and July 2019, the government alleged that Medtronic underreported those payments by disclosing only the value of food and drinks personally consumed by the surgeon and other physician attendees. The government said the total paid to Carnaval for each event belonged in the disclosure as a payment or transfer of value to the surgeon.

A meal could therefore appear in the reporting while the much larger relationship behind it remained obscured. In the government’s account, the surgeon was both a diner and an owner of the business receiving the event payment. Reporting what was on his plate captured only part of the alleged benefit.

The agreement also identifies an internal information gap. Sales employees allegedly knew about the ownership and the surgeon’s requests for events, but withheld that information from Medtronic’s compliance department.

Entertainment and Reporting Also Met in Medicrea

Medicrea faced a similar combination of allegations over entertaining U.S. physicians during a conference in France. In its May 2021 settlement, Medicrea agreed to pay $1 million to resolve civil whistleblower allegations over the entertainment and another $1 million over failing to report those expenses fully through Open Payments.

The parallel is the manufacturer’s description of its spending. The entertainment generated one allegation, and the reporting of it generated another. In the Medtronic restaurant case, the agreement lets an insider see exactly where those accounts diverged: the event payment, the expense description and the amount attributed to the physician.

What Evidence Is Needed to Prove Fraud?

In a restaurant-payment case, the useful evidence connects the manufacturer’s spending, the physician’s financial benefit, the purpose of the events and the device business the manufacturer wanted. The Medtronic allegations put expense reports, restaurant ownership, guest selection and information withheld from compliance at the center of that account.

A 2020 analysis in the Journal of Forensic and Investigative Accounting explains that healthcare kickbacks can involve economic relationships more complex than a straightforward payment for services. The manufacturer paid a restaurant bill, but the government’s allegation followed the benefit through the restaurant to the physician who could select the device.

We examine how the internal account compares with the reported one: what the event was for, who requested it, who benefited and how the company described the payment. Invitations and calendars can show the gathering behind an expense category. Ownership information and venue records can show whose business received the money. Sales records and implant use can help explain why that physician mattered to the manufacturer.

Those connections give different employees different views of the same arrangement. A sales representative may know why the event was booked. Someone reviewing expenses may see the educational description. A compliance employee may see the payment attributed to a physician without being told who owns the venue. Our work is to connect what the insider knows to the commercial decisions and claims at the center of a potential whistleblower case.

Medtronic’s Response Reached Beyond the Sales Representative

Medtronic terminated the sales representative involved in most of the events and the representative’s sales manager, and disciplined twelve other employees. The agreement describes those actions as following the company’s internal review and the government’s investigation. The other employees knew of the conduct or attended certain events.

The Surgeon and His Device Companies Reached a Separate Settlement

The same surgeon and his companies, Medical Designs and Sicage, agreed to a separate $4.4 million False Claims Act settlement announced in May 2021. The allegations included profits from physician-owned device businesses, restaurant benefits and unnecessary surgeries. The two companies also owed $100,000 in separate Open Payments penalties involving undisclosed physician ownership and payments.

Whistleblowers brought the case against the surgeon and his device companies. Their allegations followed the benefits to the physician, including money from devices he used in his own surgeries.

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. For an insider with restaurant-payment or device-selection evidence, the question is how that knowledge connects to the government’s claim. We work through that connection with you and bring in medical device whistleblower lawyers who understand kickbacks and manufacturer reporting.

You Know Why the Dinner Was Booked

If the event you attended bears little resemblance to the expense report, speak to one of our whistleblower experts about what those dinners were really for. We build your case around the relationship between the spending and the device sales, bring in medical device whistleblower lawyers with experience tracing those payments, and stay beside you through the pursuit of a recovery.